TaxTMI 
TaxTMI 
2026 (2) TMI 1190
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....ons raised by the petitioner for reopening of the assessment under section 147 marked as Annexure-V for the A.Y. 2011-12, as one without jurisdiction. (c) Declare that Respondent No. 3 erred in law in invoking the provisions of section 147 of the Act on mere surmises, conjectures and suspicions without having any reasons to believe as contemplated under the provisions of section 147 of the Act. (d) Issue a writ of Certiorari or direction in the nature of a writ of certiorari or order to forebear the Respondent No. 3 from giving effect and / or taking any step whatsoever pursuant to and/or in furtherance of the notice u/s 148 of the Act in No.AAACK6734C dated: 30.03.2018 and/or in any proceedings initiated thereunder for the assessment year 2011-12. Annexure-K (e) Such other order or orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case, in the interest of justice and equity." 2. Heard learned Senior Counsel for the petitioner and learned counsel for the respondent and perused the material on record. 3. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the....
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....y when the reopening does not amount to change of opinion by the respondents since material which was not available earlier were subsequently made available to the respondents. 7. The legal position as to whether reopening of assessment is permissible merely on the basis of a changed opinion without there being tangible material to come to a conclusion that there is escapement of income from assessment and the reasons should necessarily have a live link with formation of a belief is no longer res integra in the light of several judgments of the Hon'ble Apex Court including the judgment of the Hon'ble Apex Court in the case of Kelvinator (supra), wherein it is held as under: "Heard learned counsel on both sides. 2. A short question which arises for determination in this batch of civil appeals is, whether the concept of "change of opinion" stands obliterated with effect from 1-4-1989, i.e., after substitution of section 147 of the Income-tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 ? 3. To answer the above question, we need to note the changes undergone by section 147 of the Income-tax Act, 1961 [ for short, "the Act"]. Prior to Direct Tax Laws....
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....subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)." [Emphasis supplied] 4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1-4-1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post 1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere chang....
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....or the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 8. So also, this Court in the case of Azim Premji's (supra) held as under: In this petition, petitioner has sought for the following reliefs: "(i) Quashing the impugned order dated: 28.07.2022 bearing ITBA/COM/F/17/2022-23/1044214522(1) passed by Respondent No.1 under Section 148A(d) of the Income Tax Act, 1961, for the Assessment Year 20184-15 (Annexure-'A'). (ii) Quashing the impugned notice dated: 28.07.2022 bearing ITBA/AST/M/148-_1/2022-23/1044223868(1) issued by Respondent No.1 under Section 148 of the Income -tax Act, 1961, for the Assessment Year 2014-15(Annexure-'B'); (iii) Declaring that Section 56(2) (vii) (c) of the Income-tax Act, 1961, has no application to the listed shares of Wipro Ltd., that were gifted to Pioneer Independent Trust in the previous year relevant to Assessment Year 2014-15; (iv) Quashing the Circular bearing No.6/2012 [F.NO.133/44/2012-SO (TPL) issued by Respondent No.4 03.08.2012 (Annexure-'C') ; and (v) Pass such other or further orders as this Hon'ble Court ....
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.... 3.3 The A.O passed the assessment order for the Assessment Year 2014-15 under Section 143(3) of the Income Tax Act (for short ' the I.T. Act') without treating the gift of Wipro shares received by the petitioner as its taxable income under Section 56(2)(vii)(c) of the I.T. Act, even though the A.O had all the information that was required for deciding, whether to apply or not to apply Section 56(2)(vii)(c) of the I.T. Act. Thus, there was no failure or omission on the part of the petitioner to disclose any material facts or information in respect of the said gift of Wipro shares received by the petitioner. 3.4 On 01.04.2021, Sections 147 to 151 of the I.T. Act were amended vide Finance Act, 2021 by bringing into force a new regime. Subsequently, the 1st respondent issued a Notice dated 21.06.2021 to the Trust under Section 133(6) of the I.T. Act, to which a reply was submitted on 24.06.2021, pursuant to which, one more notice dated 25.06.2021 was issued by the 1st respondent, to which also, the petitioner submitted replies dated 28.06.2021 and 29.06.2021. Thereafter, respondents issued a Notice dated 30.06.2021 under Section 148 of the I.T. Act (after amendment).....
