Case Note & Summary
The petitioner, Sterlite Technologies Limited, challenged a notice dated 27 March 2021 issued under Section 148 of the Income Tax Act, 1961 for reassessment of Assessment Year 2016-17. The petitioner had filed its return on 29 November 2016 declaring total income of Rs. 161,79,93,020 under normal provisions and book profit of Rs. 219,56,07,298 under Section 115JB. The case was selected for scrutiny and an assessment order under Section 143(3) was passed on 21 December 2018, assessing income at Rs. 176,32,00,710 under normal provisions and book profit at Rs. 225,45,68,489 under Section 115JB. Subsequently, the Assessing Officer issued the impugned notice alleging that income had escaped assessment within the meaning of Section 147. The reasons recorded stated that on perusal of records, it was observed that the assessee had purchased 100% shares of a company and claimed certain deductions, which were not properly examined. The petitioner contended that the notice was based on a mere change of opinion as all transactions were already examined during the original scrutiny assessment, and that the notice was issued beyond four years without any failure to disclose material facts. The court analyzed the reasons and found that the transactions in question were indeed part of the original assessment records and had been considered. The court held that the reassessment notice was based on a change of opinion and lacked fresh tangible material, and therefore was invalid. The court quashed the notice and allowed the petition.
Headnote
A) Income Tax - Reassessment - Section 148 of the Income Tax Act, 1961 - Notice Beyond Four Years - The court considered whether a reassessment notice issued under Section 148 for Assessment Year 2016-17, beyond four years from the end of the assessment year, was valid when the reasons recorded were based on the same transactions already examined during the original scrutiny assessment completed under Section 143(3). The court held that the notice was based on a mere change of opinion and lacked fresh tangible material, and therefore was invalid. (Paras 1-10) B) Income Tax - Reassessment - Section 147 of the Income Tax Act, 1961 - Reason to Believe - The court examined the requirement of 'reason to believe' under Section 147 for reopening an assessment. It held that the reasons recorded must be based on new information not available during the original assessment, and that a mere change of opinion on the same set of facts does not constitute valid reason to believe. The court quashed the notice as the revenue failed to show any failure on the part of the assessee to disclose material facts. (Paras 2-10) C) Income Tax - Reassessment - Section 151 of the Income Tax Act, 1961 - Sanction - The court noted that the sanction for issuance of notice under Section 148 was granted without proper application of mind, as the reasons did not disclose any fresh material. The court held that the notice was liable to be set aside on this ground as well. (Paras 8-10)
Issue of Consideration
Whether a notice issued under Section 148 of the Income Tax Act, 1961 for reassessment beyond four years from the end of the relevant assessment year is valid when the reasons are based on the same material already considered during the original scrutiny assessment, and whether such notice is barred by change of opinion.
Final Decision
The court allowed the petition and quashed the notice dated 27 March 2021 issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2016-17.
Law Points
- Reassessment notice beyond four years requires failure to disclose material facts
- Change of opinion not permissible in reassessment
- Section 148 notice must be based on fresh tangible material
- Section 147 requires reason to believe based on new information
