2013 (12) TMI 661 - AT - Income Tax

Validity of assessment u/s 147 the receipt of Rs.10, 05, 496/- on account of foreign exchange fluctuation though added to the capital account but no corresponding income was credited to the P&L A/c - Held that - As apparent from the reasons recorded by the Assessing Officer u/s 148(2) it is a clear case of change of opinion - The reasons recorded by the AO are not bona fide Following CIT vs Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - The concept of change of opinion on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 - The Assessing Officer has to have reason to believe that income has escaped assessment - The Assessing Officer cannot reopen an assessment on mere change of opinion - The Assessing Officer has power to reopen an assessment if he had tangible materials to prove income has escaped assessment Decided in favour of assessee.

Summary

Issues:
Jurisdiction of Assessing Officer for making assessment u/s 147 r.w.s.143(3) of the IT Act.

Analysis:
The appeal was filed against the order of the ld. C.I.T. (A)-VI, Kolkata. The assessee raised four grounds of appeal, with ground nos. 2 and 3 related to the jurisdiction of the Assessing Officer for making the assessment. The Assessing Officer issued a notice u/s 148 of the Act on the grounds that income had escaped assessment due to foreign exchange fluctuation gains not being offered for taxation. The AO reopened the assessment and made additions to the income. The assessee appealed to the ld. CIT(A) challenging the legality and merit of the assessment. The ld. CIT(A) dismissed the appeal.

Change of Opinion:
The ITAT Kolkata observed that the reasons recorded by the Assessing Officer for reopening the assessment were not bona fide and amounted to a change of opinion. Citing the decision of the Hon'ble Supreme Court in CIT vs Kelvinator of India Limited, it was noted that the concept of "change of opinion" is crucial to prevent the abuse of power by the Assessing Officer. The Assessing Officer must have tangible material to believe that income has escaped assessment, and the reason must be linked to the formation of that belief.

Decision:
In light of the above analysis, the ITAT Kolkata set aside the order of the ld. CIT(A) and quashed the reassessment framed by the AO. Consequently, ground nos. 2 to 4 of the assessee were allowed. As the reassessment was annulled, ground no. 1 on merit was deemed unnecessary for adjudication. Therefore, the appeal of the assessee was allowed, and the decision favored the assessee.