2011 (3) TMI 1634 - HC - Income Tax

Re-assessment Proceedings u/s 147 - Mere Change in Opinion - reason to believe - reopening was made by AO on the basis of tangible material in the form of tax audit report filed by the assessee and on the basis of information available in the Profit and Loss account - ITAT quashed the reassessment order as the reopening was on mere change of opinion on the basis of material already available on record at the time of completion of the original assessment HELD THAT - It is not in dispute that the re-assessment proceedings were initiated by the AO on the basis of tax audit report filed by the assessee in Form No.3CD and on the basis of information available in the Profit and Loss account. There was no reference to any new material by the AO which had come into his possession after the completion of original assessment under Section 143(3) of the Act. It is also a matter of record that before initiating re-assessment proceedings by issuing notice under Section 148 of the Act the AO had initiated proceedings under Section 154 of the Act for the same reasons and proceedings initiated under Section 154 were dropped by him after the issuance of notice under Section 148 and were thus pending on the date of initiation of the re-assessment proceedings. In these circumstances the Tribunal while setting aside the reassessment proceedings relied upon the Full Bench Judgment of this Court in the case of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT where held that No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Officer to the same set of facts. Also held if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the Assessing Officer the notice and the subsequent proceedings will be without jurisdiction liable to be struck down in exercise of writ jurisdiction of this Court. If reason to believe be available the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. We do not find any substantial question of law that would arise for consideration in this appeal. The appeal is devoid of any merit and is accordingly dismissed.

Summary

Issues:
Validity of re-assessment proceedings under Section 147 of the Income Tax Act based on change of opinion and availability of tangible material.

Analysis:
The judgment involves the assessment completed under Section 143(3) of the Income Tax Act, resulting in a loss. Subsequently, re-assessment proceedings were initiated under Section 147 based on a notice issued under Section 148. The re-assessment led to additions on account of disallowance of prior period expenses and capital expenditure. The key issue was the validity of the re-assessment proceedings, challenged by the assessee, based on the grounds of change of opinion and the presence of tangible material.

The CIT (A) upheld the re-assessment order, emphasizing the formation of belief by recording reasons for income escapement as the main prerequisite under the amended provision of Section 147. The CIT (A) highlighted that the AO required tangible material to reach a conclusion, and the issue not decided in the original assessment did not constitute a change of opinion.

The Income Tax Appellate Tribunal, following the Supreme Court's judgment in a related case, quashed the re-assessment order, deeming it a mere change of opinion without new material post-original assessment. The Tribunal noted that the AO initiated re-assessment based on the tax audit report and Profit and Loss account information, without any additional material.

The Tribunal's decision was supported by the Full Bench Judgment, emphasizing that the power to reopen an assessment was not intended for reviewing past decisions based on changing moods. It clarified that the absence of new material or change in law indicated a mere change of opinion, lacking jurisdictional foundation for re-assessment under Section 147.

In conclusion, the Tribunal found no substantial question of law in the appeal, dismissing it for lack of merit. The judgment reaffirmed the importance of tangible material and the absence of jurisdiction for re-assessment based solely on a change of opinion without new information.