Reassessment under section 147 invalid when based on change of opinion without new material facts

Gujarat HC held that reopening of assessment under section 147 was invalid as it constituted mere change of opinion. The assessee had fully disclosed service tax liability in balance sheet and satisfied all queries during original assessment proceedings under section 143(3). The AO attempted reassessment based on re-verification of existing records without any new tangible material or information. The court ruled that assumption of jurisdiction under section 147 is impermissible when based solely on change of opinion rather than discovery of new facts.

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Issues:
Challenging notice under Section 148 of the Income Tax Act and rejection of objections raised by the petitioner.

Analysis:
The petitioner challenged a notice dated 27th March, 2021, under Section 148 of the Income Tax Act, 1961, as well as an order dated 11th December, 2021, which rejected the objections raised by the petitioner. The petitioner filed a return of income on 26th September, 2013, declaring income at Rs.12,09,758/- for the A.Y. 2013-14. The department processed the return, and a scrutiny assessment order under Section 143(3) of the Act was framed on 27th March, 2015. The petitioner received several notices and filed replies accordingly. The petitioner submitted details of service tax challan under VCES Scheme on 23rd June, 2014. An assessment order under Section 143(3) of the Act was passed on 31st December, 2015. Subsequently, the petitioner received a notice under Section 148 of the Act on 27th March, 2021, which led to the petitioner filing objections against the reasons for reopening, objections that were later rejected by the respondent on 11th December, 2021.

The petitioner contended that there was no fault on their part and reopening the scrutiny assessment under Section 143(3) was impermissible. The petitioner argued that the reopening was a mere change of opinion as specific queries regarding service tax payment were addressed during the original scrutiny proceedings. The petitioner also challenged the sanction under Section 151, claiming it was granted mechanically without proper reasoning. On the other hand, the respondent argued that the petitioner had not fully disclosed facts necessary for assessment and had underpaid service tax, justifying the reassessment. The respondent maintained that the sanction under Section 151 was valid and proper.

Upon reviewing the submissions and materials, the Court considered whether the reassessment was a change of opinion. The reasons recorded for reopening highlighted the non-payment of service tax by the petitioner, which was already known from the case records. The Court found that no new information or tangible material prompted the reassessment, indicating a mere re-verification of existing records. It was noted that all queries, including service tax issues, were addressed during the original assessment proceedings. Consequently, the Court concluded that the reassessment was indeed a change of opinion, which is impermissible under the law. As a result, the petition was allowed, and the notice under Section 148 of the Income Tax Act, 1961, along with the order rejecting the petitioner's objections, were quashed.

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