AO cannot reopen case u/s 148 on account of Error discovered on re-consideration of same material: Bombay HC

Bombay High Court in the matter of Parinee Realty Pvt. Ltd. vs. Assistant Commissioner of Income Tax & Anr said that Error discovered on re-consideration of the same material does not give AO, power to re-open u/s 148 of the IT Act.

Present petition has been filed against the notice issued under Section 148 of the Income Tax Act, 1961 (the Act) seeking to re-open the assessment for A.Y. 2017-18 and the order rejecting petitioner’s objections.

Observations and Findings:

• In the facts and circumstances of the present case, 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 reopening is based on mere change of opinion, the notice issued under Section 148 of the Act has to be set aside.
• The information on which reliance has been placed was received before the assessment order was passed. On this ground alone, it can be concluded that the conditions precedent to the exercise of the powers to re-assessment, i.e., existence of a reason to believe that income chargeable to tax has escaped assessment has not been met.
• Further it has to be noted that after the information on 20.01.2019 was received, as noted in the assessment order, five notices were issued by the Assessing Officer under Section 142(1) of the Act. In the notice dated 1st October, 2019 a specific query has been raised by which petitioner was called upon to provide party wise details alongwith address of the parties to whom loan and advances were given and details of interest received on such loans and also furnish the nature of the loans/advances. Petitioner responded.
• It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
• There can be no doubt in the facts of the present case that the issue of loan being given to group companies either at low interest rate or no interest rate was a subject matter of consideration by the Assessing Officer during the original assessment proceedings. It would therefore, follow that the re-opening of the assessment is merely on the basis of change of opinion of JAO from that held during the course of assessment proceedings leading to the assessment order dated 21st December, 2019.This change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment.
• As held by the Apex Court in the case of Indian & Eastern Newspaper Society, New Delhi vs. Commissioner of Income Tax, New Delhi , even if it is an error that the Assessing Officer discovered, still an error discovered on a re-consideration of the same material does not given him power to re-open.
• When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment.
• Even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings.
• Where on consideration of material on record, one view is conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view.
• The impugned notice dated 30th March, 2021 issued under Section 148 of the Act and the order dated 22nd June, 2021 rejecting petitioner’s objections are quashed and set aside.