Bombay High Court Quashes Reassessment Triggered On A Change Of Opinion As To The Calculation Of Tax Payable By The Assessee

The Bombay High Court has quashed the reassessment proceedings triggered by a change of opinion as to the calculation of tax payable by the assessee.

The bench of Justice Dhiraj Singh Thakur and Justice Kamal Khata has found no substance in the AO’s reason to believe that income chargeable to tax has escaped assessment in so far as there is no mention of any tangible material that led to his conclusion.

The petitioner/assessee had filed her return of income for AY 2014-15 on July 28, 2014. The AO had passed an order under Section 143 (3) by which he added Rs. 1,07,18,922 to the total income on account of the withdrawal of exemption claimed by the petitioner under Section 10(38), and the petitioner paid tax on it. The petitioner was granted a waiver of penalty for the AY 2014–15 on an application under Section 273A by the PCIT.

The reassessment notice was issued after a period of four years, following which a return of income was filed by the petitioner. It was followed by a notice under Section 143(2) and a notice under Section 142(1) seeking details, to which the petitioner filed a response and objected to the reassessment by communication.

Since the notice under Section 148 has been issued after the expiration of four years from the end of the relevant AY, respondents have to show that the jurisdictional requirement is satisfied and that there was a failure to truly and fully disclose material facts.

The AO records that the assessee claimed to have purchased shares of the penny stock scrips for a total of Rs. 33,09,976 and sold them for a consideration of Rs. 1,15,90,280. Therefore, he held that the long-term capital gain would be unexplained investment or income from other sources and not a capital gain as claimed by the assessee on the premise that the entire transaction of purchase and sale of shares was a part of the accommodation entry and represents an unexplained investment made by the assessee in cash to obtain an equivalent amount of bogus profit on the sale of shares.

The court held that reconsideration of the material available at the time of the original assessment proceedings was tantamount to a change of opinion and therefore invalid.

Case Title: Chanchal Bhagwatilal Gokhru Versus Union of India

Citation: 2023 LiveLaw (Bom) 253

Case No.: Writ Petition No. 2014 Of 2022

Date: 04/05/2023

Counsel For Petitioner: Rajendra

Counsel For Respondent: Akhileshwar Sharma

Click Here To Read The Order