Facts of the Case

The petitioner company challenged a notice dated 31 March 2018 issued under Section 148 of the Income Tax Act, 1961 and the subsequent order dated 25 September 2018 under Section 148A(d) for Assessment Year 2011-12.

The petitioner, engaged in the real estate business, had filed its return declaring income of ₹6,23,974. The case was scrutinized, and an assessment order was passed under Section 143(3). Subsequently, a survey under Section 133A was conducted at the office of one of its directors, which later culminated in search proceedings and assessment under Section 153A, wherein no additions were made.

Later, reassessment proceedings were initiated based on information from the Investigation Wing regarding substantial cash deposits made by one Mr. Manoj Sethi, who allegedly had financial transactions with the petitioner and certain amalgamated entities. The Assessing Officer concluded that transactions amounting to ₹9.50 crore had escaped assessment due to failure of full and true disclosure by the petitioner.

Issues Involved

  1. Whether reassessment proceedings under Section 147/148 were valid after expiry of four years from the end of the assessment year.
  2. Whether the petitioner had failed to disclose fully and truly all material facts necessary for assessment.
  3. Whether the reopening was merely based on a change of opinion.
  4. Scope of Assessing Officer’s jurisdiction when new information emerges from the Investigation Wing. 

Petitioner’s Arguments

The petitioner contended that the transactions with Mr. Manoj Sethi were legitimate loan transactions carried out through banking channels (cheque/RTGS) and had already been disclosed during earlier assessments.

It was argued that Mr. Sethi had no connection with the company as a director or shareholder, and therefore, his cash deposits could not justify adverse inference against the petitioner. The petitioner further asserted that reassessment constituted a mere change of opinion, as the case had already undergone scrutiny and assessment earlier.

Reliance was placed on judicial precedents emphasizing that reopening beyond four years requires failure to disclose material facts.

Respondent’s Arguments

The Revenue argued that the petitioner had not made a full and true disclosure regarding the impugned transactions. It contended that fresh tangible material received from the Investigation Wing indicated unexplained financial dealings involving large amounts, justifying reassessment.

The Revenue further submitted that the Assessing Officer need only demonstrate a prima facie belief of escaped income at the reopening stage, and sufficiency of evidence is not to be examined at that stage.

Court Order / Findings

  • Section 147 permits reassessment where the Assessing Officer has “reason to believe” that income has escaped assessment.
  • After four years, reopening is permissible if there is failure to make full and true disclosure of material facts.
  • Mere production of books of account does not necessarily amount to full disclosure.
  • The information from the Investigation Wing constituted tangible material justifying reassessment.
  • The earlier assessment order did not examine the specific transactions forming the basis of reopening.
  • In absence of prior examination, the doctrine of “change of opinion” does not apply.
  • Courts should not preempt reassessment merely because the assessee disputes the allegations on merits.

Important Clarification

The judgment underscores that reopening of assessment beyond four years is sustainable where material facts were not fully disclosed, even if documents were available on record. It also clarifies that the “change of opinion” doctrine applies only where the Assessing Officer had consciously examined the issue earlier.

The Court emphasized that findings in the writ proceedings should not prejudice the merits of the reassessment, leaving the assessee free to raise all contentions before the tax authorities.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1772176980_NEWDELHIBDRBUILDERSANDDEVELOPERSPRIVATELIMITEDVsCOMMISSIONEROFINCOMETAXCENTRALCIRECLE15.pdf 

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