2015 (9) TMI 1417 - AT - Income Tax

Validity of reopening of assessment - Held that - On a perusal of the reasons recorded, it is very much evident that the Assessing Officer only upon revisiting the Balance Sheets filed with the original return of income and revised return of income, had formed the belief that there is under assessment of income. It is patent and obvious that no new material has come to the possession of the Assessing Officer after completion of the original assessment under section 143(3) of the Act. The Balance Sheet filed along with the original return of income as well as the revised return of income were part of the record when the assessment order under section 143(3) of the Act was originally passed by the Assessing Officer. Thus, the Assessing Officer having considered these materials while completing the original assessment, initiation of proceedings under section 147 of the Act on the basis of the very same material amounts to change of opinion. In the present case, it is apparent from the reasons recorded that there is no such material available before the Assessing Officer while he recorded his reasons for re opening the assessment. That being the case, the re opening of assessment on re appreciation / review of same set of facts and material which were available at the time of completing assessment originally under section 143(3) of the Act, tantamounts to change of opinion, hence, not permissible in law. In view of the aforesaid, we hold that re opening of assessment under section 147 of the Act in the present case is invalid - Decided in favour of assessee

Summary

Issues:
1. Validity of re-opening assessment under section 147 of the Income Tax Act, 1961.
2. Addition of unexplained cash credit under section 68 of the Act.

Issue 1: Validity of re-opening assessment under section 147:
The appellant challenged the re-opening of assessment under section 147, arguing that there was no fresh tangible material for re-opening, making it a mere change of opinion. The original assessment was based on the Balance Sheet, and the re-opening was solely due to a difference in cash balance shown in the original and revised returns. The Tribunal noted that the Assessing Officer had no new material, and re-opening based on the same facts amounted to a change of opinion. Citing judicial precedents, the Tribunal held that tangible material must exist for re-opening, which was lacking in this case. Consequently, the re-opening was deemed invalid, and the assessment order was quashed.

Issue 2: Addition of unexplained cash credit under section 68:
The Assessing Officer re-opened the assessment due to a difference in cash balance shown by the assessee in the original and revised returns. The Officer treated this difference as unexplained cash credit under section 68 of the Act. However, as the Tribunal found the re-opening invalid, the addition made under section 68 became redundant and was not adjudicated upon. Therefore, the Tribunal allowed the appeal, considering the re-opening invalid, and the subsequent addition under section 68 unnecessary.

The Tribunal's decision highlighted the importance of tangible material for re-opening assessments under section 147 and emphasized that re-opening based on the same facts without new evidence constitutes a change of opinion, rendering it invalid. The judgment clarified the legal principles governing the validity of re-opening assessments and the consequences on subsequent additions based on such re-openings.