2014 (3) TMI 503 - AT - Income Tax

Reopening of assessment u/s 147 of the Act - Allowability of exemption u/s 10B of the Act Hedl that - There is no doubt from reading of the reasons recorded all the relevant factors were disclosed by the assessee during the original assessment as the original assessment was completed u/s. 143(3) of the Act vide order dated 28.11.2008 and the deduction claimed by the assessee u/s. 10B of the Act was granted - Notice for reopening of assessment was given on 17.2.2011 thus, there is no failure to truly and fully disclose all material facts for the purpose of assessment by the assessee - It is only a question of drawing inference from these facts - The inference from the available documents on record has to be drawn by the Assessing Officer - Since the AO did not draw the correct inference or failed to draw inference, it does not mean that there was non-disclosure of all facts by the assessee - the finding of the CIT(A) upheld and he has not committed an error in coming to the conclusion that the assessee has disclosed all material facts and they were before the AO at the time of completion of original assessment u/s. 143(3) of the Act - the Explanation to second proviso to section 147 of the Act has no application Decided against Revenue.

Issues:
- Reopening of assessment u/s 147 based on non-compliance with provisions for exemption u/s 10B
- Application of the Explanation to the second proviso to section 147
- Disclosure of all material facts by the assessee during original assessment
- Interpretation of legal precedents regarding reopening of assessments

Analysis:

Issue 1: Reopening of assessment u/s 147 based on non-compliance with provisions for exemption u/s 10B
In the case of M/s. Navionics Systems Pvt. Ltd., the Revenue challenged the reopening of assessment for A.Y. 2006-07 based on non-compliance with provisions for exemption u/s 10B. The Assessing Officer disallowed the exemption claimed by the assessee and raised a demand. The CIT(A) relied on legal precedents to determine that the power to reopen an assessment cannot be used for a mere change of opinion or drawing a different inference from the same facts available earlier. The tribunal agreed with the CIT(A) that the AO did not have additional evidence beyond what was available during the original assessment. Therefore, the tribunal dismissed the Revenue's appeal, emphasizing that the recording of reasons for reopening amounted to a change of opinion.

Issue 2: Application of the Explanation to the second proviso to section 147
The tribunal analyzed whether the Explanation to the second proviso to section 147 was applicable in the case. It was concluded that there was no failure by the assessee to disclose all material facts during the original assessment u/s. 143(3). The tribunal held that the AO's failure to draw the correct inference did not imply non-disclosure by the assessee. Consequently, the tribunal rejected the ground raised by the Revenue and dismissed the appeal.

Issue 3: Disclosure of all material facts by the assessee during original assessment
The tribunal carefully reviewed the reasons recorded by the AO for reopening the assessment and found that all relevant factors were disclosed by the assessee during the original assessment. It was emphasized that the inference drawn from the available documents had to be made by the Assessing Officer. The tribunal held that there was no failure to disclose material facts by the assessee, and the Explanation to the second proviso to section 147 did not apply in this case. Therefore, the tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

Issue 4: Interpretation of legal precedents regarding reopening of assessments
The tribunal referred to legal precedents such as the judgments of the Delhi High Court and the Madras High Court to ascertain the legality of reopening assessments. It was highlighted that reopening assessments should not be based on a change of opinion or a different inference drawn from the same facts available earlier. The tribunal's decision was influenced by these legal interpretations, leading to the dismissal of the Revenue's appeals in both cases.

In conclusion, the tribunal's detailed analysis focused on the legality of reopening assessments, the disclosure of material facts, and the application of legal precedents to ensure fair and just decisions in the cases under consideration.

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