Reopening Based on Mere Change of Opinion Invalid: ITAT Quashes ₹4.96 Crore Income Tax Addition [Read Order]

The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) quashed the reassessment proceedings, ruling that the reopening of assessment based on a mere change of opinion was invalid under the Income Tax Act, 1961.

GCK Stock Private Limited, a securities trading company, had originally filed its return for the Assessment Year 2015-16, disclosing income of Rs. 3,77,390, which was accepted in a scrutiny assessment completed under Section 143(3) in December 2017.

Based on information from SEBI and the Investigation Wing, the Assessing Officer (AO) reopened the case under Section 148A(d) in July 2022, alleging that the assessee had engaged in pre-arranged reversal trades in illiquid stock options, leading to an artificial loss of Rs. 4.96 crore.

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The assessee’s counsel objected to the reopening, arguing that the issue of reversal trades had already been examined in the original assessment. They further argued that the reassessment was time-barred under the limitation framework clarified in the Supreme Court’s ruling in Union of India v. Rajeev Bansal, which stated that for AY 2015–16, any reassessment notice issued after March 31, 2022, is invalid due to the inapplicability of TOLA (Taxation and Other Laws [Relaxation and Amendment of Certain Provisions] Act, 2020).

The assessee’s counsel submitted that no personal hearing was granted despite a written request and that the order passed under Section 148A(d) failed to address the detailed objections raised, which violated principles laid down in GKN Driveshafts (India) Ltd. v. ITO.

The department counsel argued that reopening was justified based on new material from SEBI showing fictitious losses and that the addition of Rs. 4.96 crore was supported by patterns of sham trades and a lack of evidence supporting genuine transactions.

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The two-member bench comprising Dr. S. Seethalakshmi (Judicial Member) and Gagan Goyal (Accountant Member) observed that the reopening was indeed a case of change of opinion on facts already examined in the original scrutiny. The tribunal held that the reassessment was time-barred in light of binding judicial precedents and that the AO failed to provide the assessee with a fair opportunity of hearing under Section 148A of the Income Tax Act.

The tribunal quashed the reassessment and held the reopening notice invalid. The appeal was partly allowed for statistical purposes, rendering the addition of Rs. 4.96 crore infructuous.

To Read the full text of the Order CLICK HERE

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