2013 (12) TMI 1564 - AT - Income Tax

Reopening of assessment - Held that - There was true disclosure of all material and primary facts at the time of original assessment and assessment was reopened in respect of the matter already covered by the disclosure made by the assessee during original assessment proceedings and initiation of reassessment proceedings on the same material would obviously amount to change of opinion. Consequently, we hold that the initiation of reassessment, in absence of any new tangible material was change of opinion which is not permissible as per statutory provisions of the Act. Accordingly, the act of the Assessing Officer in initiation of reassessment proceedings and notice issued u/s 148 of the Act is quashed.

Summary

Issues Involved:
1. Jurisdiction and validity of reassessment proceedings under sections 147 and 148 of the Income Tax Act.
2. Limitation and failure to disclose material facts.
3. Validity of reasons recorded for reopening the assessment.

Detailed Analysis:

1. Jurisdiction and Validity of Reassessment Proceedings under Sections 147 and 148:
The assessee challenged the reassessment proceedings initiated by the Assessing Officer (AO) under sections 147 and 148 of the Income Tax Act, claiming that the AO's order was "beyond jurisdiction, bad in law, and void ab initio." The Tribunal observed that the original assessment was completed under section 143(3) and later reopened under section 147 based on the AO's belief that income had escaped assessment due to the assessee's failure to disclose fully and truly all material facts. However, the Tribunal noted that the details pertaining to the provision for doubtful debts and diminution in the value of investments were already disclosed in the assessee's profit and loss account and computation of total income. The Tribunal concluded that the AO's action amounted to a "change of opinion," which is not permissible under the law, and thus quashed the reassessment proceedings.

2. Limitation and Failure to Disclose Material Facts:
The assessee contended that the reassessment proceedings were initiated after the expiry of four years from the end of the relevant assessment year, which is barred by limitation as per the proviso to section 147. The Tribunal noted that the assessee had made full and true disclosure of all material facts necessary for the assessment during the original proceedings. The Tribunal referred to the decision of the Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs Usha International Ltd., which held that reassessment cannot be initiated if the assessee had furnished full and true particulars at the time of the original assessment. The Tribunal concluded that the initiation of reassessment proceedings was unjustified as there was no failure on the part of the assessee to disclose material facts.

3. Validity of Reasons Recorded for Reopening the Assessment:
The Tribunal examined the reasons recorded by the AO for reopening the assessment, which stated that the assessee had not added the provision for doubtful debts and diminution in the value of investments to the book profit, resulting in under-assessment of income. The Tribunal observed that these details were already available with the AO during the original assessment proceedings and there was no new tangible material before the AO at the time of reopening. The Tribunal held that the reasons recorded by the AO were based on the same material that was considered during the original assessment, and thus, reopening the assessment on these grounds amounted to a change of opinion. Consequently, the Tribunal quashed the reassessment proceedings and allowed the appeal of the assessee.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings initiated under sections 147 and 148 of the Income Tax Act, on the grounds that the reassessment was based on a change of opinion, barred by limitation, and there was no failure on the part of the assessee to disclose material facts. The other grounds raised by the assessee were deemed dismissed as they did not survive for adjudication on merits after quashing the reassessment proceedings.