2014 (6) TMI 470 - AT - Income Tax

Validity of reopening of assessment u/s 147 of the Act Reason to believe - Held that - CIT(A) rightly held that the AO has accepted the income returned u/s 143(3) of the Act, after examination of all the relevant material, such as agreement/cancellation of agreement - the AO had no reason to believe that there was escapement of income to initiate proceedings u/s 147 of the Act Relying upon CIT V/s. Kelvinator India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA - mere change of opinion cannot be a reason to reopen the assessment - the AO has rightly taken the consideration of Rs.20 lakhs received by the assessee from M/s. Balaji Construction Company under the head capital gain , and gave benefit u/s 54EC in the original assessment - CIT(A) was justified in holding that the reopening of the assessment, based on the audit objection, is neither legal nor valid, and consequently, cancelling the same - Decided against

Summary

Issues:
1. Validity of reopening of assessment under S.147 of the Act for the assessment year 2006-07.

Analysis:
The Appellate Tribunal ITAT Hyderabad heard the appeal by the Revenue against the order of the Commissioner of Income-tax(Appeals) II, Hyderabad for the assessment year 2006-07. The main grievance of the Revenue was regarding the legality and validity of the reopening of the assessment under Section 147 of the Income Tax Act. The original assessment completed under Section 143(3) was reopened due to a Receipt Audit Objection, which questioned the treatment of a certain amount received by the assessee as long term capital gains exempt under Section 54EC. The Tribunal found that the issue of exemption under Section 54EC was thoroughly examined during the original assessment, and the Assessing Officer had accepted the income returned by the assessee after detailed examination of relevant material, such as agreements. The Tribunal also noted that the compensation received by the assessee was for relinquishing rights, which falls under capital gains and not income from other sources. The Tribunal referenced relevant case laws to support its decision, emphasizing that mere change of opinion cannot be a valid reason to reopen an assessment. Consequently, the Tribunal upheld the Commissioner's decision to cancel the reopening of the assessment.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the Commissioner's order. The Tribunal's detailed analysis focused on the legality and validity of the reopening of the assessment under Section 147 of the Income Tax Act for the assessment year 2006-07. The Tribunal highlighted the Assessing Officer's acceptance of the income returned by the assessee during the original assessment, the nature of the compensation received, and the relevant legal principles to determine that the reopening of the assessment was neither legal nor valid.