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2014 (5) TMI 1062 - AT - Income TaxReopening of assessment - Held that - The reopening of assessment originally completed u/s 143(3) by the AO beyond the period of four years from the end of the relevant assessment year was bad in law as rightly held by the ld. CIT(A) as the same was based merely on change of opinion and there was no failure on the part of the assessee, specifically pointed by the AO in the reasons recorded, to disclose fully and truly all material facts necessary for his assessment. The assessment completed by the AO us/ 143(3) r.w.s. 147 in pursuance of such invalid initiation, therefore, was bad in law and the ld. CIT(A), in our opinion, was fully justified in cancelling the said assessment. We, therefore, uphold the impugned order of ld. CIT(A) cancelling the assessment made by AO u/s 143(3) r.w.s.147 of the Act - Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment made under section 143(3) read with section 147 of the Income Tax Act, 1961. 2. Whether the reopening of the assessment was based on a mere change of opinion. 3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Issue-wise Detailed Analysis: 1. Validity of the assessment made under section 143(3) read with section 147 of the Income Tax Act, 1961: The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] which canceled the assessment made under section 143(3) read with section 147. The assessee, a company incorporated in 1991, had declared rental income as business income and claimed various expenses, resulting in a declared loss. The original assessment accepted this. However, the Assessing Officer (AO) later found that the assessee had discontinued its business and reopened the assessment, treating the rental income as "income from house property" and recalculating the Annual Letting Value (ALV) of the property. The CIT(A) held that the reassessment was invalid as there was no failure on the part of the assessee to disclose all material facts fully and truly. The Tribunal upheld this decision, noting that the reopening was based on the same facts available during the original assessment and thus constituted a mere change of opinion. 2. Whether the reopening of the assessment was based on a mere change of opinion: The assessee argued that the reopening of the assessment was bad in law as it was based on a mere change of opinion, which is not permissible. The AO had originally accepted the rental income as business income but later changed his opinion to treat it as income from house property. The Tribunal agreed with the assessee, citing legal precedents that a mere change of opinion does not constitute "reason to believe" that income has escaped assessment. The Tribunal emphasized that the AO must have tangible material to justify reopening an assessment, and in this case, no new material had come to the AO's possession after the original assessment. 3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment: The Revenue contended that the assessee had failed to disclose the relationship between the director's son and the lessee firm, which was material for the assessment. However, the Tribunal found that this fact was disclosed in the agreement filed during the original assessment proceedings. The Tribunal concurred with the CIT(A) that there was no failure on the part of the assessee to disclose all material facts fully and truly. The Tribunal noted that the AO had based the reopening on the same facts available during the original assessment, and there was no new information or material to justify the reopening. Conclusion: The Tribunal upheld the CIT(A)'s decision to cancel the assessment made under section 143(3) read with section 147, concluding that the reopening was based on a mere change of opinion and that the assessee had disclosed all material facts fully and truly. The appeal filed by the Revenue was dismissed. Order Pronouncement: The order was pronounced in the open court on 28th May 2014.
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