2017 (2) TMI 1269 - AT - Income Tax

Reopening of assessment - reasons to believe - Held that - A perusal of the aforesaid reasons recorded by the Assessing Officer makes it abundantly clear that the assessment originally completed by him under section 143(3) was reopened by the Assessing Officer on the basis of the same records as was available before him while completing the original assessment under section 143(3) and there was no new tangible material that had come to his possession on the basis of which the assessment was reopened by him. At the time of hearing before me, the learned Departmental representative has not disputed this position. In the case of CIT v. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) the assessee it was held by the hon ble Supreme Court that after the amendment made with effect from April 1, 1989, the Assessing Officer has to have reason to believe that income has escaped assessment but this does not imply that the Assessing Officer can reopen an assessment on a mere change of opinion. It was held that the concept of change of opinion must be treated as an in-built test to check the abuse of power and hence the Assessing Officer even after the amendments made in the relevant provisions from April 1, 1989 has the power to reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Reopening of assessment made by the Assessing Officer in the present case was bad in law as the same was based merely on the change of opinion and the assessment completed by him under section 143(3) read with section 147 in pursuance thereof is invalid and the same is liable to be cancelled. Appeal of the assessee is allowed

Summary

Issues:
Validity of assessment made by the Assessing Officer under section 143(3)/147.

Analysis:
The appeal was filed by the assessee against the order of the Commissioner of Income-tax (Appeals) challenging the addition made to the total income. The assessee, an individual engaged in the transportation business, initially declared a loss in his personal name, which was accepted in the original assessment under section 143(3). However, the Assessing Officer reopened the assessment under section 147, disallowing the claimed loss and determining the income based on section 44AE of the Act. The assessee contended that the reopening was based on a mere change of opinion, citing relevant case laws. The Departmental representative argued that the reopening was valid as it addressed new issues not previously examined. The reasons recorded for reopening indicated discrepancies in the assessee's accounts, leading to the belief that income had escaped assessment.

Upon review, the Tribunal found that the assessment was reopened without any new tangible material, solely based on a change of opinion, which was impermissible under the law. The Tribunal referred to the decision in CIT v. Kelvinator of India Ltd., emphasizing that the Assessing Officer must have a reason to believe income has escaped assessment and cannot reopen based on a mere change of opinion. Citing the case of Debashis Moulik v. Asst. CIT, the Tribunal held that the assessment was invalid and ordered its cancellation. The appeal of the assessee was allowed, overturning the addition made to the total income.

In conclusion, the Tribunal ruled in favor of the assessee, finding the reopening of the assessment to be invalid due to being solely based on a change of opinion without new tangible material. The decision highlighted the importance of tangible material to establish income escapement and emphasized the limitations on the Assessing Officer's power to reopen assessments.