2023 (9) TMI 758 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - no information furnished by the Petitioner including relating to his immovable property - HELD THAT - From the facts in the present case it is evident that the AO had within his possession all the primary facts and it was for him to make necessary enquiry and draw proper inferences. Thus the AO did not do and it is even admitted by the Respondents that the AO failed to appreciate the information provided by the Petitioner by oversight . Thus it cannot be said that the income chargeable to tax for the AY under consideration has escaped assessment by reason of the omission or failure on the part of the Petitioner to disclose fully and truly all material facts. The AO had all the material before him when he made the original assessment. Whether assessment cannot be reopened on a mere change of opinion and more particularly in the absence of any fresh tangible material ? - The first assessment order is based upon the information and details provided by the Petitioner including material relating to his immovable property and the deductions under Section 54(F) of the Act have been computed on the basis of the material provided by the Petitioner. Thus the AO had in his possession all the primary facts and it was for him to make necessary inquiries and draw proper inference as to whether deductions as claimed under Section 54(F) of the Act were to be allowed or otherwise while working the computations. Thus it can be safely held that the reopening of the assessment order is clearly on the basis of a change of opinion and that too without surfacing of any tangible new information. As noted earlier a perusal of the communications reveal that there was nothing more to disclose and a person cannot be said to have omitted or failed to disclose information which clearly has been placed before the AO at the time of issuance of the first assessment order. It is settled law that the reasons for reopening an assessment can be tested and examined only on the basis of the reasons recorded at the time of issuing the notice under Section 148 of the Act. The Revenue has not even placed on record any document to suggest that the reasons recorded have been furnished to the Petitioner. On this ground alone the assessment order impugned herein deserves to be quashed. Petitioner had fully and truly disclosed all material facts necessary for the purpose of assessment. The AO issued the first assessment order after carefully scrutinizing the material furnished by the Petitioner. The Respondents have failed to furnish any reasons for reopening as mandated by law. There is not even a whisper in the entire communication trail as to what was not disclosed. In our view thus this is not a case where assessment should be permitted to be reopened on the reasonable belief that income has escaped assessment on account of failure of the assessee to disclose truly and fully or material information necessary for computation of income. Decided in favour of assessee.

Summary

Issues Involved:
1. Failure to disclose material facts.
2. Re-assessment based on change of opinion.
3. Lack of new tangible material.
4. No income escaped assessment on merits.

Summary:

1. Failure to disclose material facts:
The Petitioner contended there was no failure on their part to disclose truly and fully material facts necessary for the assessment year 2015-16. The Petitioner had filed the original return on 27th September 2015, followed by a revised return on 7th December 2015. All required details were furnished in response to the scrutiny assessment initiated by notice dated 1st February 2017 under Section 143(2) of the Income Tax Act, 1961. The assessment order dated 25th May 2017 was passed after considering these submissions. The Petitioner argued that the reopening of the assessment was based on verified facts already on record, without any failure or omission on their part.

2. Re-assessment based on change of opinion:
The Petitioner argued that the re-assessment was purely on the basis of a change of opinion, which is impermissible in law. The original assessment order was passed after considering the detailed information and specific queries raised by the AO. The Petitioner relied on the Supreme Court decision in GKN Driveshafts (India) Ltd. v D.C.I.T., which mandates that reasons for reopening must be conveyed to the assessee, allowing them to file objections. The Petitioner reiterated that the AO had already applied his mind to the facts and material provided during the original assessment.

3. Lack of new tangible material:
The Petitioner contended that there was no new tangible material to justify the reopening of the assessment. The detailed computation of capital gains, deductions claimed under Sections 54 and 54(F) of the Act, and details regarding ownership and transfer of properties were already provided during the original assessment. The Petitioner relied on the decision in Gemini Leather Stores v. ITO, which states that failure of the assessing officer to make an enquiry does not indicate any failure/omission on the part of the assessee to disclose facts.

4. No income escaped assessment on merits:
The Petitioner argued that even on merits, there was no income that had escaped assessment. The AO had all the material facts before him during the original assessment, and it was for him to make necessary enquiries and draw proper inferences. The Petitioner cited the decision in Aroni Commercials Ltd. v Deputy Commissioner of Income Tax, which held that reopening an assessment based on the same material with a different view constitutes a change of opinion.

Court's Decision:
The Court found that the Petitioner had fully and truly disclosed all material facts necessary for the assessment. The AO issued the first assessment order after scrutinizing the material furnished by the Petitioner. The Respondents failed to provide reasons for reopening the assessment as mandated by law. The Court held that the reopening of the assessment was based on a change of opinion without any new tangible material. Consequently, the notice dated 26th March 2021, the order disposing objections dated 24th March 2022, the impugned assessment order, and the impugned notice of remand dated 24th March 2022, as well as the impugned show cause notice for levy of penalty dated 24th March 2022, were quashed and set aside. The Rule was made absolute in terms of prayer clause (a), and there was no order as to costs.