The Bombay High Court quashed reassessment notice on the ground that there was non-application of mind by Assistant Commissioner of Income Tax without considering relevant documents.
The writ petition invokes the jurisdiction under Article 226 of the Constitution of India challenging the legality and validity of the notice issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961 (the Act) and order rejecting the objections of the petitioner to the aforementioned notice. The impugned notice relates to Assessment Year 2015-2016.
The petitioner, Lakshdeep Investments & Finance Pvt Ltd, filed its return of income for the Financial Year 2015-2016 declaring total income of Rs.136 crores and since the transaction of issuance of rights shares and the receipt of the share premium was on its capital account, there was no requirement of bringing the said amount to tax.
However, the revenue selected the petitioner’s return for scrutiny under Section 143 (2) of the Act by its notice and in the course of assessment proceedings and the petitioner received the impugned notice under Section 148 of the Act that, the petitioner’s income chargeable to tax for assessment year 2015-2016 had escaped assessment.
Nitesh Joshi, counsel for the petitioner argued that the belief formed by the Assessing Officer should not be based on Audit objections, which is the case as demonstrated herein and that the respondents have failed to produce the relevant information, namely, the correspondence with the Audit Department, since it would obviously favour the petitioner’s case.
Suresh Kumar, Counsel for the respondents submitted that the provisions of Section 151 to obtain approval for the reopening has been complied with and that the reasons cited in the notice for reopening assessment under Section 148 is based upon the fact that the wrong valuation had been assigned by the petitioner in its earlier assessment to the rights shares.
The Coram comprising Justices Dhiraj Singh Thakur and Valmiki Sa Menezes observed that “The impugned notice under Section 148 appears to suffer from total non-application of mind, in that, respondent No.1, Assistant Commissioner of Income Tax, has not considered all the documents furnished by the petitioner along with its reply / objections to the reopening notice, wherein its valuation report of all the details of calculation and disclosures made in the earlier scrutiny proceedings had been produced.”
The Bench concluded by noting that it is a clear case of a change of opinion on the very same material which was before the earlier Assessment Officer and on which basis, the first assessment order was passed after scrutiny. This line of action is impermissible under Section 147 of the Act.
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