2025 (12) TMI 472 - AT - Income Tax

Reassessment under s.147 quashed as change of opinion; no failure of full, true disclosure after s.143(3) inquiry

ITAT Delhi-AT allowed the assessee's appeal and quashed the reassessment initiated u/s 147 beyond four years. The Tribunal held that, in terms of the ... Reopening of assessment u/s 147 - Independent application of mind or borrowed satisfaction - assessment has been reopened beyond four years by the AO - basis of investigation report received from the Investigation Wing - HELD THAT:- It is an undisputed fact that the assessment in the case of assessee has been reopened after four years. Whenever, the assessment is opened beyond four years, first proviso to section 147 of the Act gets triggered. Accordingly, the Assessing Officer has to show that income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment in the return of income for that assessment year. From the reasons recorded by the AO it is not emanating that the AO has complied with the conditions set out by the first proviso to section 147 of the Act. Per contra, the assessee has placed on record the inquiries made by the AO during assessment proceedings u/s. 143(3) of the Act with respect to the issue of share capital/share application money received by the assessee. The assessee has specifically pointed to the notice issued u/s. 133(6) of the Act to one such investor i.e. M/s. MJH Marketing Consultant P. Ltd. AO has made inquiries on the issue which has now been again rasied in assessment proceedings. This is clearly a case of change of opinion. It is no more res integra that assessment cannot be reopened merely on the basis of change of opinion. In light of above findings based on documents on record, reassessment proceedings in the instant case is held to be bad in law. Appeal of the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether reassessment proceedings initiated under section 147 beyond four years from the end of the relevant assessment year, in respect of share capital/share premium/share application money, were valid in absence of any recorded failure by the assessee to disclose fully and truly all material facts necessary for assessment. 1.2 Whether reopening of assessment, where the issue of share capital/share application money had already been inquired into and accepted in the original scrutiny assessment under section 143(3), amounted to a mere change of opinion, rendering the reassessment invalid. 1.3 Whether reassessment initiated on the basis of information from the Investigation Wing without proper independent satisfaction by the Assessing Officer constituted valid 'reasons to believe' for escapement of income. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Validity of reassessment beyond four years; requirement of failure to disclose fully and truly; change of opinion Legal framework (as discussed) 2.1 The Court noted that the reassessment was initiated under section 147 after expiry of four years from the end of the relevant assessment year. In such a case, the first proviso to section 147 is attracted, requiring that escapement of income must be 'by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment'. Interpretation and reasoning 2.2 It was undisputed that the original assessment had been completed under section 143(3), and that in those proceedings the Assessing Officer had examined the issue of share capital/share premium/share application money by issuing notices under section 133(6) to investor companies, including one investor (M/s. MJH Marketing Consultants Pvt. Ltd.). 2.3 The record showed that in response to the section 133(6) notice, the investor furnished requisite details confirming investment in the assessee's shares, and the Assessing Officer, after such inquiry, accepted the returned income in the original assessment. 2.4 On examination of the reasons recorded for reopening, the Court found that: (a) The reasons referred to certain entities allegedly providing accommodation entries and treated the assessee as a beneficiary, and (b) There was no allegation or finding in the recorded reasons that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. 2.5 The Court observed that the very issue of share capital/share application money, including the specific investor later subjected to addition (M/s. MJH Consultants Pvt. Ltd.), had already been scrutinized during the original assessment, with requisite information called for and obtained. Reopening the same issue, based on substantially the same material, amounted to a mere change of opinion. 2.6 Since the reassessment was initiated beyond four years and the recorded reasons did not show any failure of full and true disclosure by the assessee, the mandatory condition in the first proviso to section 147 was not satisfied. Conclusions 2.7 The reassessment proceedings initiated under section 147 beyond four years were held to be bad in law as the Assessing Officer did not record, nor did the reasons disclose, any failure by the assessee to make a full and true disclosure of material facts. 2.8 Reopening on the same issue of share capital/share application money that had already been examined in the original assessment constituted a change of opinion, which is impermissible as a ground for reassessment. On this ground also, the reassessment was held invalid. 2.9 Consequently, the assessment order passed under section 147 read with section 143(3) was quashed. Issue 3: Use of Investigation Wing information and independent 'reasons to believe' Interpretation and reasoning 3.1 The assessee contended that the notice under section 148 and the reasons for reopening were based solely on Investigation Wing information, and that the Assessing Officer had neither relevant material nor formed an independent belief. 3.2 The department argued that the Investigation Wing report provided fresh information post-original assessment and that the Assessing Officer conducted independent inquiry and formed his own 'reasons to believe' regarding escapement of income. 3.3 The Court focused on the recorded reasons and the prior inquiries under section 143(3), and held that, irrespective of the source of information, the absence of satisfaction regarding failure to disclose fully and truly, coupled with the fact that the same issue had already been examined earlier, rendered the reopening invalid. Conclusions 3.4 The Court did not accept the reassessment as validly founded on 'reasons to believe' in law, since the basic jurisdictional conditions under the first proviso to section 147 and the bar against change of opinion were not met. 3.5 As the reassessment itself was quashed on jurisdictional grounds, the additions made on merits did not survive and were not adjudicated further.