Reopening notice under section 148 quashed as mere change of opinion after full disclosure during original assessment

Gujarat HC quashed reopening notice u/s 148 for AY 2016-17. Assessee's return was scrutinized under s 143(3) after providing complete details regarding s 80IC deduction claim following merger. Assessment was completed accepting the return. Revenue later issued s 148 notice claiming undertaking became ineligible for s 80IC benefit post-merger under s 80IA(12) read with s 12A. HC held reopening constituted mere change of opinion as assessee had fully disclosed all material facts during original assessment and responded to queries. No reason to believe income escaped assessment existed. Petition allowed, notice quashed.

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Issues:
Challenge to notice under Section 148 of the Income Tax Act 1961 for Assessment Year 2016-17 based on change of opinion by the Assessing Officer, consequential order of assessment under Section 147 read with Section 144B dated 31.03.2022, and notice of demand under section 156 dated 31.03.2022.

Analysis:

1. Jurisdiction of Notice under Section 148:
The petitioner challenged the notice under Section 148 on the grounds of full disclosure of material facts necessary for assessment for A.Y. 2016-17. The petitioner argued that the notice was issued solely based on a change of opinion by the Assessing Officer, which is illegal and without jurisdiction. The petitioner contended that since the original assessment was framed after verifying the details provided in relation to the deduction under Section 80IC of the Act, the notice for reopening was unjustified.

2. Legal Basis for Challenge:
The petitioner relied on the decision of the Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd. to support the argument that reopening based on a mere change of opinion is impermissible. Additionally, the petitioner cited a decision of the Court in Special Civil Application No. 5651 of 2021, emphasizing that the reasons recorded for reopening did not have a live link or nexus with the material relied upon during the regular assessment proceedings.

3. Respondent's Argument and Court's Analysis:
The respondent contended that the notice under Section 148 was issued because income chargeable to tax had escaped assessment concerning the deduction claimed under Section 80IC of the Act. The respondent argued that the assessee's undertaking was not eligible for the deduction under Section 80IC as per the provisions of the Act. However, upon revisiting the facts, the Court observed that the assessee had fully disclosed all material facts relevant for assessment at the original stage. The Court concluded that the reasons recorded for reopening the assessment were merely a change of opinion by the respondents.

4. Court's Decision:
The Court held that the notice dated 28.03.2021 for reopening the assessment could not be sustained. Consequently, the impugned notice under Section 148, the Assessment Order under Section 147 read with Section 144B dated 31.03.2022, and the demand notice dated 31.03.2022 were quashed and set aside. The Court made the rule absolute to the aforementioned extent, ruling in favor of the petitioner.

This detailed analysis of the judgment highlights the legal arguments presented by both parties, the Court's assessment of the jurisdictional issues, and the ultimate decision rendered by the Court.

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