2011 (3) TMI 718 - AT - Income Tax

Re-assessment - under section 143(3) read with section 147 - Addition - unexplained cash credit under section 68 - the initiation of assessment proceedings in the present case was based on statement of Shri Swarn Singh Mor, which was available on record when the assessment came to be made originally under section 143(3) and there was no new material or information which had come to the possession of the Assessing Officer after the completion of the original assessment to justify the reopening - The reopening thus was based merely on a fresh application of mind by the Assessing Officer to the same set of facts and to the same material on record as was available at the time of completion of original assessment under section 143(3) - Held that the initiation of re-assessment proceedings in the present case itself was bad in law and the re-assessment completed by the Assessing Officer under section 143(3) read with section 147 in pursuance thereof is liable to be cancelled being invalid - Thus, the assessee in this appeal challenging the addition made by the Assessing Officer in the said assessment has become infructuous - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reassessment proceedings under section 143(3) read with section 147.
2. Addition of Rs. 4,09,13,500 under section 68 as unexplained cash credits.

Detailed Analysis:

1. Validity of Reassessment Proceedings:
The primary issue in this case was whether the reassessment proceedings initiated by the Assessing Officer (AO) under section 143(3) read with section 147 were valid. The AO reopened the assessment based on the statement of Shri Swarn Singh Mor, Director of M/s. Peero Exports Ltd., who expressed ignorance about the loan transactions with the assessee. This statement was already available during the original assessment.

The assessee argued that the reopening was based on a mere change of opinion, which is not permissible in law. They contended that no new material had come to the AO's possession after the original assessment to justify the reopening. The assessee relied on judicial pronouncements, including the decision of the Bombay High Court in Asian Paints Ltd. v. Dy. CIT and the Delhi High Court in Kelvinator of India Ltd., to support their contention that reassessment based on the same facts and material constitutes a change of opinion.

The Department argued that the original assessment had been invalidated by the Tribunal, and thus, there was no question of change of opinion. They cited the Supreme Court's decision in Kalyanji Mavji & Co. v. CIT, which allows reopening based on material already available on record.

The Tribunal, however, referred to the Larger Bench decision of the Supreme Court in Indian & Eastern Newspaper Society Ltd. v. CIT, which clarified that an error discovered on reconsideration of the same material does not give the AO the power to reopen the assessment. The Tribunal also relied on the Supreme Court's decision in Kelvinator of India Ltd., which upheld that reassessment cannot be based on a mere change of opinion.

The Tribunal concluded that the reassessment was based on a fresh application of mind to the same set of facts and material, constituting a change of opinion, which is not permissible. Consequently, the initiation of reassessment proceedings was held to be invalid.

2. Addition under Section 68:
Given the Tribunal's decision on the preliminary issue of the validity of reassessment proceedings, the issue of the addition of Rs. 4,09,13,500 under section 68 as unexplained cash credits became infructuous. The Tribunal did not find it necessary to adjudicate this issue separately, as the reassessment itself was invalidated.

Conclusion:
The Tribunal allowed the appeal of the assessee, holding that the reassessment proceedings initiated under section 143(3) read with section 147 were invalid due to being based on a mere change of opinion. Consequently, the reassessment order and the addition of Rs. 4,09,13,500 under section 68 were set aside.