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....re contended that there is no merit in the petition and the same is liable to be dismissed. 5. I have given my anxious consideration to the rival submissions and perused the material on record. 6. Before adverting to the rival contentions, it is necessary to state that it is an undisputed fact that the impugned proceedings were initiated subsequent to 01.04.2021 when Sections 147 to 151 were amended under the Finance Act, 2021. In Ashish Agarwal's case (supra), the Apex Court laid down the detailed guidelines and issued directions with regard to proceedings and notices under the pre-amendment regime and post-amendment regime and held as under:- 3. While appreciating the controversy, a few facts and the relevant statutory provisions applicable pre 01.04.2021 and post 01.04.2021 are required to be referred to. The procedure governing initiation of reassessment proceedings prior to coming into force of the Finance Act, 2021 was governed by the following provisions:- "Income escaping assessment- 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subjec....
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....as been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understa....
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....ice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation.-For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1^st day of October, 2005 in response to a notice served under this section. (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so. Time limit for notice- 149.(1) No notice under section 148 shall be issued for the ....
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....s recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself." 3.1. In pursuance to the power vested under section 3 of the Relaxation Act, 2020, the Central Government issued following Notifications inter-alia extending the time lines prescribed under section 149 for issuance of reassessment notices under section 148 of the Income Tax Act, 1961: Date of Notification Original limitation for issuance of notice under Section 148 of the Act Extended Limitation 31.03.2020 20.03.2020 to 29.06.2020 30.06.2020 24.06.2020 20.03.2020 to 31.12.2020 31.03.2021 31.03.2021 31.03.2021 30.04.2021 27.04.2021 30.04.2021 30.06.2021 The Explanations to the Notifications dated 31st March, 2021 and 27th April, 2021 issued unde....
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....nless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. Explanation 1.-For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means,- (i) any information flagged in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; (ii) any final objection raised by the Comptroller and Auditor-General of India to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act. Explanation 2.-For the purposes of this section, where,- (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assesse....
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....s of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a) (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on....
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.... also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded: Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this sub-section shall be deemed to be extended accordingly. Explanation.-For the purposes of clause (b) of this subsection, "asset" shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151.' Sanction for issue of notice- "151. Specified authority for the purposes of section 148 a....
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....pective assessee. 6. It cannot be disputed that by substitution of sections 147 to 151 of the Income Tax Act (IT Act) by the Finance Act, 2021, radical and reformative changes are made governing the procedure for reassessment proceedings. Amended sections 147 to 149 and section 151 of the IT Act prescribe the procedure governing initiation of reassessment proceedings. However, for several reasons, the same gave rise to numerous litigations and the reopening were challenged inter alia, on the grounds such as; (1) no valid "reason to believe" (2) no tangible/reliable material/information in possession of the assessing officer leading to formation of belief that income has escaped assessment, (3) no enquiry being conducted by the assessing officer prior to the issuance of notice; and reopening is based on change of opinion of the assessing officer and (4) lastly the mandatory procedure laid down by this Court in the case of GKN Driveshafts (India) Ltd. v. Income Tax Officer; (2003) 1 SCC 72, has not been followed. 6.1 Further pre-Finance Act, 2021, the reopening was permissible for a maximum period up to six years and in some cases....
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....e specified authority is required, even for conducting the enquiry as per section 148A(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 6.6. Substituted section 149 is the provision governing the time limit for issuance of notice under section 148 of the IT Act. The substituted section 149 of the IT Act has reduced the permissible time limit for issuance of such a notice to three years and only in exceptional cases ten years. It also provides further additional safeguards which were absent under the earlier regime pre-Finance Act, 2021. 7. Thus, the new provisions substituted by the Finance Act, 2021 being remedial and benevolent in nature and substituted with a spec....
