2014 (8) TMI 756 - AT - Income Tax

Reopening of assessment u/s 147 treated as invalid Assessment reopened after previous sanction of the CIT u/s 151 Change of opinion - Held that - The assessee had made full and true disclosure of its income - The AO has issued notice of reopening u/s 148 after expiry of four years - The AO has not recorded any reasons that escapement of any income chargeable to tax was on account of failure on the part of the assessee to file return or to disclose fully and truly all material facts necessary for making assessment of the relevant A.Y - Even if the reasons are properly recorded and approval of the CIT is obtained u/s 151 of the Act, limitation provided in the Act cannot be increased - Notice u/s 148 is found to be clearly beyond four years of the completion of the regular assessment order - no new material or information has come to the knowledge of the AO. The interest of the bank is not outstanding liability in the balance sheet of the assessee - The entire exercise undertaken by the A.O amounts to change of his opinion which law does not permit him to do so relying upon Banswara Syntex Ltd. Versus Assistant Commissioner of Income-Tax 2004 (3) TMI 13 - RAJASTHAN High Court - if the escapement of income believed by the AO is not attributable to any failure on the part of the assessee in filing return u/s 139 or 148 or to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the proceedings for assessment or reassessment of any AY cannot be initiated after expiry of four years from the end of the AY for which assessment or reassessment is sought to be made u/s 147 of the Act Decided against Revenue.

Summary

Issues Involved:
Reopening of assessment u/s 147 as invalid due to previous sanction of CIT u/s 151

Analysis:
1. The appeal by the revenue challenged the order of the CIT(A) regarding the reopening of assessment u/s 147 as invalid despite the case being reopened after the previous sanction of the CIT u/s 151 of the Income Tax Act for the assessment year 2005-2006.

2. The Assessing Officer (A.O) reopened the assessment based on interest payments related to term loans and debits in the Profit & Loss account. The A.O's reasons for reopening the assessment included discrepancies in interest payments and conversions of loans, leading to the reassessment order.

3. The assessee disputed the initiation of proceedings u/s 147, arguing that interest payments were made and liabilities were settled. The CIT(A) quashed the reassessment order, citing it as a change of opinion by the A.O, which is impermissible by law. The CIT(A) also deleted the addition made on merits.

4. The Revenue, aggrieved by the legal finding on the reopening of assessment, filed an appeal challenging the legal aspect but not the deletion made on merits. The Tribunal noted that the A.O reopened the assessment after the four-year limitation period, without any new material or information, leading to a change of opinion rather than a valid reason for reassessment.

5. The Tribunal upheld the CIT(A)'s decision, emphasizing that the A.O's actions amounted to a change of opinion, not attributable to any failure on the part of the assessee. Citing relevant case law, including the decision of the Jurisdictional High Court, the Tribunal dismissed the revenue's appeal on the legal issue, confirming the A.O's finding and the CIT(A)'s decision.

6. Consequently, the appeal of the revenue was dismissed by the Tribunal, affirming the CIT(A)'s decision on the legal issue related to the reopening of assessment u/s 147 as invalid due to being beyond the limitation period and constituting a change of opinion by the Assessing Officer.