2023 (3) TMI 418 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - tangible material with the AO justifying reopening of the assessment - set off of the long-term capital loss against the long-term capital gain of the current year could not have been allowed while taxing the long-term capital gain - HELD THAT:- In the case of ITO v/s. Lakhmani Mewal Das [1976 (3) TMI 1 - SUPREME COURT] the Supreme Court held that the duty of the assessee does not extend beyond making a true and full disclosure of the primary facts. Once he has done that his duty ends, it is for the Income Tax Officer to draw the correct inference through primary facts. It is not responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts. If the Income Tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment.

As based upon the reasons recorded, one needs to scrutinize whether there was any tangible material with the Assessing Officer justifying reopening of the assessment or can it be said to be a case of ‘review’ and ‘change of opinion’ by the said officer. On the perusal of the papers and the reasons mentioned in the notice for reopening we find that AO has not mentioned what was the new tangible material to justify the reopening and what was the material fact which was not truly and fully disclosed.

In the absence of any new tangible material available with the Assessing Officer, and in view of the fact that there is a general presumption that an order of assessment u/s 143(3) has been passed after proper application of mind and considering the fact that in the present case, the AO had sought clarification with regard to the details of sale of property and transfer of shares, details whereof were submitted during the course of the proceedings, it certainly goes to show that the issue with regard to transactions with all parties had been gone into by the said AO. There is no failure on the part of the petitioner to disclose any material facts and consequently the reopening is invalid in view of the proviso of Section 147 of the IT Act.

In this regard reliance is placed on Tata Sons [2022 (2) TMI 496 - BOMBAY HIGH COURT] where the Court held that "when there is a discretion in the assessment order connected with the issue for which the reassessment is initiated, the reopening was struck down as being without jurisdiction on the ground of change of opinion - once the facts and claims were enquired into during the original assessment, a notice on the same would be construed as a change of opinion, for the purposes of reopening of the assessment.

In the present case, the petitioner has disclosed all the primary facts to the respondent as can be evinced from the responses to the original proceedings. We are, accordingly, of the opinion that the original assessment was completed with, after having considered all the facts and material. Thus the impugned notice u/s 148 and assessment order passed u/s 143 (3) r.w.s. 147 are quashed and set aside - Decided in favour of assessee.