2025 (2) TMI 1148 - HC - Income Tax

Tax department can reopen assessment under Section 147 when petitioner fails to prove complete documentation was previously submitted

Sanjay Patel Versus The Assistant Commissioner of Income Tax Circle 19 (3) Mumbai, Chief Commissioner of Income Tax, Mumbai, Union of India.

The Bombay HC dismissed a writ petition challenging reopening of assessment under Section 147 based on audit objection. The petitioner failed to provide ... Reopening of assessment u/s 147 - attempt to reopen the case based on the audit objection - petitioner's failure to provide attachments and evidence to support their claims - Scope of post-amendment reopening - HELD THAT:- In the absence of any attachments being annexed in the present petition, this Court cannot examine whether the issue for which reopening is sought, details of which were filed during the regular assessment proceedings or not. If the petitioner relied on the same email, it was incumbent upon him to annex the attachments to Exhibit C’. Therefore, even on this count, the petitioner cannot invoke the extraordinary jurisdiction of this Court in support of his submission. In the assessment order, the officer has stated that the income was assessed after verification of the details. At least prima facie, there is no indication of the details. Therefore, this would require examination and investigation of the facts as to what details were filed, and in the absence of any attachments to Exhibit ‘C’, this Court cannot exercise its discretionary and equitable jurisdiction to investigate such factual issues. The information furnished to the petitioner states that the revenue audit could not find any documentary evidence on record to show nexus. Therefore, this would require the Court to go into facts of what was filed or not, and such an exercise certainly cannot be carried out in writ proceedings. Given the facts in the present case and the petitioner’s failure to provide the entire material on which he alleges a change of opinion, we do not deem it appropriate to decide the legal contention of whether post-amendment reopening can be done based on an audit opinion even if a query was raised during assessment proceedings. The necessary factual foundation for deciding this issue is simply not evident in this case. Merely relying upon precedents but not demonstrating how they apply to the fact situation at hand or not placing the entire material before the Court renders it quite unsafe to decide this issue one way or the other in this case. Our observations are, therefore, prima facie. We deem it fit not to exercise discretionary and extraordinary jurisdiction to entertain the present petition but to give the petitioner liberty to raise the issue of the validity of the reassessment proceeding before the Appellate Authority if and when the reassessment order is challenged pursuant to the notice under Section 148 of the Act. WP dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether the reopening of assessment under Section 148 read with Section 148A(d) can be sustained where the reopening is purportedly founded on an audit objection and Explanation-1 to Section 148 (i.e., 'information' suggesting income has escaped assessment). 2. Whether a reassessment on the same issue that was examined during the original assessment proceedings amounts to an impermissible 'change of opinion'. 3. Whether the taxpayer's failure to file a timely reply to the Section 148A(b) show-cause notice, and the failure to place before the Court the attachments/annexures said to have been relied upon in the original assessment and in the belated reply, precludes the High Court from exercising extraordinary writ jurisdiction to examine validity of reopening. 4. Whether the Court should decline to exercise discretionary extraordinary jurisdiction and instead leave the grievance to be raised before the Appellate Authority in assessment proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of reopening based on audit objection / Explanation-1 to Section 148 Legal framework: The amended Section 148 defines 'information' (Explanation-1) which may include audit objections as a basis to form information that income has escaped assessment and thereby permit reopening. Section 148A(b)/(d) prescribes the show-cause procedure before issuing notice under Section 148. Precedent Treatment: Co-ordinate Benches have taken divergent approaches; some decisions under the erstwhile 'reasons to believe' regime held reopening impermissible where it amounted to change of opinion, while some recent decisions post-amendment have left open or held that audit objections can constitute 'information'. The Court noted a decision holding audit opinion sufficient post-amendment but did not treat it as binding here. Interpretation and reasoning: The Court refrained from a conclusive pronouncement on whether, post-amendment, audit objection alone can sustain reopening. The absence of the foundational factual material (attachments and annexures) prevented the Court from factually determining whether the audit objection furnished 'information' within Explanation-1 and whether the issue was in fact re-opened on any new information distinct from the original assessment material. Ratio