RAJENDRA SUGANCHAND SHAH vs. ASST. COMMISSIONER OF INCOME TAX CIRCLE 1(3)

Facts

The assessee, Rajendra Suganchand Shah, engaged in the business of running petrol pumps, challenged a notice issued by the Assistant Commissioner of Income Tax (ACIT) under Section 148 of the Income Tax Act, 1961, to re-open his assessment for Assessment Year (AY) 2011-12. The notice was issued on March 28, 2018. The dispute concerns a sum of Rs. 6 Crore received in Financial Year 2006-07 (AY 2007-08) as an advance for property sale, which was later repaid in Financial Year 2010-11. The original assessment for AY 2011-12 was completed under Section 143(3) on January 24, 2014, without making additions regarding this transaction. The ACIT issued the Section 148 notice citing that the Rs. 6 Crore amount remained unsubstantiated and represented income from unexplained sources that had escaped assessment.

Held

The High Court allowed the writ petition and quashed the impugned notice. The Court found substance in two of the assessee's submissions: first, that the transaction, having occurred in AY 2007-08, could not be examined under AY 2011-12. Second, the re-opening appeared to be a case of change of opinion. The Court referred to the Supreme Court's decision in Commissioner of Income-Tax vs. Kelvinator of India Ltd., emphasizing that re-assessment must be based on tangible material and not a mere change of opinion. The Court noted that the original Assessing Officer had minutely scrutinized the Rs. 6 Crore transaction and the repayment thereof, and after due consideration of the details furnished, consciously chose not to make any addition. Therefore, the subsequent action of re-opening the case based on the same issue was considered untenable as it amounted to a change of opinion. Consequently, the impugned notice and all consequential proceedings were quashed.

Key Issues

1. Whether the Assessing Officer could re-open the assessment for AY 2011-12 concerning an amount received in AY 2007-08, particularly when the re-opening is beyond four years and there was no failure on the assessee's part to make a full and true disclosure? (Question of law and fact, concerning Section 147 of the Income Tax Act, 1961). 2. Whether the re-opening of assessment is based on a mere change of opinion by the Assessing Officer, lacking valid reasons to believe that income chargeable to tax has escaped assessment, and without a specific finding of escapement? Assessee's Contentions: - The transaction occurred in AY 2007-08, so AY 2011-12 could not be re-opened for it. - Re-opening is beyond four years, and there was no failure to disclose fully and truly. - Re-opening is based on a mere change of opinion. - Reasons for re-opening lack validity; no "reason to believe" that income escaped assessment. - Re-opening is impermissible for a roving inquiry without a specific finding of escapement. - No cause-and-effect relationship between reasons for re-opening and income escaping assessment. - Re-opening is based on "borrowed satisfaction." Revenue's Contentions: - Not recorded in the judgment.