2012 (8) TMI 267 - AT - Income Tax

Validity of reopening of assessment u/s 148 - same set of facts - assessee contended change of opinion - Held that - It is observed that actually the issue had been gone into by the AO who framed the regular assessment u/s 143(3). Details filed by assessee before AO, the manner in which the replies have been filed, along with supporting documents, simply prove that these could not have been filed suo moto. These details had been called for by the AO and in response to which these replies had been filed. Since the AO has initiated the reassessment proceedings on the same facts and on the same figures, as shown by the assessee in its books, we are of the considered opinion that no tangible material had been brought on record by the AO, which could have given him some valid reason to initiate the reassessment proceedings. Therefore, notice issued u/s 148 is held to be void, and consequently the proceedings are void ab initio - Decided in favor of assessee.

Summary

Issues:
1. Reopening of assessment under section 148 of the Act
2. Disallowance of provision for quality claims received from customers

Analysis:
Issue 1: Reopening of assessment under section 148 of the Act
The appeal was filed against the order of CIT(A) upholding the action of the Income-tax Officer in re-opening the assessment under section 148 of the Act. The assessee contended that the assessment could not be reopened merely on the basis of a change of opinion on the same set of facts. The AO had issued a notice under section 148, and the reasons for reassessment were provided to the assessee upon request. The AO had debited a certain amount under the head "Claim" in the profit and loss account, treating it as an unascertained liability. The assessee had submitted detailed responses and documents regarding the claims paid, emphasizing that the issue had already been dealt with during the regular assessment. The AR argued that the reassessment proceedings were initiated without tangible material and were therefore bad in law. The ITAT agreed, holding that the reassessment proceedings were void ab initio as no valid reason was presented by the AO to initiate them.

Issue 2: Disallowance of provision for quality claims received from customers
As the reassessment proceedings were deemed void, the ITAT did not delve into the merits of the second ground raised by the assessee regarding the disallowance of an amount being provision for quality claims received from customers. The appeal was allowed based on the finding that the reassessment proceedings were bad in law, rendering the notice issued under section 148 as void. Consequently, the proceedings were considered void ab initio, and the appeal was allowed without further discussion on the second ground.

In conclusion, the ITAT Mumbai held that the reassessment proceedings were initiated without tangible material, constituting a clear case of a change of opinion on an issue already addressed during the regular assessment. Citing relevant legal precedents, the ITAT deemed the reassessment proceedings as void ab initio and allowed the appeal filed by the assessee.