SLP dismissed, Reopening Notice Quashed for Lack of New Information or Tangible Material

Summary in Key Points:

Issue: Whether the reopening of an assessment under Section 148 of the Income-tax Act, 1961 was valid based on information received from a survey, when the same information had already been used for reopening assessments for earlier years and those notices were quashed.
Facts: The assessee received a reopening notice under Section 148A(b) for the assessment year 2018-19. The notice was based on information from a survey conducted at a bank where the assessee transacted. The same information had been used to reopen assessments for earlier years, but those notices were quashed.
Decision: The High Court quashed the reopening notice, holding that there was no new information or tangible material to justify reopening the assessment for the current year. The Supreme Court upheld the High Court’s decision.

Decision:

The Supreme Court dismissed the Special Leave Petition (SLP) filed by the revenue department, upholding the High Court’s decision to quash the reopening notice. The court’s decision was based on the following:

No New Information: The information used for the current reopening was the same as that used for previous years, where the reopening notices were already quashed.
Lack of Tangible Material: The AO did not provide any new tangible material or evidence to justify reopening the assessment for the current year.
Reassessment Not Enlarged: The High Court clarified that the scope of reassessment was not enlarged by the amended provisions applicable after April 1, 2021. Therefore, the reopening could not be justified solely based on the new reassessment regime.

Important Note: This case highlights the importance of having new information or tangible material to justify reopening an assessment. The court’s decision emphasizes that the AO cannot rely on the same information used for previous reassessments, especially when those reassessments were quashed. This protects taxpayers from repetitive and unnecessary reassessment proceedings.

SUPREME COURT OF INDIA

Deputy Commissioner of Income-tax

Gokul Agro Resources Ltd.

J.B. PARDIWALA AND R. Mahadevan, JJ.

SLP (CIVIL) Diary No. 55481 of 2024

JANUARY 2, 2025

N. Venkataraman, A.S.G., Raj Bahadur Yadav, AOR, Mrs. Gargi Khanna, Chinmayee Chandra, Jagdish Chandra, Navanjay Mahapatra and Suyash Pandey, Advs. for the Petitioner.

ORDER

1. Heard the learned Additional Solicitor General appearing for the petitioner – Revenue and gone through the materials on record.

2. There is a gross delay of 123 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner.

3. Even otherwise, we see no reason to interfere with the impugned order passed by the High Court.

4. The Special Leave Petition is, accordingly, dismissed on the round of delay as well as merits.

5. Pending applications, if any, also stand disposed of.

_______________________

HIGH COURT OF GUJARAT

Gokul Agro Resources Ltd.

Deputy Commissioner of Income-tax

BHARGAV D. KARIA AND Niral R. Mehta, JJ.

R/SPECIAL CIVIL APPLICATION NO. 22654 of 2022

APRIL 22, 2024

Tushar Hemani, Sr. Counsel and Hardik V. Vora for the Petitioner. Varun K. Patel, for the Respondent.

ORDER

Bhargav D. Karia, J.- Rule returnable forthwith. Mr. Varun K. Patel, learned Senior Standing Counsel waives service of notice of rule on behalf of the respondent.

2. This petition has been filed challenging the order passed u/s.148A(d) of the Income Tax Act, 1961 (for short ‘the Act’) and the notice issued u/s.148 of the Act dated 31^st March, 2022 for A.Y. 2018-19.

3. The brief facts are similar to that of the Special Civil Application no.4383 of 2022 as the reopening notice u/s.148A(d) dated 09.03.2022 was issued by the Assessing Officer relying upon the action u/s.133A of the Act carried on on 11^th June, 2019 in case of Jammu & Kashmir Bank, wherein it was found that there was a difference between the remittance-sheet and the account statement of the various parties of the bank and the petitioner has transacted with the Jammu & Kashmir Bank and therefore, the following reasons are recorded for the notice u/s.148A(d).

