2010 (3) TMI 1195 - AT - Income Tax

Summary

Issues Involved:
1. Validity of initiation of proceedings u/s 147.
2. Legality of the consequent re-assessment order.
3. Justification of additions made by the AO.

Summary:

1. Validity of initiation of proceedings u/s 147:
The assessee, a cine artist, filed a revised return claiming estimated expenses at 30% of professional receipts, which was later withdrawn. The AO initiated proceedings u/s 147, suspecting expenses were incurred from undisclosed sources. The ld. CIT(A) annulled the assessment, stating there was no failure on the part of the assessee and the reassessment was based on a change of opinion. The Tribunal upheld this view, noting no new material justified the AO's belief that income had escaped assessment, and the initiation of reassessment proceedings was merely on a change of opinion.

2. Legality of the consequent re-assessment order:
The AO's re-assessment included disallowance of motor car expenses and unexplained expenditure u/s 69C. The Tribunal found no material indicating the assessee's failure to disclose necessary facts, and the AO's actions were deemed a roving enquiry, not permissible under section 147. The Tribunal referenced the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., emphasizing that reassessment must be based on tangible material and not a mere change of opinion.

3. Justification of additions made by the AO:
The Tribunal noted that the original assessment u/s 143(3) had already considered the disallowance of 30% expenses, which the assessee had withdrawn. There was no evidence of expenses being met from undisclosed sources. The Tribunal cited previous decisions, including ACIT vs. Smt. Jaya Bachchan, where similar reassessment proceedings were annulled due to lack of new material and being based on a change of opinion.

Conclusion:
The Tribunal upheld the ld. CIT(A)'s decision to annul the assessment, rejecting the revenue's appeal and confirming that the AO was not justified in initiating proceedings u/s 147. The re-assessment was deemed illegal, bad in law, and void. The revenue's appeal was dismissed.