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DEVENDRA KUMAR UPADHYAYA, SUBHASH VIDYARTHI
Distributors India (South) – Appellant
Versus
Union of India – Respondent
JUDGMENT :
Subhash Vidyarthi, J.
1. Heard Shri Desh Deepak Chopra, Senior Advocate assisted by Sri. Shailesh Verma, Advocate, the learned counsel for the petitioner and Shri Manish Misra, Advocate, the learned counsel for the respondents.
2. By means of this writ petition filed under Article 226 of the Constitution of India, the petitioner has challenged the validity of a notice dated 26.03.2021 issued by the Income Tax Officer, Range-5, Ayakar Bhawan, 5, Ashok Marg, Lucknow under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') proposing to assess/reassess the income/loss for the assessment year 2013-14.
3. The petitioner's case is that it is a registered partnership firm. It has entered into agreements with various Pharmaceutical and FMCG (Fast Moving Consumer Goods) Companies for providing Carrying and Forwarding Agents (C&F Agents) services. As per the terms of the agreements, the petitioner incurs various business expenses on behalf of the principal companies and while reimbursing the expenses, the principal companies deduct TDS. However, the reimbursement of expenses is not the petitioner's income and, therefore, it is not reflected in the petitioner
Point of Law : Court satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148.
Under section 147 of the Act the proceedings for the reassessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any....
Reopening of assessment under Section 148 is invalid if based on materials already available during the original assessment, constituting a mere change of opinion without fresh evidence.
Point of Law : Assessment - Unless any income chargeable to tax has escaped assessment for such assessment year by reason o f the failure on the part of the assesse to disclose fully and truly all ma....
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 the Income Tax Act after four years is impermissible without failure to disclose material facts; mere change of opinion does not justify such action.
The 'reason to believe' for reassessment must be based on tangible material with a direct nexus to the formation of the belief, and reassessment cannot be made on a change of opinion.
Point of Law : Power to reopen an assessment must be conditioned on the existence of “tangible material” and that “reasons must have a live link with the formation of the belief”.
The judgment established the importance of tangible material and the prohibition of a mere change of opinion in the exercise of power under section 147 of the Income Tax Act.
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.
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