Validity of reassessment proceedings where prior consideration exists: identical grounds cannot justify reopening, reassessment quashed

Reopening an assessment cannot be justified where the same facts and reasons were previously considered and rejected, because reassessment powers are confined to income that escaped the assessing officer's knowledge rather than a mere change of opinion; consequence: notices issued to reopen the assessment and related proceedings were quashed. The authority's prior decision to drop revision proceedings after considering the assessee's reply demonstrated that the grounds for reassessment were identical to matters already on record, so subsequent approval by a senior official could not validate the reopening which amounted to a review and was set aside.

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Issues Involved:
1. Validity of the notice under Section 148A(b) and consequent reassessment proceedings.
2. Applicability of Section 56(2)(viia) of the Income Tax Act, 1961.
3. Alleged "change of opinion" by the Assessing Officer (AO).

Detailed Analysis:

Issue 1: Validity of the notice under Section 148A(b) and consequent reassessment proceedings

The petitioner sought directions to quash the notice dated 27.05.2022 issued under Section 148A(b), the order under Section 148A(d), and the consequent notice under Section 148, both dated 30.07.2022, for the Assessment Year (AY) 2014-15. The petitioner argued that the reassessment proceedings were initiated based on a "change of opinion," which is impermissible. The original assessment order dated 21.12.2016 had assessed the petitioner's income as 'Nil' after considering the shareholding pattern and other relevant details. Later, the Principal Commissioner of Income Tax-II (PCIT) issued a notice under Section 263, which was subsequently dropped after considering the petitioner's reply. Despite this, a notice under Section 148 was issued on 28.06.2021, followed by a notice under Section 148A(b) on 27.05.2022, leading to the reassessment proceedings.

The court referred to Section 147 and 148 of the Income Tax Act, emphasizing that the AO must have "reasons to believe" that income has escaped assessment, and this belief must be based on tangible material, not merely a change of opinion. The court cited the Supreme Court's decision in Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited, which held that the AO's power to reassess cannot be used as a power to review.

Issue 2: Applicability of Section 56(2)(viia) of the Income Tax Act, 1961

The PCIT had initially invoked Section 263, alleging that the petitioner purchased shares at less than their fair market value, resulting in a loss of Rs. 6,00,00,000/- to the revenue. The petitioner contended that the shares were acquired through a "Right Issue," making Section 56(2)(viia) inapplicable. The court noted that the PCIT had dropped the proceedings under Section 263 after considering the petitioner's submissions. Despite this, the AO initiated reassessment proceedings on the same grounds, which the court found to be a "change of opinion."

Issue 3: Alleged "change of opinion" by the Assessing Officer (AO)

The petitioner argued that the reassessment proceedings were a clear case of "change of opinion," as the same issue had been examined during the original assessment and the subsequent Section 263 proceedings. The court agreed, stating that the AO had no authority to reassess based on the same facts and circumstances already considered. The court emphasized that the higher authority's approval (PCCIT) does not legitimize the reassessment if it violates the settled principles governing such actions.

Conclusion:

The court found that the reassessment proceedings were initiated based on a "change of opinion," which is not permissible. The impugned notice under Section 148A(b) dated 27.05.2022, the order under Section 148A(d), and the notice under Section 148 of the Income Tax Act, both dated 30.07.2022, along with the consequential proceedings, were set aside. The writ petition was allowed, and the reassessment proceedings were quashed.

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