Case Note & Summary
The judgment concerns two writ petitions filed by Prabhat Properties Private Limited challenging notices under section 148 of the Income-tax Act, 1961 for the assessment years 2015-16 and 2016-17, along with the orders rejecting the petitioner's objections. The petitioner, a company engaged in property development and share trading, had filed its return of income for AY 2015-16 on 28.09.2015, declaring nil income after claiming set-off of brought forward losses. The case was selected for scrutiny, and after examination, the assessment was completed under section 143(3) on 15.11.2017, accepting the returned income at nil. Subsequently, on 31st March 2021, the Assessing Officer issued a notice under section 148 proposing to reassess the income, citing information received from ITO (I&CI) Unit 2(3) Mumbai that the petitioner had shown a total profit of Rs. 2,07,33,019 from trading in shares and commodities, and that the petitioner had traded through two share brokers involved in reversal trades and accommodation entries. The petitioner filed objections, which were rejected by order dated 24th January 2022. The petitioner then approached the High Court under Article 226 of the Constitution. The main legal issue was whether the reassessment notice was valid when the reasons for reopening were based on the same material that had already been considered during the original scrutiny assessment. The petitioner argued that the reassessment was based on a mere change of opinion and lacked any fresh tangible material. The respondents contended that the information from I&CI was credible and indicated escapement of income. The court analyzed the reasons recorded and found that the information from ITO (I&CI) was already available in the assessment records and had been examined during the original assessment. The court noted that the original assessment under section 143(3) had considered the share trading profits and accepted the return. The court held that reopening on the same material without any fresh tangible information amounts to an impermissible change of opinion. The court quashed the reassessment notices and the orders rejecting objections, allowing the writ petitions.
Headnote
A) Income Tax - Reassessment - Section 147/148 of Income-tax Act, 1961 - Reopening of Assessment - The court considered whether a notice under section 148 could be issued when the reasons for reopening were based on the same information that was already available and considered during the original assessment under section 143(3). The court held that the reassessment notice was invalid as it was based on a mere change of opinion and not on any fresh tangible material. (Paras 1-10) B) Income Tax - Reasons for Reopening - Section 147/148 of Income-tax Act, 1961 - Disclosure of Material - The court examined the requirement that the reasons recorded must disclose tangible material not considered earlier. The court found that the reasons merely referred to information from ITO (I&CI) which was already part of the assessment records and had been examined during scrutiny. Held that reopening without fresh material is not permissible. (Paras 3-8) C) Income Tax - Change of Opinion - Section 147/148 of Income-tax Act, 1961 - Validity - The court held that reassessment cannot be based on a mere change of opinion by the Assessing Officer. The original assessment had examined the share trading profits and accepted the return. The subsequent notice was based on the same facts, constituting an impermissible change of opinion. (Paras 5-9)
Issue of Consideration
Whether a notice under section 148 of the Income-tax Act, 1961 for reassessment can be sustained when the reasons for reopening are based on the same material that was already considered during the original assessment under section 143(3)?
Final Decision
The court allowed the writ petitions and quashed the notices under section 148 dated 31st March 2021 for AY 2015-16 and the similar notice for AY 2016-17, as well as the orders rejecting objections dated 24th January 2022. The court held that the reassessment was based on the same material already considered in the original assessment and amounted to an impermissible change of opinion.
Law Points
- Reassessment under section 147/148 of Income-tax Act
- 1961 cannot be based on same material already considered in original assessment
- Change of opinion not permissible
- Reasons must disclose tangible material not considered earlier
- Section 148 notice must be based on fresh information
