Case Note & Summary
The petitioner, an individual assessee, filed a return of income for Assessment Year 2018-19 on 27.07.2018 declaring total income of Rs. 27,26,64,000/-. The case was selected for scrutiny assessment under Section 143(3) of the Income Tax Act, 1961. During the scrutiny proceedings, the Assessing Officer issued notices under Section 142(1) seeking details regarding the computation of capital gains from the sale of shares and the claim under Section 54F. The petitioner furnished comprehensive replies and supporting documents, satisfying the queries. The assessment was completed under Section 143(3) on 12.03.2021, accepting the returned income without any adverse inference. Subsequently, the respondent issued a show-cause notice under Section 148A on 21.03.2022, proposing to reassess the income on the ground that there had been a change in the directors of the company whose shares were sold, which allegedly converted the capital gains into business income, resulting in escapement of income. The petitioner filed a detailed reply on 28.03.2022, pointing out that the same issue had already been examined in the original assessment. Ignoring the reply, the respondent passed an order under Section 148A(d) and contemporaneously issued a notice under Section 148 on 07.04.2022, pursuant to which the petitioner approached the High Court under Article 226 of the Constitution. The core legal question was whether the reassessment proceedings were invalid as being based on a mere change of opinion. The petitioner contended that the reassessment was nothing but a review of the earlier assessment, which is impermissible, as all material facts were already on record and had been examined. The revenue argued that the information was flagged on the Insight Portal under a high-risk category, and with the approval of the specified authority, the notice was validly issued. The court, after perusing the response filed in the original assessment and the assessment order itself, found that the Assessing Officer had indeed examined the capital gains issue and accepted the explanation. The court observed that the reasons set out in the order under Section 148A(d) had been fully considered in the original assessment order. Relying on the Supreme Court’s decision in Commissioner of Income Tax v. Kelvinator of India Limited, (2010) 320 ITR 561 (SC), which clarified that the concept of ‘change of opinion’ still holds good even after the amendment to Section 147, the court held that the Assessing Officer lacks the power to review his own assessment and cannot reopen an assessment on the same set of facts without any new tangible material. Consequently, the court allowed the writ petition, quashing the order under Section 148A(d) dated 07.04.2022 and the notice under Section 148 dated 07.04.2022 for Assessment Year 2018-19.
Headnote
A) Tax Law - Reassessment - Prohibition on Review by Assessing Officer - Income Tax Act, 1961, Sections 147, 148, 148A(d) - The court examined the response filed by the assessee in the original assessment proceedings and the assessment order dated 12.03.2021 under Section 143(3), noting that the reasons for reassessment, i.e., the treatment of capital gains as business income due to change in directors, were already considered. The court held that the Assessing Officer does not have the power to review his own assessment and cannot initiate reassessment proceedings based on a mere change of opinion; the impugned order and notice were quashed. (Paras 7-9) B) Tax Law - Reassessment - Interpretation of 'Reason to Believe' - Income Tax Act, 1961, Section 147 - The court relied on the Supreme Court decision in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited, (2010) 320 ITR 561 (SC), which held that even after the amendment to Section 147, the concept of change of opinion remains relevant; the phrase 'reason to believe' must be given a schematic interpretation to prevent arbitrary re-openings. The court applied this principle to the facts, finding that the Assessing Officer had merely sought to review information already on record. (Para 9)
Issue of Consideration
Whether the initiation of reassessment proceedings under Section 148A(d) and issuance of notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2018-19 were based on a change of opinion and therefore impermissible, given that the same information was already considered in the original assessment under Section 143(3).
Final Decision
The writ petition is allowed. The order dated 07.04.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the notice under Section 148 of the Act dated 07.04.2022 for Assessment Year 2018-19 are quashed and set aside.
Law Points
- Reassessment proceedings under Section 148 of the Income Tax Act cannot be initiated on mere change of opinion
- the Assessing Officer has no power to review his own assessment
- proceedings under Section 148 cannot be used to re-examine documents already considered in original assessment
- the concept of change of opinion remains a valid basis to quash reassessment notice even after the amendment to Section 147
