High Court of Bombay

Arvind Sahdeo Gupta vs. Income Tax Officer and Ors.

MANU/MH/3092/2023

08.08.2023

Direct Taxation

If the reasons for re-opening the assessment are based on incorrect facts, the notice issued for re-opening cannot be sustained

The challenge raised in present Writ Petition is to the notice dated 24th March, 2020 that has been issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961. The challenge raised to the notice issued under Section 148 of the Act of 1961 is principally on the grounds that the said notice has been issued on incorrect facts, no reasons have been given while deciding the objections raised by the Petitioner to the re-opening of the proceedings and the same have been decided without passing any speaking order. In addition, it is urged that the re-opening of the proceedings is without there being any independent application of mind and no reasons to believe have been indicated by the Income Tax Officer ("ITO") in that regard.

The effect of re-opening the assessment based on wrong facts or conclusions has been considered in Tata Sons Limited vs. Dy. Commissioner of Income Tax and Others. It has been held that if the reasons for re-opening the assessment are based on incorrect facts or conclusions, the notice issued for re-opening cannot be sustained.

By issuing subsequent notice, the ITO has sought further information from the Petitioner which information does not form the basis of the reasons assigned for re-opening the proceedings. This is clear from the notice dated 24th August, 2021. The Division Bench in Nivi Trading Limited vs. Union of India and Ors. has held that if further details are sought or some verification is proposed by the officer, same cannot be a substitute for the reasons that have led the Assessing Officer to believe that an income chargeable to tax has escaped assessment.

The notice dated 24th March, 2020 issued under Section 148 of the Act of 1961 seeking re-opening of the assessment is based on incorrect facts. The objections raised by the petitioner pointing out the relevant facts including the proper Assessment Year to which the said transaction pertained being Assessment Year 2012-13 coupled with the fact that the amount of Rs. 9,90,314 that was stated to be the amount being profit from the sale of shares having been explained to be the amount of loss, the objections having been decided without any speaking order and not dealing with the undisputed factual aspects leads to the conclusion that the re-opening of the assessment is without there being any reason to believe that the income has escaped assessment.

The notice dated 24th March, 2020 suffers from fundamental factual errors. An exceptional case thus having been made out to interfere in exercise of writ jurisdiction, the impugned notice dated 24th March, 2020 issued under Section 148 of the Act is quashed and set-aside. Consequentially, further steps taken by the Respondents based on said notice would no longer survive.

Tags : Assessment Notice Validity

Share :