DEEN DAYAL GUPTA S/O SHRI RAM KANWAR vs. ASSISTANT COMMISSIONER OF INCOME TAX

Facts

The petitioner, Deen Dayal Gupta, filed a writ petition challenging a notice dated March 29, 2019, issued under Section 148 of the Income Tax Act, 1961, and an order dated May 15, 2019, rejecting his objections. The original assessment for AY 2014-15 was completed under Section 143(3) accepting the returned income of ₹31,63,270/-. The reopening was initiated on the grounds that the petitioner was engaged in money lending, claimed interest expenditure of ₹35,86,892/-, and did not hold a license under the Rajasthan Money Lending Act, 1963, leading to escapement of income. The petitioner objected, arguing full disclosure during original scrutiny, no fresh material, and a mere change of opinion. The Assessing Officer rejected these objections.

Held

The High Court agreed with the Assessing Officer's reasoning that the reopening was not a mere change of opinion but based on facts not previously examined. The Court noted that while reassessment cannot be based on a change of opinion on the same material, it is permissible when a ground for reopening was never considered or examined in the original assessment. The notice arose from an aspect that genuinely escaped the Assessing Officer's attention: whether an amount allowed as expenditure qualified for that treatment. However, the Court acknowledged that under Section 2(9) of the Rajasthan Money Lending Act, 1963, money advanced through negotiable instruments falls outside the licensing requirement of Section 5. The petitioner's objection regarding negotiable instruments lacked specific particulars (cheque numbers, etc.) before the Assessing Officer. The Court, not inclined to speculate or make findings on unsupported submissions, affirmed the rejection of objections but granted liberty to the petitioner to place particulars of negotiable instruments on record. The Assessing Officer is to examine these particulars and proceed accordingly if transactions qualify for exemption under Section 29 of the Act. The writ petition was disposed of with these observations.

Key Issues

1. Whether the notice issued under Section 148 of the Income Tax Act, 1961, for AY 2014-15 is valid, or if it is based on a mere change of opinion by the Assessing Officer, thereby rendering it non-est. Assessee's Contention: The original assessment under Section 143(3) was completed after considering all material. The reopening is based on a change of opinion on facts already on record, not on fresh information. Section 147 permits reassessment only upon discovery of fresh information. Revenue's Contention: The reopening is not based on a change of opinion but on the licensing issue under the Rajasthan Money Lending Act, 1963, which was not examined in the original assessment. 2. Whether the licensing requirement under the Rajasthan Money Lending Act, 1963, applies to the petitioner, considering the nature of the transactions involving negotiable instruments. Assessee's Contention: Section 2(9)(i) of the Rajasthan Money Lending Act, 1963, excludes loans advanced on negotiable instruments for commercial purposes from the definition of 'loan', thus the licensing regime does not apply. Revenue's Contention: A license is mandatory for all money lending businesses, irrespective of the mode of advancing money.