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..... Therefore, we propose to modify the judgments and orders passed by the respective High Courts as under:- (i) The respective impugned section 148 notices issued to the respective assessees shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and treated to be show-cause notices in terms of section 148A(b). The respective assessing officers shall within thirty days from today provide to the assessees the information and material relied upon by the Revenue so that the assessees can reply to the notices within two weeks thereafter; (ii) The requirement of conducting any enquiry with the prior approval of the specified authority under section 148A(a) be dispensed with as a one-time measure vis-à-vis those notices which have been issued under Section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts; (iii) The assessing officers shall thereafter pass an order in terms of section 148A(d) after following the due procedure as required under section 148A(b) in respect of each of the concerned assessees; (iv) All the defences which m....
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....ns before the various respective High Courts shall be deemed to have been issued under section 148A of the IT Act as substituted by the Finance Act, 2021 and construed or treated to be show-cause notices in terms of section 148A(b). The assessing officer shall, within thirty days from today provide to the respective assessees information and material relied upon by the Revenue, so that the assesees can reply to the show-cause notices within two weeks thereafter; (ii) The requirement of conducting any enquiry, if required, with the prior approval of specified authority under section 148A(a) is hereby dispensed with as a one-time measure vis-à-vis those notices which have been issued under section 148 of the unamended Act from 01.04.2021 till date, including those which have been quashed by the High Courts. Even otherwise as observed hereinabove holding any enquiry with the prior approval of specified authority is not mandatory but it is for the concerned Assessing Officers to hold any enquiry, if required; (iii) The assessing officers shall thereafter pass orders in terms of section 148A(d) in respect of each of the concerned assessees; Thereafter after foll....
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....aid show cause notice dated 31.05.2022 with reference to Section 148A(b), which led to the respondents passing the impugned order. It is therefore clear that the legality, validity and correctness of the impugned order has to be examined in the light of the judgment of the Apex Court in Ashish Agarwal's case as well as the provisions of Sections 147 to 151 of the I.T. Act, before and after amendment vide Finance Act, 2021 w.e.f. 01.04.2021. 8. In this context, it is relevant to extract Section 149 of the I.T. Act (after amendment), which reads as under:- Time limit for notice- 149.(1) No notice under section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant ass....
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.... is not based on books of account or other documents or evidence in the possession of the A.O; on the contrary, the allegation of escapement of income is based only on the disclosure expressly made by the petitioner-assessee itself of the gift of Wipro shares received by it and the very same information was readily available with the A.O. when the original assessment order dated 28.06.2016 was passed by him. It is significant to note that at the time of passing the said order dated 28.06.2016, the A.O. came to the definite conclusion that Section 56(2)(vii)(c) did not apply insofar as the petitioner was concerned despite having all details, information and material in this regard that was required at that time and based on the very same material, it was impermissible for the A.O. to simply / merely change his mind and initiate reassessment proceedings by issuing a notice dated 30.06.2021; it is therefore clear that in the facts of the instant case, Section 149(1)(b) was not applicable and it was only Section 149(1)(a) of the I.T. Act that was applicable and consequently, the impugned proceedings pursuant to the Notice dated 30.06.2021 issued beyond he period of limitation, which ex....
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....provisions of Sections 147 to 151 of the I.T. Act prior to amendment. 16. As stated earlier, the mandatory requirements/ conditions / ingredients contained in Section 147 have to be complied with by the respondents - revenue to issue a notice by placing reliance upon the pre-amended provisions. In this regard, in relation to assessment year 2013-14 pertaining to the financial year 2012-13, identical notices were issued by the respondents - revenue, which were challenged before this Court by the petitioner in W.P.No.8059/2021, wherein after referring to various judgments of the Apex Court and this Court, the impugned notice and reasons for reopening were quashed. The relevant portions of the said order passed in W.P.No.8059/2021 are extracted hereunder: "10. The first question that arises for consideration is, whether on 31.03.2021, the respondents were entitled to reopen the assessment proceedings of the petitioner for the assessment year 2012-13 after the expiry of four years as contemplated in Section 147 of the I.T. Act; in this context, reliance is placed upon the proviso to Section 147 of the I.T. Act by the respondents in order to contend that the respondent....
