Reopening of assessment based on incorrect facts or conclusions cannot be sustained

Arvind Sahdeo Gupta Vs ITO (Bombay High Court)

Bombay High Court held that if the reasons for re-opening the assessment are based on incorrect facts or conclusions, the notice issued under section 148 of the income Tax Act for re-opening cannot be sustained.

Facts- Vide the present writ petition, the petitioner has challenge issuance of notice dated 24/03/2020 u/s. 148 of the Act of 1961 on the grounds that the said notice has been issued on incorrect facts, no reasons have been given while deciding the objections raised by the petitioner to the re-opening of the proceedings and the same have been decided without passing any speaking order. In addition, it is urged that the re-opening of the proceedings is without there being any independent application of mind and no reasons to believe have been indicated by the Income Tax Officer (for short “ITO”) in that regard.

Conclusion- The effect of re-opening the assessment based on wrong facts or conclusions has been considered in the case of Tata Sons Limited, wherein, it has been held that if the reasons for re-opening the assessment are based on incorrect facts or conclusions, the notice issued for re-opening cannot be sustained.

Held that it is clear that the notice dated 24/3/2020 issued under Section 148 of the Act of 1961 seeking re­opening of the assessment is based on incorrect facts. The objections raised by the petitioner pointing out the relevant facts including the proper Assessment Year to which the said transaction pertained being Assessment Year 2012-13 coupled with the fact that the amount of Rs.9,90,314/- that was stated to be the amount being profit from the sale of shares having been explained to be the amount of loss, the objections having been decided without any speaking order and not dealing with the undisputed factual aspects leads to the conclusion that the re-opening of the assessment is without there being any reason to believe that the income has escaped assessment. In these facts, the notice dated 24/3/2020 suffers from fundamental factual errors. An exceptional case thus having been made out to interfere in exercise of writ jurisdiction, the impugned notice dated 24/3/2020 issued under Section 148 of the Act of 1961 is quashed and set-aside. Consequentially, further steps taken by the respondents based on said notice would no longer survive.

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