4. The assessee replied on 15.03.2022 and provided all the bank statements held with the Jammu & Kashmir Bank pertaining to A.Y. 2017-18 relevant to A.Y. 20178-19 and book of all bank accounts held with the said Bank of the said period and it was contended by the petitioner that the transaction in foreign currencies with the said bank had been recorded in the books of accounts on the basis of entries appearing in the bank statement and difference if any arises on account of foreign exchange fluctuation between the entry already captured in the books of accounts and the settlement thereof as per the bank statement had already been disclosed at foreign exchange fluctuation gain/loss in the books of accounts of the assessee company. Hence, the difference identified between the bank remittance Data (Bill IDs) maintained by the bank and the bank statement of the assessee company would have no bearing on the books of accounts of the assessee company on the income as well and therefore, there is no question of any escapement of income.

5. The respondent Assessing Officer however, without considering the above explanation and the objections raised by the petitioner company, passed the order u/s.148A(d) observing as under :-

“5. It is further important to mention here that, in this case, the assessee has filed its return of income for the year under consideration and the return of income was only processed u/s.143(1) of the Act. In view of the above provision of Clause (b) of explanation 2 section 147 are of the Act. In view of the above, provision of clause (b) of explanation 2 Section 2 selection 147 are clearly applicable to facts of the case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. It is further noticed that, in earlier year, since, the case was not selected for regular scrutiny assessment, no further inquiries were concluded nor any queries was raised on the abovementioned issues and hence the issues discussed above were still unattended, unverified and never discussed by the A.O. For above stated reasons, it is not a case of change of opinion by the AO in view of the above facts and discussion, it is found that income to the extent of Rs.170,09,90,045/- Act, 1961.

6. The only ground on which the respondent authority has passed the impugned order u/s.148A(d) is that the case of the petitioner was not selected for scrutiny for A.Y. 2018-19 for regular scrutiny assessment and no further inquiries were conducted nor any queries were raised on the issue for reopening of the assessment year and therefore, the impugned notice was issued u/s. 148 of the Act.

7. Mr. Tushar Hemani, learned Senior Counsel for the petitioner reiterated the same submissions, which are made for earlier two assessment years i.e. A.Ys. 2016-17 and 201718 for which Special Civil Application no.4383 of 2022 and Special Civil Application no.4986 of 2022 are allowed after order passed of even date of this Court, and it was submitted that on the same reasoning the impugned order passed u/s.148A(d) and notices are required to be quashed and set aside.

7.1 It was submitted that merely because the case of the petitioner is not selected for scrutiny for the year under consideration, ground of challenge of change of opinion would not be available to the petitioner, but the basic fallacy in the impugned order with regard to the escapement of income would be there and accordingly only because of difference in the account statement and remittance sheet of the bank cannot be treated as an escapement of the income as stated by the respondent Assessing Officer. It was further pointed-out that no detail with regard to the so-called alleged difference is stated either in the notice u/s.148A(B) or in the impugned order passed u/s.148A(d) of the Act.

8. On the other hand, Mr. Varun K. Patel, learned Senior Standing Counsel for the respondent submitted that as in the facts of the case as there was no scrutiny assessment conducted by the respondent for the year under consideration and further inquiry is required to be made with regard to the difference found out during the course of survey action conducted on the Jammu & Kashmir Bank and huge difference between the remittance sheet and the account statement is stated in the impugned notice, as well as the order amounting to Rs.170,09,90,045/-, which requires to be considered during the course of the assessment pursuant to the impugned order and notice issued u/s.148 of the Act. It was submitted that under the new regime of the provision of reassessment, the information as per the explanation-1 of Section 148 of the Act has wide meaning and accordingly, the impugned order and the notice is required to be sustained without any interference.

9. Considering the above submissions and more particularly in view of the orders of the even date passed in the earlier A.Ys. for 2016-17 and 2017-18 in Special Civil Application no.4383 of 2022 and Special Civil Application no.4986 of 2022, we are of the opinion that on same material only because the year under consideration being A.Y. 2018-19 no scrutiny assessment is undertaken by the respondent -Assessing Officer and this being a new regime of reassessment after 1^st April, 2021, no different treatment can be given for reopening only because the scope is enlarged by the amended provisions for reopening. In our opinion, when the earlier assessment years which are subjected to reopening for which the notice is already quashed on the same material, there cannot be a reopening for the year under consideration and therefore, the impugned order, as well as, the notice is also required to be quashed and set aside.

10. In the result, the petition is allowed. The impugned order and the notice u/s.148 of the Act dated 31^st March, 2022 for A.Y. 2018-19 is quashed and set aside. Rule is made absolute. No order as to costs.