2012 (12) TMI 118 - AT - Income Tax

Validity of reassessment proceeding on the basis of change of opinion - Held that - If the entire material had been placed by the assessee before the AO at the time when the original assessment was made and the AO applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened - facts were before the AO at the time of framing the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the AO or his successor to reopen the assessment of the assessee - initiation of reassessment proceeding is based merely on change of opinion - initiation of reassessment proceeding was bad also on account of applicability of proviso to sec. 147 in favor of assessee

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.
2. Applicability of the proviso to Section 147.
3. Alleged "change of opinion" by the Assessing Officer (AO).
4. Treatment of service line deposits.
5. Depreciation on energy meters.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The primary issue raised by the revenue was whether the reassessment proceedings under Section 147 were valid. The revenue argued that the CIT(A) erred in annulling the reassessment orders, ignoring that if a transaction is found to be bogus based on subsequent information, it cannot be said that the original disclosure was "true" and "full." The revenue relied on several Supreme Court and High Court decisions to support this argument.

2. Applicability of the Proviso to Section 147:
For ITA No. 488/Del/2011, the CIT(A) struck down the reassessment proceedings based on the proviso to Section 147, which states that reassessment cannot be initiated after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts. The CIT(A) found no such failure on the part of the assessee, as all material facts were disclosed during the original assessment.

3. Alleged "Change of Opinion" by the AO:
The CIT(A) held that the reassessment proceedings were invalid as they were based on a "change of opinion." The original assessment had already scrutinized the issues regarding service line deposits and depreciation on energy meters. The AO had raised queries during the original assessment, and the assessee had provided detailed explanations, which were accepted by the AO. Therefore, reopening the assessment on the same issues was merely a change of opinion, which is not permissible.

4. Treatment of Service Line Deposits:
The AO had added a sum of Rs. 6,82,00,000/- to the income of the assessee, treating it as a revenue receipt. The assessee had received service line deposits from customers, part of which was transferred to the profit and loss account as revenue, while the balance was shown as a liability. The AO contended that the entire amount should be treated as revenue receipt. However, the CIT(A) found that this issue was already scrutinized during the original assessment, and the reassessment was based on the same material, thus constituting a change of opinion.

5. Depreciation on Energy Meters:
In ITA No. 489/Del/2011, apart from the issue of service line deposits, the reassessment also involved the depreciation on energy meters. The AO had disallowed the higher depreciation claimed by the assessee, treating it as an incorrect rate. The CIT(A) found that this issue was also raised and addressed during the original assessment, and reassessment on this ground was similarly a change of opinion.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to annul the reassessment proceedings, emphasizing that the reassessment was based on a change of opinion and that there was no failure on the part of the assessee to disclose fully and truly all material facts. The appeals filed by the revenue were dismissed, affirming that the initiation of reassessment proceedings was invalid both on the grounds of change of opinion and the applicability of the proviso to Section 147.