vs. Obiter: Obiter - the Court expressly declined to decide the substantive legal question of whether audit objections post-amendment permit reopening, indicating that such determination requires proper factual foundation. Conclusion: No determination made; issue left open for adjudication in an appropriate case where factual materials are placed before the Court or before the Appellate Authority in assessment proceedings. Issue 2: Reopening as a prohibited change of opinion when matter examined earlier Legal framework: The settled principle that reassessment cannot be resorted to merely to change an opinion formed in the original assessment, as developed under the erstwhile Section 148 jurisprudence, remains relevant to the question whether reopening is permissible on the same facts. Precedent Treatment: The petitioner relied on coordinate decisions that applied the 'change of opinion' doctrine; the respondents distinguished those decisions on the ground that they arose under the pre-amendment 'reasons to believe' regime or did not involve audit objections. The Court observed that some coordinate Benches have not decided the post-amendment audit-objection point. Interpretation and reasoning: The Court observed that to decide whether reopening amounted to change of opinion requires examination of the materials before the assessing officer and the material constituting the alleged new information. Because the petition did not place the attachments or the original assessment materials before the Court, it could not resolve whether the reopening was a disguised change of opinion. Ratio vs. Obiter: Ratio (limited) - reaffirmation that the change-of-opinion principle remains fact-dependent and cannot be resolved on incomplete record; Obiter - the Court did not lay down a new test but emphasized necessity of factual foundation. Conclusion: The question whether reopening here was a change of opinion was not decided for want of documentary foundation; factual inquiry necessary at assessment/appellate stage. Issue 3: Effect of belated reply and suppression/non-production of annexures on writ jurisdiction Legal framework: Section 148A(b) prescribes time-bound filing of reply to the show-cause; judicial review in writ jurisdiction requires the petitioner to place before the Court all relevant material on which reliance is placed if seeking extraordinary relief. Precedent Treatment: The Court relied on principles of discretionary writ jurisdiction and previous observations cautioning against entertaining petitions where key documents are suppressed or not produced. Interpretation and reasoning: The petitioner did not file any reply by the returnable date and only sent a belated email after expiry; no application for extension was made. Further, attachments referred to in the original assessment and in the belated reply were not annexed to the petition. The Court found that (a) respondents were justified in treating that no timely reply was filed; (b) the petitioner could not complain of non-consideration of a belated reply without having first sought extension; and (c) suppression of attachments meant the Court could not meaningfully examine factual questions about nexus and whether the issue had been previously considered. The Court held that extraordinary equitable jurisdiction ought not be exercised on an incomplete record or where statutory time-limits have not been respected by the petitioner. Ratio vs. Obiter: Ratio - where a petitioner fails to file timely statutory replies and withholds foundational documents, the High Court will ordinarily decline to exercise extraordinary writ jurisdiction to adjudicate factual disputes underlying reopening notices. Conclusion: The petitioner's failure to timely reply and to produce annexures precluded relief in writ jurisdiction; respondent's procedural stance in the impugned order was justified. Issue 4: Appropriateness of exercising extraordinary jurisdiction versus leaving remedy to assessment/appellate forums Legal framework: High Court's writ jurisdiction is discretionary and equitable; where contentious factual matrix is unresolved and alternate statutory remedies exist (appeal/rectification/reassessment challenges), courts may refuse extraordinary relief and leave parties to statutory fora. Precedent Treatment: The Court surveyed coordinate decisions and noted divergence; it emphasised the availability of appellate remedies under the Income-tax Act. Interpretation and reasoning: Given the absence of key documents, the belatedness of the reply, the factual nature of the dispute (nexus of expense to income), and the availability of statutory remedies, the Court concluded it would not exercise extraordinary jurisdiction. The Court granted liberty to raise the validity of reassessment before the Appellate Authority if and when reassessment order is passed. Ratio vs. Obiter: Ratio - when foundational facts are not before the Court and statutory appeals exist, the High Court may decline to entertain writ petitions challenging reopening and direct the petitioner to avail statutory remedies. Conclusion: The Court dismissed the petition, exercising restraint and directing the petitioner to pursue remedies before the Appellate Authority; no costs ordered.