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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Arunbhai Maneklal Jhaveri And Sons Through Partner Rajubhai Arunbhai Jhaveri - Petitioner
Versus
The Deputy Commissioner of Income Tax Circle 2(1)(1) - Respondent
R/Special Civil Application No. 18509 of 2021
Decided On : 14-06-2024
Income Tax - Reopening Assessment - Income Tax Act, 1961 - Sections 147, 148, 143(3), 142(1) - The court held that reopening of assessment based on mere change of opinion without new tangible material is impermissible under the Act.
Fact of the Case:
The petitioner, a partnership firm, filed its income tax return for AY 2017-18, which was scrutinized and accepted. Subsequently, a notice for reopening the assessment was issued based on new information regarding cash deposits, which the petitioner contested as a change of opinion.
Finding of the Court:
The court found that the reopening notice was based on previously disclosed information and did not constitute new tangible material, thus quashing the notice.
Issues: Whether the reopening of the assessment under Section 148 was justified based on the information received from the Investigation Wing.
Ratio Decidendi: The court emphasized that reopening assessments requires tangible material indicating income escapement, and cannot be based on mere change of opinion.
Result: The notice for reopening the assessment was quashed and set aside.
ORDER :
Bhargav D. Karia, J.
1. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs :
2. The brief facts of the case are as under:
2.1 The petitioner is a partnership firm established on 1st April 1994. The petitioner filed the return of income for the Assessment Year 2017-18 through electronic media on 29th October 2017 declaring total income of Rs.96,91,680/-.
2.2 Thereafter, the case of the petitioner was selected for scrutiny assessment under Section 143(3) of the Income Tax Act, 1961 (for short, “the Act”) and notice was accordingly issued by the Assessing Officer - ACIT, Circle 5(2)(1), Ahmedabad. During the course of assessment proceedings, various details and explanation were called for, all of which had been duly submitted on record of the then Assessing Officer so as to say that there was due compliance and full and true disclosure on the part of the petitioner.
2.3 The then Assessing Officer had issued notice under Section 142(1) of the Act dated 23rd August 2019 whereby he had asked to submit details regarding source and nature of cash deposited for the Financial Years 2015-16 and 2016-17 and in response to the same, the petitioner had submitted the details of source and nature of cash deposited for the Financial Years 2015-16 and 2016-17 vide reply dated 3rd December 2019.
2.4 Thereafter, the petitioner received another notice under Section 142(1) of the Act dated 30th November 2019, wherein the then Assessing Officer sought for information with regard to the cash deposit made by the assessee firm in its various bank accounts with AXIS Bank and other banks during the Financial Year 2016-17 and in response to the same, the petitioner made two submissions dated 10th December 2019 on the ITBA Online platform on 10th December 2019.
2.5 Subsequently, the petitioner received other notices under Section 142(1) of the Act dated 11th October 2019 and 21st November 2019, all of which were duly complied with by the petitioner vide replies dated 29th August 2019, 18th October 2019, 23rd October 2019, 8th November 2019 and 22nd November 2019 respectively so as to say that due compliance was made against all of the notices issued by the Assessing Officer from time to time.
2.6 Ultimately, the assessment order under Section 143(3) of the Act was framed after thorough scrutiny on 26th December 2019, wherein no addition has been made in respect of the amount cash deposit determining the total income at Rs.96,91,680/- being returned income as assessed income. The then Assessing Officer, after verification of facts and submissions placed before him by the petitioner such as source of cash deposit in the form of cash book, bank book, month wise cash sales being the source of cash deposits and after application of mind, passed the assessment order dated 26th December 2019 under Section 143(3) of the Act.
3. The petitioner, thereafter, received notice under Section 148 of the Act dated 30th March 2021 for reopening of the Assessment Year 2017-18.
3.1 That the petitioner has filed Income Tax Return under Section 148 of the Act dated 23rd April 2021 under protest and made compliance with the provisions of the Act.
3.2 Subsequently, the respondent issued notice under Section 143(2) read with Section 147 of the Act dated 21st May 2021 along with reasons recorded for reassessment on the basis of information received from the Investigation Wing, Ahmedabad.
4. The petitioner filed objections against with the relevant exhibits vide letter dated 27th May 2021. The respondent, by letter dated 11th November
Reopening of income tax assessments requires new tangible material; mere change of opinion is insufficient.
The court ruled that an Assessing Officer must demonstrate a tangible basis for believing income has escaped assessment; mere suspicion or lack of evidence does not justify reopening.
Reopening of assessment under section 148 requires new tangible material; reliance on previously considered facts constitutes a change of opinion, which is impermissible.
Reopening of assessment under the Income Tax Act requires tangible new material; mere change of opinion is insufficient.
Reopening of assessment under the Income Tax Act requires fresh tangible information; reliance on previously available data constitutes a change of opinion, which is impermissible.
The court emphasized the need for tangible material to believe that income had escaped assessment and held that the power to grant approval for re-opening an assessment is coupled with a duty and can....
Reopening of assessment under section 148 requires valid reasons and cannot be based on mere suspicion or for verification purposes.
The Assessing Officer must have tangible evidence linking the taxpayer to alleged income escape for valid reassessment under the Income Tax Act; mere suspicion is insufficient.
Reopening of assessment under the Income Tax Act requires tangible material; mere change of opinion is insufficient for reassessment.
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