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2010 (2) TMI 797 - AT - Income Tax


Issues Involved:

1. Validity of reassessment proceedings under Section 147.
2. Non-communication of reasons for reassessment.
3. Alleged time-barred assessment.
4. Reassessment based on change of opinion.
5. Impact of the CIT dropping proceedings under Section 263 on subsequent reassessment.

Detailed Analysis:

1. Validity of reassessment proceedings under Section 147:

The assessee challenged the order of the Commissioner of Income-tax (Appeals) [CIT(A)] for upholding the reassessment initiated by the Assessing Officer (AO) under Section 147, arguing that there was no income that had escaped assessment. The assessee contended that all material facts were fully disclosed, and no new information was available to the AO. The CIT(A) justified the reassessment, stating that the AO had reasons to believe income had escaped assessment, supported by decisions like ITO vs. Selected Dalurband Coal Co. P. Ltd. and Raymond Woollen Mills Ltd. However, the Tribunal found that the AO did not form an independent opinion and merely relied on the reasons stated in the notice under Section 263, which was previously dropped by the CIT.

2. Non-communication of reasons for reassessment:

The assessee argued that the reasons for reassessment were not furnished until after the completion of the assessment, which hindered their ability to defend properly. The Tribunal supported this view, referencing the case of Videsh Sanchar Nigam Ltd., where it was held that reasons must be provided before completing the assessment to ensure its validity.

3. Alleged time-barred assessment:

The assessee claimed the assessment was time-barred. However, this specific argument was not elaborated upon in the Tribunal's decision, as the primary focus remained on the validity of the reassessment process itself.

4. Reassessment based on change of opinion:

The assessee argued that the reassessment was based on a change of opinion, with no new material surfacing post the original assessment. The Tribunal agreed, noting that the AO's reasons for reassessment were identical to those in the previously dropped Section 263 notice, indicating no new information or independent reasoning.

5. Impact of the CIT dropping proceedings under Section 263 on subsequent reassessment:

The Tribunal emphasized that the CIT had already dropped proceedings under Section 263, concluding that the original assessment was neither erroneous nor prejudicial to revenue interests. The Tribunal held that reopening the assessment on the same grounds was an attempt to circumvent the CIT's order, which was not permissible. The Tribunal referenced the Madras High Court decision in CIT vs. Ramachandra Hatcheries, supporting the view that reassessment cannot be used to bypass a final order under Section 263.

Conclusion:

The Tribunal concluded that the reassessment proceedings initiated by the AO were invalid due to the lack of independent reasoning and the reliance on previously addressed issues under Section 263. Consequently, the appeal by the assessee was allowed, and the appeal by the revenue was dismissed as infructuous.

Order:

The appeal by the assessee is allowed, and the appeal by the revenue is dismissed. The order was pronounced in open court on 16.2.2010.

 

 

 

 

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