Bombay High Court Quashed Reassessment Notice Issued Under Section 148 of the Income Tax Act, 1961

Constitution of India, 1950 – Article 226 – Writ jurisdiction – High Court’s power to quash reassessment notice issued without jurisdiction.

Income Tax Act, 1961 – Section 143(3) – Scrutiny assessment – Order passed disallowing part of bad debt claims.

Income Tax Act, 1961 – Section 148 – Reopening of assessment – Conditions precedent – Reassessment proceedings based on change of opinion impermissible.

Reassessment – Reopening within 4 years – Examination of issue during scrutiny assessment – Subsequent reopening based on same material amounts to change of opinion – Held, notice under Section 148 quashed as without jurisdiction (Para 15, 19, 22).

The Bombay High Court held that reopening of assessment based on change of opinion was not permissible even within 4 years from the end of the relevant assessment year. The issues raised in the reassessment notice were already considered and accepted during the scrutiny assessment proceedings. Absence of new material rendered the reassessment proceedings without jurisdiction. The court quashed the notice under Section 148 dated 30 March 2012.

Subjects:

Writ jurisdiction – Reopening of assessment – Change of opinion – Double deduction – Scrutiny assessment – Share premium account – Bad debts – Set-off losses.

Nature of Litigation: Petition filed under Article 226 of the Constitution of India challenging the validity of notice issued under Section 148 of the Income Tax Act, 1961 for reassessment of assessment year 2007-08.

Relief Sought: Petitioner sought quashing of reassessment notice on grounds of change of opinion and lack of jurisdiction.

Reason for Filing: Notice for reopening issued on the allegation of income escapement due to double deduction, claimed to be based on material already examined in original scrutiny assessment.

Previous Decisions: Scrutiny assessment under Section 143(3) completed on 30 December 2009 – Disallowance of certain bad debt claims – Assessed income declared Nil after set-off of losses.

Issues:

a. Whether reassessment notice under Section 148 was issued based on change of opinion. b. Whether reassessment could be initiated on matters already scrutinized and accepted in the original assessment proceedings. c. Whether there was any escapement of income due to alleged double deduction.

Submissions/Arguments:

Petitioner: a. Argued that the issues raised in the reassessment notice had already been considered during the original assessment proceedings. b. Contended that reopening on the same material amounts to a change of opinion, which is impermissible in law. c. Asserted that no double deduction was claimed, and the allegation was factually incorrect.

Respondent: a. Justified reassessment proceedings on the basis of audit scrutiny revealing alleged double deduction. b. Claimed reopening within 4 years permissible despite the same issue being examined earlier.

Ratio:

a. Reopening of assessment cannot be based on the same material already examined and accepted during scrutiny assessment – Such reopening amounts to change of opinion and is impermissible (Para 12, 15). b. Absence of new tangible material justifying reassessment renders the notice without jurisdiction (Para 18, 22). c. Non-rebuttal of petitioner’s objections on factual inaccuracies further supports quashing of reassessment notice (Para 17, 20).

Precedents:

• Indian & Eastern Newspaper Society v. CIT, (1979) 2 Taxman 197 (SC)

• Aroni Commercials Ltd. v. DCIT, (2014) 44 taxmann.com 304 (Bombay)

• Commissioner of Income Tax v. Usha International Ltd., (2012) 25 taxmann.com 200 (Delhi HC – FB)

• Ankita Choksey v. ITO, WP No. 3344 of 2018, decided on 10 Jan 2019

• Marico Ltd. v. ACIT, 117 taxmann.com 244 (SC)