Case Note & Summary
The petitioner, Saurashtra Infra & Power Pvt. Ltd., a company engaged in infrastructure development and running a Container Freight Station, filed its return of income for the assessment year 2015-16 on 30 September 2015, declaring book profit under Section 115JB of the Income Tax Act, 1961 of Rs.8,72,54,012/- and claiming a deduction of Rs.10,24,27,306/- under Section 80IA of the Act. The return was processed under Section 143(1) and later selected for scrutiny under Section 143(3), resulting in an assessment order dated 29 December 2017 wherein the Assessing Officer allowed the deduction under Section 80IA after examining the claim. Subsequently, on 26 March 2021, the Assessing Officer issued a notice under Section 148 of the Act seeking to reopen the assessment on the ground that the deduction under Section 80IA was erroneously allowed. The petitioner challenged the notice, contending that the reopening was based on a change of opinion and that the Assessing Officer had not formed an independent reason to believe but had merely acted on information received from the investigation wing. The court examined the reasons recorded for reopening and found that the Assessing Officer had not applied his mind independently but had relied on the satisfaction of the investigation wing. The court held that the notice was invalid as it was based on borrowed satisfaction and a mere change of opinion. The court quashed the notice and the reassessment proceedings, allowing the petition.
Headnote
A) Income Tax - Reassessment - Section 148 of the Income Tax Act, 1961 - Validity of Notice - The Assessing Officer must have an independent reason to believe that income has escaped assessment; reliance on borrowed satisfaction from the investigation wing without application of mind renders the notice invalid. (Paras 1-13)
B) Income Tax - Deduction under Section 80IA - Change of Opinion - Reassessment cannot be based on a mere change of opinion regarding the allowability of deduction under Section 80IA of the Income Tax Act, 1961, especially when the original assessment had examined the claim. (Paras 14-20)
C) Income Tax - Reassessment - Information from Investigation Wing - The Assessing Officer must independently apply his mind to the information received; mere forwarding of information by the investigation wing does not constitute valid reason to believe. (Paras 21-30)
Issue of Consideration
Whether the notice issued under Section 148 of the Income Tax Act, 1961 for reopening of assessment was valid when the Assessing Officer relied on information from the investigation wing without forming an independent reason to believe that income had escaped assessment.
Final Decision
The court allowed the writ petition and quashed the notice dated 26 March 2021 issued under Section 148 of the Income Tax Act, 1961 and the reassessment proceedings.
Law Points
- Reassessment notice under Section 148 must be based on the Assessing Officer's own reason to believe
- not on borrowed satisfaction
- Section 148 of the Income Tax Act
- 1961
- Section 80IA deduction
- change of opinion not permissible
Case Details
2023 LawText (BOM) (01) 168
WRIT PETITION NO. 1360 OF 2022
Dhiraj Singh Thakur, Kamal Khata
Mr. V. Sridharan, Senior Advocate with Mr. B.V. Jhaveri, Mr. Sriram & Ms. Bhargavi Rawal for petitioner; Mr. Anhileshwar Sharma with Ms. Shilpa Goel for respondents
Saurashtra Infra & Power Pvt. Ltd.
Deputy Commissioner of Income-tax, Circle-3(3)(1), Pr. Commissioner of Income-tax-3, The Assessing Officer, National Faceless Assessment Centre, Union of India
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Nature of Litigation
Writ petition challenging notice under Section 148 of the Income Tax Act, 1961 for reopening of assessment for assessment year 2015-16.
Remedy Sought
Petitioner sought quashing of the notice dated 26 March 2021 issued under Section 148 of the Income Tax Act, 1961 and the reassessment proceedings.
Filing Reason
Petitioner challenged the reassessment notice on the ground that it was based on a change of opinion and that the Assessing Officer did not have an independent reason to believe that income had escaped assessment.
Previous Decisions
The original assessment under Section 143(3) was completed on 29 December 2017, wherein the deduction under Section 80IA was allowed after scrutiny.
Issues
Whether the notice under Section 148 of the Income Tax Act, 1961 was valid when the Assessing Officer relied on information from the investigation wing without forming an independent reason to believe.
Whether the reopening of assessment was based on a mere change of opinion regarding the allowability of deduction under Section 80IA.
Submissions/Arguments
Petitioner argued that the reassessment notice was based on a change of opinion and that the Assessing Officer had not applied his mind independently but had borrowed satisfaction from the investigation wing.
Respondents contended that the information from the investigation wing provided fresh material justifying the reopening and that the Assessing Officer had formed a reason to believe.
Ratio Decidendi
A notice under Section 148 of the Income Tax Act, 1961 for reopening of assessment must be based on the Assessing Officer's own reason to believe that income has escaped assessment. Reliance on borrowed satisfaction from the investigation wing without independent application of mind renders the notice invalid. Additionally, reopening cannot be based on a mere change of opinion regarding a deduction that was already examined in the original assessment.
Judgment Excerpts
The present petition is fled, inter-alia, challenging the notice, dated 26th March 2021, issued u/s. 148 of the Income Tax Act, 1961
The Assessing Officer must have an independent reason to believe that income has escaped assessment; reliance on borrowed satisfaction from the investigation wing without application of mind renders the notice invalid.
Procedural History
The petitioner filed its return for AY 2015-16 on 30 September 2015. The return was processed under Section 143(1) and later selected for scrutiny under Section 143(3), resulting in an assessment order dated 29 December 2017. On 26 March 2021, a notice under Section 148 was issued seeking to reopen the assessment. The petitioner filed the present writ petition challenging the notice.
Acts & Sections
- Income Tax Act, 1961: 148, 143(1), 143(3), 115JB, 80IA
