2013 (9) TMI 365 - AT - Income Tax

Reopening of Assessment - reason to believe - change of opinion - Held that - The Assessing Officer had miserably failed to show that there was any tangible material to hold that there was escapement of income from assessment - Assessing Officer not only examined the documents/evidence originally submitted by the assessee but had asked for further documents The notice issued under section 148 of the Act was nothing but mere change of opinion - The issues which have already been considered in the original assessment cannot be reappreciated in reassessment proceedings under the garb of income escaping assessment - If the Assessing Officer had not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of income of the assessee. Relying upon Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA - the Assessing Officer had power to reopen the assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment - the information was supplied by the assessee, if the Assessing Officer fails to take note of the same or does not appreciate the evidence from all dimensions in the first instance, he cannot be permitted to reopen the assessment under section 147 of the Act to cover up his own folies - Once the entire evidence as required by the Assessing Officer was submitted by the assessee, duty was cast upon the Assessing Officer to take cognisance of the evidence and pass assessment order under section 143(3) of the Act - The Assessing Officer cannot review his own order under the guise of section 148 and reappreciate the evidence which was already before him at the time of original assessment Decided against Revenue. Method of accounting in certain cases - Whether u/s 145A the excise duty element cannot be added to the value of closing in stock on the last day of the accounting year - Following Loknete Balasaheb Desai S. S. K. Ltd. 2011 (6) TMI 48 - BOMBAY HIGH COURT - central excise liability was not incurred and consequently the addition of excise duty made by the assessing officer to the value of the excisable goods was liable to be deleted - The assessee had provided for excise duty on closing stock in accordance with AS 2 - The assessee in its letter had categorically stated that the amount appearing in annexure 10B of tax audit report represents excise duty provision on the closing stock of finished goods as on March 31, 2005 - This amount was paid before the clearance of goods from the factory prior to the date of tax audit report as certified by the tax auditors - An amount was debited in the profit and loss account under the head manufacturing and other expenses - This amount represents difference between opening provision of excise duty on stock as on April 1, 2004 and the excise duty on closing stock as on March 31, 2005. The Assessing Officer has erred in coming to the conclusion that since the sale is net off excise duty, the debit towards excise duty in the profit and loss account cannot be allowed. With regard to compliance with the provisions of section 43B was concerned, the assessee had stated that the amount of excise duty debited in the profit and loss account had been paid in the next year before the due date of filing of return and therefore, disallowance on this ground was not warranted.

Issues Involved:
1. Validity of reopening of assessment beyond the period of four years.
2. Deduction of foreign exchange gain from the actual cost of assets for depreciation and deduction under section 35.
3. Capitalization of lump sum consideration paid towards technical know-how.
4. Proof of opting for duty drawback or DEPB/DFRC for deduction under section 80HHC.
5. Disallowance of excise duty on closing stock.
6. Jurisdiction of the Assessing Officer to reopen the assessment based on change of opinion.

Detailed Analysis:

1. Validity of Reopening of Assessment Beyond Four Years:
The assessee argued that the reopening of the assessment was beyond the permissible period of four years. The Commissioner of Income-tax (Appeals) (CIT(A)) held that the reassessment proceedings were initiated merely on a change of opinion, which is not permissible. The CIT(A) relied on the Supreme Court judgment in CIT v. Kelvinator of India Ltd., which states that the Assessing Officer (AO) must have "tangible material" to conclude that there was an escapement of income. The Tribunal upheld the CIT(A)'s decision, agreeing that the reassessment was based on a change of opinion without any new tangible material.

2. Deduction of Foreign Exchange Gain from Actual Cost of Assets:
The AO contended that the assessee did not reduce the entire foreign exchange gain from the actual cost of the asset for claiming depreciation under section 32 and deduction under section 35. The CIT(A) found that the details regarding this issue were already provided during the original assessment proceedings. The Tribunal upheld this finding, noting that reassessment on this issue was merely a reappreciation of already submitted evidence.

3. Capitalization of Lump Sum Consideration Paid Towards Technical Know-How:
The AO argued that the lump sum payment towards technical know-how should be capitalized after allowing depreciation, based on the Supreme Court decision in Scientific Engineering House P. Ltd. v. CIT. The CIT(A) found that this issue was also addressed during the original assessment, and reassessment on this ground was not justified. The Tribunal agreed, emphasizing that the AO cannot reopen the assessment to cover up his own oversight.

4. Proof of Opting for Duty Drawback or DEPB/DFRC for Deduction Under Section 80HHC:
The AO noted that the assessee did not prove that it had opted for either duty drawback or DEPB/DFRC, which is necessary for deduction under section 80HHC. The CIT(A) determined that the AO had already considered this issue during the original assessment. The Tribunal concurred, stating that reassessment based on this issue was not permissible as it was a change of opinion.

5. Disallowance of Excise Duty on Closing Stock:
The AO disallowed the excise duty on closing stock, arguing that the sale was valued net of excise duty, leading to a double deduction. The CIT(A) held that the assessee had provided for excise duty on closing stock in accordance with Accounting Standard 2, and this did not affect profits. The CIT(A) relied on the Bombay High Court's judgment in CIT v. Loknete Balasaheb Desai S. S. K. Ltd. The Tribunal upheld the CIT(A)'s decision, agreeing that the provision for excise duty was correctly accounted for and complied with section 43B.

6. Jurisdiction of the Assessing Officer to Reopen the Assessment Based on Change of Opinion:
The Tribunal emphasized that the AO cannot review his own order under the guise of section 148 to reappreciate evidence already before him during the original assessment. The Tribunal upheld the CIT(A)'s decision that the reassessment was based on a change of opinion and dismissed the appeals of the Revenue.

Conclusion:
The Tribunal dismissed both appeals of the Revenue and the cross-objections of the assessee. The reassessment proceedings were found to be based on a change of opinion without any new tangible material, and the original assessment details were already provided by the assessee. The Tribunal upheld the CIT(A)'s decisions on all issues, emphasizing adherence to legal precedents and proper accounting standards.

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