Shivam Ispat Private Limited Thr. Its Director Vijendra Kumar Singla vs. Union Of INDIA, Ministry Of Finance And Anr

Facts

The petitioner, Shivam Ispat Private Limited, filed an income tax return for Assessment Year 2016-2017. The case was selected for limited scrutiny, and notices were issued. A show cause notice was issued regarding alleged clandestine and unaccounted sales amounting to Rs. 3,07,96,304/-. The Assessing Officer, by an order dated 28.12.2018, added Rs. 3,07,963/- (1% gross profit on the alleged suppressed sales) to the petitioner's income. The petitioner withdrew an appeal against this order due to acceptance under the Vivad se Vishwas scheme. Subsequently, a notice under Section 148 of the Income Tax Act was issued on 27.3.2021, proposing to reassess income for AY 2016-2017. The petitioner objected, arguing it was a change of opinion, not a mistake. The objections were rejected by the respondent no. 2 via an order dated 2.2.2022, which is under challenge.

Held

The Court held that the impugned order dated 2.2.2022 and the consequent notice dated 27.3.2021 are not sustainable and are quashed and set aside. The Court found that the reasons for reassessment, as stated in the notice and the impugned order, relied on the same material (report of the Directorate General of Goods and Services Tax Intelligence) that formed the basis of the original assessment order dated 28.12.2018. This indicated a change of opinion rather than a mistake. The Court reiterated the principle from Kelvinator of India Ltd that a change of opinion, without tangible material indicating escapement of income, cannot be a basis for reopening an assessment, especially considering the power to review is not available to the Assessing Officer. The reliance on Gruh Finances Ltd was distinguished as that case involved absence of conscious consideration of material, which was not the situation here. The Court also noted that the amendment to Section 147 by the Finance Act, 2021, was not applicable to the present case. The ratio decidendi is that reopening of assessment based on a mere change of opinion, without new tangible material, is impermissible.

Key Issues

1. Whether the reopening of assessment for Assessment Year 2016-2017 by the notice dated 27.3.2021 and the subsequent rejection of objections by the order dated 2.2.2022 is legally sustainable, considering the prior assessment order dated 28.12.2018? (Section 147, Income Tax Act, 1961) Petitioner's arguments: The petitioner contended that the reopening was based solely on a change of opinion, as no new facts or information were available to the Assessing Officer. They argued that a finalized assessment cannot be reopened merely on reconsideration of the same material, citing M/s. Indian & Eastern Newspaper Society, Commissioner of Income Tax, Commissioner of Income Tax Vs Kelvinator of India Ltd, and Aroni Commercials Limited Vs Dy. Commissioner of Income Tax. Revenue's arguments: The respondent argued that the reopening was justified as it was a case of a mistake committed during the earlier assessment, not a mere change of opinion. They relied on Gruh Finances Ltd VS. Joint Commissioner of Income-Tax(Assessment).