2012 (11) TMI 279 - AT - Income Tax

Re-assessment - Omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts - Deduction u/s 80HHE - Following the decision of court in case of Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India 2010 (1) TMI 11 - SUPREME COURT OF INDIA held that - post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open - The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then,in the garb of re-opening the assessment, review would take place - to reopen an assessment tangible material should be there. In the present case, it is a fact that that the reassessment was completed on 03/07/2006 and subsequently, another notice u/s 148 was issued 17/03/2008. The reassessment was completed on 28/11/2008 denying the deduction u/s 80HHE to the assessee for the reason that she was not engaged in the business of export of software and that she was merely a software consultant providing services to the overseas client. In earlier reassessment completed on 03/07/2006, the Assessing Officer had thoroughly examined the material available on record and the agreement was available, hence, the subsequent reassessment was merely a change of opinion - Reassessment made by the Assessing Officer u/s 147 is without jurisdiction and, therefore, the same invalid - In the result, appeal of the assessee is allowed.

Summary

Issues involved:
Reopening of assessment under section 147 of the Income Tax Act, validity of reassessment, eligibility for deduction under section 80HHE, change of opinion by Assessing Officer.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The case involved appeals against the orders of the CIT(A) for the assessment years 2003-04 and 2004-05, where the Assessing Officer reopened the assessment under section 147 of the Income Tax Act. The issue was whether the reassessment was valid based on the reasons recorded by the Assessing Officer for reopening the case. The CIT(A) upheld the reassessment, stating that the notice was issued within the prescribed time limit of four years from the end of the assessment year. However, the appellate tribunal noted that there was no new material before the Assessing Officer to conclude that income had escaped assessment, leading to the finding that the reassessment was merely a change of opinion without any valid reason to believe that income had escaped assessment.

2. Validity of Reassessment and Eligibility for Deduction under Section 80HHE:
The Assessing Officer denied the deduction under section 80HHE to the assessee for the reason that she was not engaged in the business of exporting software but was only a software consultant providing services to overseas clients. The CIT(A) upheld the initiation of proceedings under section 147, stating that the services rendered by the assessee did not fall within the meaning of services eligible for deduction under section 80HHE. However, the appellate tribunal disagreed, citing that the Assessing Officer had already examined the material available on record during the earlier reassessment and that the subsequent reassessment was based on the same facts, leading to the conclusion that it was a change of opinion without valid reasons to believe that income had escaped assessment.

3. Change of Opinion by Assessing Officer:
The appellate tribunal referred to various legal precedents, including the case of Kelvinator India Pvt. Ltd., to establish that reassessment based solely on a change of opinion without new material is invalid. The tribunal held that the reassessment made by the Assessing Officer under section 147 was without jurisdiction and, therefore, invalid. As a result, both appeals of the assessee were allowed, and the reassessment made under section 147 was quashed, leading to the conclusion that there was no need to delve into the merits of the case further.

In summary, the appellate tribunal found that the reassessment made by the Assessing Officer under section 147 was invalid due to being a mere change of opinion without valid reasons to believe that income had escaped assessment. The tribunal upheld the appeals of the assessee, quashed the reassessment, and concluded that there was no need to examine the merits of the case further.