Reassessment Notice Issued By The AO Merely On The Basis Of Change Of Opinion: Bombay High Court Quashes Order

The Bombay High Court has quashed the reassessment order on the grounds that the only reason for issuing the notice under Section 148 of the Income Tax Act appeared to be that the Assessing Officer had come to a different opinion on the question of valuation than the one adopted by the petitioner.

The division bench of Justice Dheeraj Singh Thakur and Justice Valmiki SA Menezes has observed that the order rejecting the objections has not even once mentioned the valuation report submitted by the petitioner during the earlier assessment proceedings after scrutiny, nor does it refer to the method used by the petitioner for valuation.

The petitioner/assessee is in the investment business. Against the share capital, the petitioner's reserves and surplus with securities held by it at the book value and fair market value for the shares quoted were at Rs. 30,11,66,00,359

The petitioner received the notice under Section 148. The notice alleged that there were reasons to be recorded—the petitioner's income chargeable to tax for assessment years 2015–2016 had escaped assessment.

The petitioner submitted that the Assessing Officer would assume jurisdiction under Section 147 only if he had reason to believe that the assessee's income chargeable to tax for the relevant year had escaped assessment. The assessment officer had previously accepted the method of determining the fair market value of the rights shares issued, which was based upon the methods provided under the Act. The Assessing Officer had recorded satisfaction in its assessment order passed under Section 143 (3), and thus, there was no ground available at law to reopen the assessment.

The court has observed that when the Assessing Officer, in his order to dispose of objections, does not deal with the factual position asserted by the petitioner, it would be safe to conclude that the revenue does not dispute the fact stated by the petitioner, and thus, there could be no reason for the Assessing Officer to believe that the income chargeable to tax has escaped assessment.

Case Title: Lakshdeep Investments & Finance Pvt. Ltd. Versus Assistant Commissioner of Income-tax

Case No: Writ Petition No. 2946 Of 2022

Citation: 2023 LiveLaw (Bom) 141

Date: 13/03/2023

Counsel For Petitioner: Nitesh Joshi, Atul K. Jasani

Counsel For Respondent: Suresh Kumar, Swapna Gokhale

Click Here To Read The Order