2022 (1) TMI 1356 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - notice has been issued after expiry of four years from the relevant Assessment Year - penny stock transactions - Change of opinion - HELD THAT - As held in Aroni Commercials Limited 2014 (2) TMI 659 - BOMBAY HIGH COURT once a query is raised during assessment proceedings and the assessee has replied to it it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and / or discussion to disclose its satisfaction in respect of the query raised. As noted earlier the very issue of Petitioner entering into transactions relating to the scrip of Confidence Finance Trading Ltd. was a subject of consideration by the AO during the original assessment proceedings. It would therefore follow that re-opening of the assessment by the impugned notice is merely on the basis of change of opinion of the AO from what held earlier during the course of the assessment proceedings leading to the assessment order. This change of opinion does not constitute justification and/ or reason to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.

Summary

Issues:
Impugning a Notice under section 148 of the Income Tax Act, 1961 for reopening assessment for AY 2013-14.

Analysis:
The petitioner challenged a Notice dated 19.03.2020 issued under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for AY 2013-14. The notice was issued after the expiry of four years from the relevant Assessment Year, and the assessment under section 143(3) had already been completed. The proviso to section 147 places the onus on the respondents to show that there was a failure on the part of the petitioner to disclose material facts required for assessment. The reasons for reopening highlighted transactions in a shell company where income was alleged to have escaped assessment. However, the court found that the respondents failed to prove any failure by the petitioner to fully disclose material facts.

The notice to reopen the assessment was deemed to be based purely on a change of opinion by the Assessing Officer. Prior to passing the original assessment order, queries were raised regarding the transactions in the shell company, to which the petitioner had responded exhaustively. The assessment order accepting the income declared by the petitioner did not specifically mention the satisfaction of the Assessing Officer regarding the queries raised. The court cited precedent to establish that once a query is raised during assessment proceedings and the assessee responds, it is considered that the query was considered by the Assessing Officer. Therefore, the court concluded that the reopening of the assessment was merely a change of opinion and did not justify the belief that income had escaped assessment.

Consequently, the court set aside the Notice dated 19 March 2020 issued under section 148 of the Income Tax Act, along with the order on objection and subsequent assessment order. The petition was disposed of with no order as to costs.