2014 (6) TMI 838 - AT - Income Tax

Cancellation of reassessment of proceedings u/s 147 of the Act Change of opinion Arrear wage revision - Held that - In order to willy nilly bring the amount to tax the AO again issued notice u/s 148 of the Act - assessee is a government loss making company and in the year as it turned into huge profit, it was decided to revise the wages and give the arrears to employees which is being sought to be reassessed Relying upon Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - reassessment cannot be made on change of opinion, assessment cannot be reopened merely on the basis of audit objection as it constitutes mere an opinion by some other agency. The issue is about wage revision (arrears) and is duly considered during the course of assessment by way of specific query which was replied by the assessee AO being satisfied allowed the claim during regular assessment u/s 143(3) - Based on the audit objection AO proposed section 154 and again required the assessee for explanation which was provided section 154 proceedings were also dropped - the assessment was again reopened u/s 147 the AO in order to tow the line of audit objection and to avoid any ramification therefrom reopened the assessment u/s 147 without valid reason - Once the issue was examined during the course of assessment which emerges from the record so clearly, it cannot be held to be a proper case of reopening of assessment thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.

Summary

Issues involved:
Appeal against order canceling reassessment proceedings under section 147 of the I.T. Act on the ground of change of opinion.

Detailed Analysis:
1. Reassessment Proceedings Initiated: The Revenue's appeal challenged the order canceling reassessment proceedings under section 147 of the I.T. Act, based on the ground of change of opinion. The original assessment was completed under section 143(3) on 31-12-2007, and subsequently, the assessing officer reopened the assessment under section 147 and made additions.

2. Validity of Reopening: The assessee contended that the issue of wage revision (arrears) was duly considered during the original assessment, with specific queries and explanations provided by the assessee. The assessing officer, after considering the explanations, allowed the claim during the regular assessment under section 143(3). Subsequently, when rectification proceedings were initiated based on an audit objection, the assessing officer dropped the proceedings after considering the assessee's objections.

3. Reopening on Change of Opinion: The assessing officer reopened the assessment under section 147 without valid reasons, merely to align with the audit objection, which was not a sufficient ground for reassessment. The CIT(A) held the reassessment to be bad in law, citing the Supreme Court judgment in the case of Kelvinator India Ltd. The reassessment cannot be made solely on the basis of a change in opinion, as confirmed by the CIT(A) based on the facts and legal principles involved.

4. Judgment and Dismissal of Appeal: The ITAT upheld the CIT(A)'s decision, dismissing the revenue's appeal. The ITAT found no infirmity in the CIT(A)'s order, as the reassessment was deemed improper due to the lack of valid reasons for reopening the assessment under section 147. The order was pronounced on 18-6-2014, confirming the dismissal of the revenue's appeal.

This detailed analysis highlights the key aspects of the legal judgment, focusing on the validity of reassessment proceedings, the grounds for reopening assessments, and the application of legal principles to determine the lawfulness of the reassessment in question.