Where Revenue fails to issue reopening notice within four-years limitation, due to shifting of office premises, same cannot be deemed as being based on ‘change of opinion’: HC

change of opinion


AHMEDABAD : THE ISSUE IS – Whether where Revenue fails to issue reopening notice within the four-years limitation, due to shifting of office premises, can such notice be deemed as being based on ‘change of opninion’. AND THE VERDICT IS NO.

Facts of the case:

The assessee, an individual, engaged in the business of brokerage from dealing in land at Surat. The assessee had returned income for the AY 2007-08, on which, no scrutiny assessment was made. A survey operation was carried out at the assessee’s business premises wherein, certain diaries and loose papers were found and seized. On perusal of such papers and written submission in responses to summons u/s 131, the AO noted that those were related to the land transactions and receipts of cash received from other persons and the cast payments made to others pertaining to the relevant AY. Accordingly, the AO held that there were sizeable land dealings relatable to the period relevant to the AY in question and therefore, formed a belief that income chargeable to tax to the tune of Rs. 44.50 crores had escaped assessment.. Hence, the AO issued the reopening notice.

The assessee, first applied for settlement of the case before the Settlement Commission and consequently, the said reopening notice remained suspended. However, when the assessee’s application was rejected by the Commission, the reassessment proceeding arising out of the said notice, was revived. At that stage, the assessee filed a petition challenging the reopening notice. Meanwhile, the AO proceeded with the reassessment and completed the same..

High Court held that,

++ the facts on record would suggest that the assessee had filed the return for the relevant AY, on which, no scrutiny assessment was made. In other words, the return was processed u/s 143(1). Under such circumstances, the AO would have wider scope for reopening the assessment since no scrutiny assessment was, originally, framed. The AO, therefore, cannot be stated to have formed any opinion and hence, the question of change of opinion would not arise. This aspect has been discussed by the Supreme Court in cases of Rajesh Jhaveri Stock Brokers P. Ltd. and Zuari Estate Development and Investment Company Ltd.;

++ the assessee has not challenged the validity of the reasons recorded by the AO while issuing the reopening notice. The assessee’s sole contention is that the sanction required in terms of Sec. 151 has not been validly granted. As is well known, Sec. 151(1) provides that no notice shall be issued u/s 148 by the AO after the expiry of a period of 4 years from the end of relevant AY unless the Pr Chief Commissioner or the Chief Commissioner or the Pr Commissioner or the Commissioner is satisfied on the reasons recorded by the AO that it is a fit case for the issuance of such notice. Sec. 151(1), thus, provides a safeguard whereby, in a case where the AO desires to reopen an assessment, by issuing notice beyond the period of 4 years from the end of relevant AY, sanction from the said higher authority would be needed;

++ the Revenue, in response to the notice issued by this Court, have appeared and filed reply dated 19.12.2017, in which, in relation to the question of sanction, it was submitted that during the assessment proceedings, the assessee had requested to provide him a copy of reasons recorded and approval obtained u/s 151(1) for the relevant AY. The same was duly provided to the assessee. The assessee had also made a noting in the order sheet. Thereafter, vide an RTI application, the assessee had requested a photo copy of the case records, order sheet and also requested examination of the case records which were duly provided. In reply to the RTI application, it was intimated by this office that copy of approval obtained u/s 151(1) is presently not found on record.

It was intimated that since the office had shifted before 6 months, it is possible that the approval may be in a separate folder and might got detached from the original order. Thereby, the assessee had filed a Special Civil Application before the Gujarat High Court alleging that prior sanction u/s 151(1) was not obtained before reopening the assessment proceedings and the AO was not justified in passing the assessment order.. Efforts were put in to obtain a copy of the same from the records of the Office of Jt. CIT, Range 1(3), Surat. Since, the Office has shifted around 6 months back, there were many records which were unpacked in cartons. The Jt. CIT, Range 1(3), Surat had specially created a team to trace the records and after lot of searching, the approval folder was traced from the office. We discarded the assessee’s first argument that no sanction at all was granted by the competent authority.

(See 2018-TIOL-921-HC-AHM-IT)

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