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2013 (7) TMI 767 - AT - Income TaxReopening of assessment u/s 147 - reason to believe - change of opinion - jurisdiction -- Held that - The AO reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return u/S 143(1) without scrutiny, and nothing more - this is nothing but a review of the earlier proceedings and an abuse of power by the AO the reasons recorded by the AO do confirm our apprehension about the harm that a less strict interpretation of the words reason to believe vis- -vis an intimation issued under section 143(1) can cause to the tax regime there is no whisper in the reasons recorded of any tangible material which came to the possession of the AO subsequent to the issue of the intimation - It reflects an arbitrary exercise of the power conferred u/s 147 - court relied on the judgement of CIT v. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA) brought out the concept of reason to belief - the reopening of the proceeding, being merely based on change of opinion should be considered as invalid and illegal and should be cancelled. Accordingly the notice issued under section 148 of the Income Tax Act is quashed and accordingly the order passed under section 147/143(3) is annulled decided against revenue
Issues Involved:
1. Condonation of Delay 2. Jurisdiction Issue: Validity of Reassessment Proceedings under Section 147/148 of the Income-tax Act, 1961 Detailed Analysis: 1. Condonation of Delay: At the outset, it was noted that the appeal by the revenue was time-barred by 9 days. The revenue filed a condonation petition supported by an affidavit. The counsel for the assessee conceded the position, and as a result, the appeal was admitted for adjudication. 2. Jurisdiction Issue: Validity of Reassessment Proceedings under Section 147/148 of the Income-tax Act, 1961: The primary issue in this appeal was whether the reassessment initiated by the Assessing Officer (AO) under Section 147/148 of the Income-tax Act, 1961, was valid. The CIT(A) had canceled the assessment on the grounds that the AO had no new material to justify the reopening of the assessment. Facts and Background: - The assessee filed the return of income under Section 139(1) on 22.10.2001 for AY 2001-02, which was processed under Section 143(1). - No notice under Section 143(2) was issued. - The AO issued a notice under Section 148 on 31.03.2005, served on 07.04.2005, citing reasons to believe that income had escaped assessment. - The reasons recorded for reopening were based on the profit and loss account details, particularly the set-off of share trading loss against other income items. CIT(A)'s Decision: - The CIT(A) quashed the reassessment proceedings, stating that the AO had no new material to justify the reopening. - The CIT(A) emphasized that the AO was aware of the share trading loss from the original return and could have issued a notice under Section 143(2) within the allowed period but failed to do so. - The CIT(A) referred to multiple judicial precedents supporting the view that reopening based on the same set of facts without new material amounts to a change of opinion, which is not permissible. Revenue's Argument: - The CIT(DR) argued that the AO had valid reasons to believe that income had escaped assessment, particularly due to the speculative nature of the share trading loss and its set-off against other income. - The CIT(DR) cited the Supreme Court decision in ACIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd., which allows reopening based on processing under Section 143(1) without it being considered a change of opinion. - The CIT(DR) also referred to the Full Bench decision of the Delhi High Court in Usha International Ltd., which supports reopening in the absence of new material if the issue was not considered on merits initially. Assessee's Argument: - The assessee's counsel relied on the Delhi High Court decision in CIT v. Orient Craft Limited, which held that reopening based on the same facts as the original return, without new tangible material, constitutes an abuse of power and is invalid. Tribunal's Analysis and Decision: - The Tribunal noted that the AO had processed the return under Section 143(1) and later issued a notice under Section 148 based on the same set of facts disclosed in the original return. - The Tribunal emphasized that the reasons to believe must have a rational connection with the formation of belief about income escapement, which was not evident in this case. - Citing the Supreme Court decision in Kelvinator of India Ltd., the Tribunal reiterated that reopening based on a mere change of opinion is not permissible. - The Tribunal concluded that the reassessment proceedings were invalid as they were based on the same facts without any new material, confirming the CIT(A)'s decision to quash the reassessment. Conclusion: The appeal by the revenue was dismissed, and the reassessment proceedings were quashed. The Cross Objection by the assessee was also dismissed as it became redundant following the main decision. Order Pronouncement: The order was pronounced in open court on 15th July 2013.
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