2017 (4) TMI 1344 - AT - Income Tax

Reopening of assessment - no fresh or tangible materials - Held that - The initiation of re-assessment proceedings was based on a change of opinion and not on any fresh or tangible materials or on account of failure of assessee. Hon ble Apex Court in the case of CIT vs. Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT OF INDIA has clearly held that no reopening could be made without tangible materials showing escapement of income where original assessment was completed u/s.143(3) of the Act. Thus the impugned reassessment proceeding was rightly held by the ld.CIT(A) to be invalid - Decided against revenue

Summary

Issues:
1. Validity of reopening of assessment for the impugned assessment year.

Analysis:
The appeal before the Appellate Tribunal ITAT Chennai involved the issue of the validity of the reopening of the assessment for the impugned assessment year. The Revenue was aggrieved by the decision of the ld. Commissioner of Income Tax (Appeals) who had held the reopening done for the assessment year as invalid. The ld. Departmental Representative argued that the reopening was not based on a change of opinion but was done based on a Revenue audit objection and in accordance with Board Circular No.21/2015. It was contended that the original assessment did not consider Section 56(2)(v) of the Act and failed to verify the investments made by the assessee. The Departmental Representative cited the judgment of the Hon’ble Apex Court in CIT vs P.V.S. Beedies Pvt Ltd, 237 ITR 13 to support their arguments.

The original assessment for the case was completed under section 143(3) of the Act. During the original assessment proceedings, the Assessing Officer had deputed an Inspector of Income Tax to verify the claim of the assessee regarding the land sold being agricultural land situated outside urban limits. The Inspector's report highlighted that the land was vacant and not cultivated, situated outside urban limits. The objections raised by the audit party formed the basis for the reopening of the assessment, questioning the exemption claimed on the capital gains and the investments made by the assessee. The ld. Assessing Officer had rebutted the audit objections by providing details of the income, investments, and the verification process conducted during the original assessment.

The Appellate Tribunal, after considering the submissions and orders of the authorities below, observed that the reassessment proceedings were initiated based on a change of opinion and not on any fresh or tangible materials. Citing the judgment of the Hon’ble Apex Court in CIT vs. Kelvinator of India Ltd, it was noted that reopening without tangible materials showing escapement of income was impermissible when the original assessment was completed under section 143(3) of the Act. The Tribunal also distinguished the case of P.V.S. Beedies Pvt Ltd relied on by the Revenue, stating that it did not support the reopening based on a change of opinion. The circular referred to by the Department was related to monetary limits for filing appeals and not relevant to reopening assessments. Consequently, the Tribunal upheld the decision of the ld. Commissioner of Income Tax (Appeals) that the reassessment proceedings were invalid, leading to the dismissal of the Revenue's appeal.

In conclusion, the Appellate Tribunal ITAT Chennai upheld the decision that the reopening of the assessment for the impugned assessment year was invalid, based on the lack of tangible materials showing escapement of income and the absence of fresh grounds warranting reassessment.