Case Note & Summary
The petitioner, Parinee Realty Pvt. Ltd., filed a writ petition challenging a notice dated 30 March 2021 issued under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for Assessment Year 2017-18, and an order dated 22 June 2021 rejecting its objections. The original assessment under Section 143(3) had been completed after scrutiny, wherein the Assessing Officer had examined the issue of long-term capital gains claimed by the petitioner. The reasons recorded for reopening stated that the petitioner had claimed long-term capital gains on sale of shares of a company, but the Assessing Officer had not examined the applicability of Section 50C of the Act. The petitioner contended that the reopening was based on a mere change of opinion, as the issue had already been considered during the original assessment. The court analyzed the reasons and found that the Assessing Officer had indeed examined the issue of long-term capital gains during the original assessment, including the applicability of Section 50C. The court held that the reopening was based on a mere change of opinion and was therefore invalid. The court relied on the principle that the Assessing Officer has no power to review but only to reassess based on tangible material. The petition was allowed, and the notice and order were quashed.
Headnote
A) Income Tax - Reassessment - Section 147, 148 Income Tax Act, 1961 - Change of Opinion - Reopening within four years of assessment year - Petitioner challenged notice under Section 148 and order rejecting objections - Court held that where the reasons for reopening were already considered during original assessment under Section 143(3), the reopening is based on mere change of opinion and invalid - Held that the Assessing Officer cannot review but can reassess only on tangible material (Paras 1-10).
Issue of Consideration
Whether the notice under Section 148 of the Income Tax Act, 1961 seeking to reopen assessment for A.Y. 2017-18 is based on mere change of opinion and therefore liable to be set aside.
Final Decision
The petition is allowed. The notice dated 30 March 2021 under Section 148 of the Income Tax Act, 1961 and the order dated 22 June 2021 rejecting the petitioner's objections are quashed and set aside.
Law Points
- Reassessment within four years requires only tangible material
- not fresh tangible material
- change of opinion is not permissible
- Assessing Officer cannot review but can reassess
- reason to believe must be based on tangible material
- proviso to Section 147 not applicable within four years.
Case Details
2022 LawText (BOM) (01) 35
Writ Petition No. 3638 of 2021
K.R. Shriram, R.N. Laddha
Mr. Nishant Thakkar a/w Mr. Hiten Chande i/b Lumiere Law Partners for Petitioner, Mr. Suresh Kumar for Respondents-Revenue
Assistant Commissioner of Income Tax, Central Circle - 2(3) & The Union of India
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Writ petition challenging notice under Section 148 of Income Tax Act, 1961 for reopening assessment and order rejecting objections.
Remedy Sought
Petitioner sought quashing of notice dated 30 March 2021 under Section 148 and order dated 22 June 2021 rejecting objections.
Filing Reason
Petitioner claimed that the reopening was based on mere change of opinion as the issue of long-term capital gains was already examined during original assessment under Section 143(3).
Previous Decisions
Original assessment under Section 143(3) was completed after scrutiny; objections to reopening were rejected by order dated 22 June 2021.
Issues
Whether the notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for A.Y. 2017-18 is based on mere change of opinion and therefore invalid.
Submissions/Arguments
Petitioner argued that the reasons for reopening were already considered during original assessment under Section 143(3), hence reopening is based on change of opinion.
Revenue argued that the Assessing Officer had not examined the applicability of Section 50C during original assessment, thus reopening was justified.
Ratio Decidendi
Where the reasons recorded for reopening an assessment under Section 148 of the Income Tax Act, 1961 are based on issues that were already considered during the original assessment under Section 143(3), the reopening is based on mere change of opinion and is invalid. The Assessing Officer has no power to review but only to reassess based on tangible material.
Judgment Excerpts
The re-opening is proposed to be made within four years of the end of the relevant assessment year. In such a situation even though proviso to Section 147 of the Act would not apply, and the Assessing Officer has to only make out availability of tangible material, it is settled law that if the re-opening is based on mere change of opinion, the notice issued under Section 148 of the Act has to be set aside.
The Assessing Officer has no power to review; he has the power to reassess. The reassessment has to be based on the fulfillment of certain conditions. It is settled law that if the concept of change of opinion is removed, then in the guise of reopening the assessment, the review would take place.
Procedural History
Original assessment under Section 143(3) completed for A.Y. 2017-18. Notice under Section 148 issued on 30 March 2021 seeking to reopen assessment. Petitioner filed objections which were rejected by order dated 22 June 2021. Petitioner then filed Writ Petition No. 3638 of 2021 before the Bombay High Court.
Acts & Sections
- Income Tax Act, 1961: Section 147, Section 148, Section 143(3), Section 50C
