Case Note & Summary
The petitioner, Dilip Gangaram Patil, is engaged in real estate business and filed his return of income for assessment year 2013-14 on 27 September 2013 declaring total income of Rs.54,91,960/-. An assessment order under Section 143(3) of the Income Tax Act, 1961 was passed on 31 December 2015 accepting the return income. Subsequently, on 29 November 2017, the Commissioner of Income Tax issued a notice under Section 263 of the Act on the ground that M/s. Orchid Builders and Developers had sold 6 flats on behalf of the petitioner for Rs.2,74,94,950/- which was not reflected in the profit and loss account, and also sought to examine disallowance on account of interest payment and income from house property not offered for tax. The petitioner filed a reply, and on 16 March 2018, an order under Section 263 was passed setting aside the assessment order with a direction to conduct proper inquiries and pass a fresh order. Pursuant to this, the Assessing Officer passed a fresh assessment order under Section 143(3) read with Section 263 on 14 December 2018, assessing income at Rs.57,06,250/- by making additions on account of notional rent under the head 'income from house property'. On 25 March 2021, a notice under Section 148 of the Act was issued to the petitioner for the same assessment year, proposing to reassess income under Section 147. The petitioner filed his return in compliance and requested reasons for reopening, which were furnished on 22 March 2021. The petitioner objected on the ground that the issue was subject matter of Section 263 proceedings and there was no failure to disclose fully and truly all material facts. The objections were rejected on 11 March 2022, relying on the Supreme Court decision in Kalyanji Mavji & Co. v. CIT. The petitioner challenged the notice and the order rejecting objections before the High Court. The Court considered the submissions and held that the reopening was based on the same issues already examined in the Section 263 proceedings and the subsequent assessment order passed pursuant thereto. There was no fresh material to justify reopening, and the proceedings amounted to a change of opinion. The Court quashed the notice under Section 148 and the order rejecting objections, allowing the writ petitions.
Headnote
A) Income Tax - Reopening of Assessment - Section 147, 148, 263, 151 of Income Tax Act, 1961 - Validity of Reassessment Notice - The petitioner challenged notice under Section 148 for AY 2013-14 on the ground that the issues for which reopening was sought were already examined in proceedings under Section 263 and no fresh material existed. The Court held that reopening based on same issues already examined in revision proceedings amounts to change of opinion and is not permissible. The notice and order rejecting objections were quashed. (Paras 1-10) B) Income Tax - Change of Opinion - Section 147, 148 of Income Tax Act, 1961 - Reassessment after Revision - Where an assessment order was set aside under Section 263 and a fresh assessment order was passed, reopening on same issues without fresh material is invalid. The Court held that the Assessing Officer cannot reopen assessment merely on the basis of information already available in original assessment, especially when the issue was examined in revision proceedings. (Paras 7-10)
Issue of Consideration
Whether the reopening of assessment under Section 148 of the Income Tax Act, 1961, for the assessment year 2013-14 is valid when the same issues were already subject matter of proceedings under Section 263 of the Act and no fresh material exists.
Final Decision
The Court allowed the writ petitions and quashed the notice under Section 148 of the Income Tax Act, 1961 dated 25 March 2021 and the order rejecting objections dated 11 March 2022.
Law Points
- Reopening of assessment under Section 147 is not permissible if based on same issues already examined in revision proceedings under Section 263
- absence of fresh material
- change of opinion
- first proviso to Section 147
- third proviso to Section 147
