Reopening us 147 148 invalid if assessee replied questionnaire raising specific queries during original assessment as it would amount to change of opinion

Reopening us 147 148 invalid if assessee replied questionnaire raising specific queries during original assessment as it would amount to change of opinion-Delhi High Court.

Case Law Details:
WP(C) 2526/2015
Allied Strips Limited (Petitioner) vs. Assistant Commissioner of Income Tax  (Respondent)
Date of Judgment: 12/05/2016
Coram: Justice Sanjeev Sachdeva and Justice Badar Durrez Ahmed

Important Judgments Cited:
CIT vs. Usha International Ltd. (2012) 348 ITR 485 (Delhi) (FB)
Haryana Acrylic Manufacturing P. Ltd. Co. Vs. CIT 2009 (308) ITR 38 (Delhi)

Brief facts of the Case:
The original assessment of the assessee was completed u/s 143(3) on 07-10-2009. During the course of the assessment proceedings a detailed questionnaire was issued by the Assessing Officer raising specific queries with regard to share application money. In response to the said query, the assessee furnished details of the share capital raised during the year alongwith with the complete details of shareholders, their addresses, PAN numbers, number of shares. Also confirmation letter from shareholders were also filed providing the details of the shares, investment made, mode of payment and the bank through which the payment was made. In addition thereto, the acknowledgement of e-returns of each of the shareholders was also furnished. The Assessing Officer after examining the aspect of share application money completed the assessment accepting the returned income without making any addition on account of the share application money.

However later on 27-03-2014 (after the expiry of four years from the completion of the original assessment), a notice was issued by the Revenue under Section 148 of the Income Tax Act, 1961 for reassessment u/s 147. The reasons supplied to the assessee stated that the Revenue had received information from Income Tax (Investigation Wing) that the assessee company had taken accommodation entry in the form of share premium/share capital from various non-existent paper companies.

Contentions of the Assessee:
The assessee submitted that the reassessment proceedings had been initiated after a period of 4 (four) years from the end of the relevant assessment year and the precondition for such initiation that there was failure on the part of the assessee to fully and truly disclose all the material particulars necessary for the assessment was absent. It was contended that there was true and full disclosure of all material particulars made by the assessee and the reasons for re-opening did not even show that there was any such failure on the part of the assessee. It was further contended that it was a clear case of change of opinion, in as much as, the reasons assigned to issuance of notice u/s 148 had been duly considered by the Assessing Officer during the original assessment under Section 143(3).

The Court held that in the facts of the case, the issuance of notice u/s 148 amounted to a change of opinion, which was not permissible.  The Court observed that the pre-condition of failure on part of the assessee to fully and truly disclose all the material particulars necessary for assessment had not been made out by the Revenue.

Important excerpts from the Judgment:

In Haryana Acrylic Manufacturing P. Ltd. Co. Vs. CIT 2009 (308) ITR 38 (Delhi), this Court held as under:-

“29. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. [2009] 308 ITR 22 (Delhi) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania [2004] 269 ITR 192 that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated March 29, 2004, under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated March 2, 2005, are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.”

In the present case also, there is not even a whisper of any allegation that there has been a failure on the part of the assessee to disclose fully and truly all material particulars necessary for assessment.