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.... issued beyond the period of limitation of four years was illegal, arbitrary and without jurisdiction or authority of law. It is also contended that a perusal of income tax returns as well as the reply submitted by the petitioner on 22.06.2015 to the notice dated 09.06.2015 issued by the respondents will indicate that the face value / book value of the shares as well as the total market value of all the quoted investments including the shares had been mentioned / stated in the returns in addition to other material particulars and details and consequently, there has not been any failure of full and true disclosure of material facts for the purpose of assessment. 18. Per contra, it is contended by the respondents that the petitioner had not disclosed and full and true facts in as much as the book value and the market value of the shares gifted in favour of the petitioner was not disclosed either in the returns or in the reply submitted by the petitioner and as such, the respondents were entitled to invoke the proviso to Section 147 of the I.T. Act and reopen the assessment. 19. As rightly contended by the petitioner, a perusal of the income tax returns submitted by ....
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....be said that the petitioner had failed to fully and truly disclose all material facts necessary for its assessment. 21. As stated supra, in the light of all the aforesaid material and relevant facts being fully disclosed by the petitioner in its returns, which were more than sufficient to complete the assessment, mere non-disclosure of the market value of the shares separately by the petitioner in its returns cannot lead to an inference that the petitioner has not fully and truly disclosed all material facts necessary for assessment; to put it differently, so long as all other material and relevant facts had been furnished and disclosed and it can be clearly discerned from the returns and the documents that the market value of the shares was in excess of Rs. 50,000/-, simply because the market value of 49,07,14,120 shares had not been separately stated / mentioned, it cannot be said that the respondents were entitled to take shelter under the proviso to Section 147 of the I.T. Act and seek to reopen the concluded proceedings of 2016 beyond the period of limitation on 31.03.2021. 22. The material on record also discloses that at the time of assessment proceedings, ....
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....e boom value and the market value of the shares which tantamount to not fully and truly disclosing material facts are clearly illegal, arbitrary, factually incorrect and perverse and contrary to the material on record warranting interference by this Court in the present petition. 24. As held by the Apex Court and other High Courts including this Court, in the aforesaid decisions, in order to invoke the proviso to Section 147 of the I.T. Act, it is incumbent upon the respondents to establish that the relevant material facts essential for the purpose of assessment had not been disclosed by the petitioner; it cannot be gainsaid that all facts / particulars which have not been stated / mentioned in the returns are not material facts and it is only those facts which would have an impact / bearing upon the assessment that can be construed or treated as essential. In the instant case, all relevant material facts viz., details of shares for the assessment years 2011-12 and 2012-13 have been stated including the breakup, face value of the shares at Rs. 2/- per share, the details of the shares for the previous year, market value of all the quoted investments including the shares etc....
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....petitioner has failed to disclose the information which is in the public domain and is continuously available to everybody. Further, the reasons recorded do not even attempt to claim that the non-application of Section 56(2) (vii)(c) of the I.T. Act and the consequent alleged escapement of income was because the Assessing officer was allegedly unaware of the market price of WIPRO shares. For application of Section 56(2)(vii)(c) of the I.T. Act, even if a price as nominal as one paise is assigned to be the market value of each Wipro share received as a gift with the number of shares received as a gift being Rs. 29.55 crores, the aggregate value will far exceed the limit of Rs. 50,000/- specified in Section 56(2)(vii)(c) of the I.T. Act. Thus, in the facts of the case, it is axiomatic that the Assessing officer considered Section 56(2)(vii)(c) of the I.T. Act not to be attracted at all rather than being unaware of the market price of WIPRO shares as alleged. The market price of these shares is irrelevant because in the reasons recorded, nowhere it is specifically alleged and established that the alleged escapement of income was by reason of the so-called non-disclosure of the share p....
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.... tax by the Assessing Officer which clearly indicated that he was fully aware of the market price of the Wipro shares much prior to issuance of the notice dated 30.06.2021 and consequently, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. So also, in the original regular assessment proceedings for the subject assessment year 2014-15, the Assessing Officer had sought for and examined the petitioner' share demat account which was provided by the petitioner to the Assessing Officer furnishing all particulars regarding the Wipro shares; this circumstance is also a pointer to the fact that the Assessing Officer had complete and full knowledge of the subject shares and their value at the time of original assessment proceedings and on this score also, it cannot be said that the income of the petitioner had escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment and consequently, the impugned order deserves to be quashed on this ground also. 19. Insofar as the othe....