2025 (3) TMI 222 - HC - Income Tax

Revenue cannot reopen assessment under section 147 based on existing material without new tangible evidence

Gujarat HC held that reopening of assessment under section 147 was barred by limitation where Revenue relied on information already available on record ... Reopening of assessment u/s 147 - Notice issues beyond the period of limitation prescribed under statute - HELD THAT:- It emerges that the Revenue has relied upon the information which was already available on record. Therefore, the reasons so recorded is not based on any new or tangible material. Revenue has merely re-verified its record pertaining to the case of the assessee. If we perused the reply of the assessee which was filed at the time of framing of assessment u/s 143(3) of the act, the entire details with regard to deduction claimed under Chapter VI-A were produced. Thus, we believe that it is not failure on the part of the assessee to fully and truly disclose all material facts before the AO. The impugned notice u/s 148 of the Act, therefore, is clearly barred by limitation as prescribed under the statute. Change of opinion - AO has sought to reopen the assessment from the material already produced on record, meaning thereby, while issuing and recording of reasons, the AO was not having any new and / or tangible material in his possession. Thus, according to us, the assessment sought to be reopened on the material which was already available can be said to be change of opinion and the same is impermissible in the eye of law. Decided in favour of assessee. The petitioner challenged a notice issued by the respondent - Revenue under Section 148 of the Income Tax Act, 1961, seeking to initiate reassessment for the Assessment Year 2014-15. The petitioner, a cooperative society, had filed its original return of income declaring total income at Rs. Nil. Subsequently, the Assessing Officer framed the assessment under Section 143(3) of the Act. The respondent issued a notice under Section 148 directing the petitioner to file a return of income for the same assessment year. The petitioner, upon request, was provided with reasons for the reopening of the assessment and filed objections challenging the validity of the notice. The respondent did not dispose of the objections, leading the petitioner to approach the High Court seeking appropriate relief.The main legal issues considered by the Court were whether the notice under Section 148 was valid and whether the reassessment was based on new material or a change of opinion from the original assessment.The petitioner's advocate argued that the notice was illegal and beyond the limitation period prescribed by law. He contended that the reassessment was based on a change of opinion, as all relevant details had been provided during the original assessment. The advocate relied on a Bombay High Court decision to support the argument that the notice was not tenable.On the other hand, the respondent's advocate argued that the petition was premature, as the petitioner would have the opportunity to present their case during reassessment proceedings and appeal options were available. The respondent contended that the reassessment was not a change of opinion and cited a Gujarat High Court decision to support this position.After hearing both parties and reviewing the reasons recorded by the Assessing Officer, the Court found that the reassessment was not based on new material but a mere re-verification of existing records. The Court concluded that the notice was barred by limitation and the reassessment was impermissible as it amounted to a change of opinion without new material. The Court distinguished the case cited by the respondent and ruled in favor of the petitioner, quashing the impugned notice dated 27th March 2021.In summary, the Court held that the notice under Section 148 was invalid due to being beyond the limitation period and constituting a change of opinion without new material. The petition was allowed, and the impugned notice was set aside, disposing of the matter in favor of the petitioner.