The Gujarat High Court, in a significant ruling, quashed a notice issued under Section 148 of the Income Tax Act, 1961, against Hareshkumar Bhupatbhai Panchani, holding that reopening an income tax assessment based on a mere change of opinion is not permissible in law. The judgment, delivered by a division bench comprising Justice Bhargav D. Karia and Justice Niral R. Mehta, was pronounced in R/Special Civil Application No. 5851 of 2022.
Background of the Case
The petitioner, Hareshkumar Bhupatbhai Panchani, filed his return of income for the assessment year 2016-17, declaring a total income of Rs. 88,84,560. Panchani had sold an immovable property along with other co-owners, his share amounting to Rs. 2,83,54,388, and claimed a deduction of Rs. 1,33,02,123 under Section 54F of the Income Tax Act for investing in a new residential property. After the assessment proceedings were concluded under Section 143(3) of the Act in December 2018, accepting the petitioner’s declared income, the case was reopened through a notice under Section 148 issued on March 30, 2021.
The reopening notice alleged that the petitioner had only submitted a “Sale Agreement without Possession” and did not furnish any supporting evidence to show that he had purchased the new residential property within the prescribed period, thereby making him ineligible for the deduction claimed under Section 54F.
Key Legal Issues Involved
The crux of the case revolved around the following legal questions:
1. Reopening of Assessment under Section 148: Whether the Income Tax Officer (ITO) could reopen the assessment based on the same material previously scrutinized by another officer during the original assessment proceedings.
2. Change of Opinion: Whether the reopening of the assessment constituted a change of opinion, which is impermissible under the law.
Arguments by the Parties
Senior Advocate Mr. Tushar Hemani, representing the petitioner, argued that the case was initially selected for a limited scrutiny, during which all necessary details and documents were submitted to the Assessing Officer (AO). The officer, after thorough examination, accepted the petitioner’s income and deduction claims. Mr. Hemani contended that the reopening of the case was not based on any fresh material or tangible information but merely on a re-evaluation of the same facts, which amounts to a change of opinion. Citing the Supreme Court’s ruling in Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. [(2010) 187 Taxman 312 (SC)], he emphasized that reassessment cannot be based on a mere change of opinion.
On behalf of the respondent, learned Advocate Mr. Karan Sanghani argued that the Assessing Officer had formed an independent opinion based on available records and that the petitioner had failed to provide concrete evidence regarding the acquisition of the residential property within the required time period to justify the deduction under Section 54F.
Court’s Decision
After hearing both parties, the Gujarat High Court quashed the notice under Section 148. The bench held that the reopening of assessment was, indeed, based on the same material previously available to the Assessing Officer, and no new tangible material had come to light that could justify reassessment.
In its judgment, the court observed:
“In our view, forming any opinion based on the same facts and circumstances which were already available with the Assessing Officer at the time of scrutiny is said to be a change of opinion and thereby the same is not permissible.”
The court also reinforced its stance by citing the Supreme Court’s ruling in Kelvinator of India Ltd., where it was held that a change of opinion does not confer the Assessing Officer with the jurisdiction to reopen a concluded assessment:
“We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition, and if the concept of ‘change of opinion’ is removed, then, in the garb of reopening the assessment, review would take place.”
Case Details:
– Case Name: Hareshkumar Bhupatbhai Panchani v. Income Tax Officer, Ward 3(3)(1) & Anr.
– Case Number: R/Special Civil Application No. 5851 of 2022
– Bench: Justice Bhargav D. Karia and Justice Niral R. Mehta
– Petitioner’s Advocate: Mr. Tushar Hemani, Senior Advocate, with Ms. Vaibhavi K. Parikh
– Respondent’s Advocate: Mr. Karan Sanghani on behalf of Mrs. Kalpana K. Raval
– Legal Provisions Involved: Section 147, Section 148, and Section 54F of the Income Tax Act, 1961
