2024 (4) TMI 1214 - HC - Income Tax

Validity of Reopening of assessment - case of the petitioner is not selected for scrutiny for the year under consideration - scope of amended provisions of the Income Tax Act - difference in the account statement and remittance sheet of the bank treated as an escapement of the income. HELD THAT - In view of the orders of the even date passed in the earlier A.Ys. for 2016-17 and 2017-18 2024 (5) TMI 227 - GUJARAT HIGH COURT we are of the opinion that on same material only because the year under consideration being A.Y. 2018-19 no scrutiny assessment is undertaken by the respondent Assessing Officer and this being a new regime of reassessment after 1st April 2021 no different treatment can be given for reopening only because the scope is enlarged by the amended provisions for reopening. In our opinion when the earlier assessment years which are subjected to reopening for which the notice is already quashed on the same material there cannot be a reopening for the year under consideration and therefore the impugned order as well as the notice is also required to be quashed and set aside. Petition allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the issuance of a notice under Section 148 of the Income Tax Act, 1961, for Assessment Year (A.Y.) 2018-19 was justified in light of the alleged difference between the bank remittance-sheet and the account statement of the petitioner.
• Whether the absence of a scrutiny assessment for A.Y. 2018-19 justifies the reopening of the assessment under the new regime of reassessment provisions.
• Whether the principles of change of opinion and lack of new tangible material apply to the reopening of the assessment for A.Y. 2018-19.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Notice under Section 148

• Relevant Legal Framework and Precedents: The notice was issued under Section 148A(d) of the Income Tax Act, which deals with the reopening of assessments based on certain conditions. The legal framework requires that there be a reason to believe that income has escaped assessment.
• Court's Interpretation and Reasoning: The court noted that the reasons for issuing the notice were based on a survey action conducted on Jammu & Kashmir Bank, which found discrepancies between the remittance sheet and account statements. However, the court found that these discrepancies were not adequately detailed in the notice or the order.
• Key Evidence and Findings: The petitioner provided bank statements and explained that any differences were due to foreign exchange fluctuations, which were already accounted for in their books.
• Application of Law to Facts: The court applied the legal standards for reopening assessments and found that the reasons provided did not meet the threshold required for reopening under Section 148A(d).
• Treatment of Competing Arguments: The petitioner argued that the discrepancies were not new information and had been addressed in their accounts. The respondent argued that the absence of a scrutiny assessment justified further inquiry.
• Conclusions: The court concluded that the notice and order lacked sufficient grounds and details to justify reopening the assessment.

Issue 2: Absence of Scrutiny Assessment

• Relevant Legal Framework and Precedents: The absence of a scrutiny assessment does not automatically justify reopening an assessment unless there is new, tangible material indicating income escapement.
• Court's Interpretation and Reasoning: The court emphasized that the mere absence of scrutiny does not constitute a valid reason for reopening assessments under the new regime post-April 2021.
• Key Evidence and Findings: The court referenced earlier decisions where similar notices were quashed due to lack of new material.
• Application of Law to Facts: The court found that the absence of scrutiny was not a sufficient basis for reopening the assessment for A.Y. 2018-19.
• Treatment of Competing Arguments: The respondent's argument that further inquiry was needed was not supported by new evidence.
• Conclusions: The court held that the absence of scrutiny does not justify reopening without new material evidence.

Issue 3: Change of Opinion and Lack of New Material

• Relevant Legal Framework and Precedents: Reopening based on a change of opinion is generally not permissible unless there is new information that was not available during the original assessment.
• Court's Interpretation and Reasoning: The court found that the reasons for reopening were based on existing information that had already been considered, thus constituting a change of opinion.
• Key Evidence and Findings: The court noted the lack of new, tangible material in the notice and order.
• Application of Law to Facts: The court applied the principle that reopening cannot be based on a mere change of opinion without new evidence.
• Treatment of Competing Arguments: The petitioner successfully argued that the reopening was based on previously considered information.
• Conclusions: The court concluded that the reopening was unjustified as it was based on a change of opinion without new material.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: The court stated, "In our opinion, when the earlier assessment years which are subjected to reopening for which the notice is already quashed on the same material, there cannot be a reopening for the year under consideration."
• Core Principles Established: The court reinforced that reopening assessments require new and tangible material evidence and cannot be based solely on a change of opinion or absence of scrutiny.
• Final Determinations on Each Issue: The court quashed the notice and order under Section 148A(d) for A.Y. 2018-19, ruling that the reopening was unjustified due to lack of new material and improper reliance on existing discrepancies.