2014 (10) TMI 610 - AT - Income Tax

Validity of reopening of assessment u/s 147 Change of opinion - Held that - The assessee along with the return of income, has made a claim for deduction under section 80IC with regard to its Century Pulp Paper unit - Such a claim of deduction under section 80IC, were duly supported by the audit report under section 10CCA - during the course of the original assessment proceedings, the AO has raised queries with regard to the claim of deduction u/s 80IC, not once but twice - the assessee has duly responded to such query and filed replies before the AO - the AO has reduced the claim of deduction u/s 80IC, by allowing the claim in respect of profits attributable to paper and the deduction relating to profits attributable to sale of pulp was denied change of opinion preclude the reopening of the assessment, whether within or outside the four years' limit from the end of the relevant assessment year - the reasons recorded by the AO is purely based on change of opinion de hors any tangible material coming into record following the decision in Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - the notice dated 15th December 2011, u/s 148, and consequent assessment order dated 22nd December 2011, passed u/s 147/143(3), is held as void as the reasons recorded are based on change of opinion and do not clothe the AO with jurisdiction to re open the assessment thus, the order of the CIT(A) is set aside Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Assessment of deduction under section 80IC.
3. Alleged "change of opinion" by the Assessing Officer.

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147:

The assessee challenged the reopening of the assessment under section 147, arguing that it was based on a "change of opinion" without any new material. The original assessment was completed under section 143(3) with specific queries raised and addressed regarding the deduction under section 80IC. The reopening was initiated based on the belief that excess allowance of deduction under section 80IC had been made, which the assessee contended was a review of the earlier assessment rather than a reassessment based on new evidence.

The Tribunal examined the facts and found that the original assessment had indeed involved a detailed examination of the deduction under section 80IC, including specific queries and responses. The reopening notice did not indicate any new material or information but was based on the records of the original assessment. The Tribunal referenced the Supreme Court's decision in Kelvinator of India Ltd., which held that reassessment cannot be used as a tool for reviewing an earlier order based on a "change of opinion."

2. Assessment of Deduction under Section 80IC:

The original assessment included a detailed evaluation of the deduction claimed under section 80IC for the Century Pulp & Paper unit, supported by an audit report under section 10CCA. The Assessing Officer had initially allowed part of the claim and disallowed a portion, which was upheld by the Commissioner (Appeals). The reopening sought to further disallow the deduction on other income related to the unit, which the Tribunal found to be an attempt to review the earlier decision rather than reassess based on new evidence.

3. Alleged "Change of Opinion" by the Assessing Officer:

The Tribunal emphasized that the concept of "change of opinion" precludes the reopening of an assessment. The Supreme Court in Kelvinator of India Ltd. established that reassessment must be based on "tangible material" and not merely a different interpretation of the same facts. The Tribunal found that the reasons recorded for reopening were based solely on the earlier assessment records, indicating a review rather than a reassessment. The Tribunal concluded that the reopening was invalid as it was based on a "change of opinion" without any new material.

Conclusion:

The Tribunal held that the reopening of the assessment under section 147 was void as it was based on a "change of opinion" and not on any new material. Consequently, the assessment order passed under section 147/143(3) was quashed. The other grounds raised by the assessee and the issues in the Departmental appeal were rendered academic and dismissed as infructuous. The assessee's appeal was allowed, and the Revenue's appeal was dismissed.