2015 (5) TMI 892 - AT - Income Tax

Reopening of assessememt - valuation of closing stock of property - Held that - The assessee during the year under consideration purchased one property situated at Panjagutta, Hyderabad for ₹ 13.13 cores and sold a portion of the said property, i.e. ground floor for consideration of ₹ 11 crores. The cost of the portion of the said property sold during the year under consideration was taken by the assessee as ₹ 7.6 crores, on the basis of a valuation report and the balance amount of ₹ 5.53 crores being cost of the remaining portion of the property continued to be held by the assessee was shown as closing stock. During the course of original assessment proceedings under S.143(3), the relevant details and documents relating to these transactions were called for by the Assessing Officer, as is evident from the relevant order sheet entries, and since the issue relating to the valuation of closing stock adopted by the assessee was directly linked with these transactions, we find it difficult to accept the contention of the Learned Departmental Representative that the same was not examined by the Assessing Officer during the course of original proceedings Moreover, the Assessing Officer himself in the letters written to the audit team as well as to the concerned Addl.CIT had stated in very clear terms that the issue relating to the valuation of closing stock was duly examined during the course of original assessment proceedings. Thus find ourselves in agreement with the learned CIT(A) that the issue relating to the valuation of closing stock having been examined by the Assessing Officer during the course of original assessment proceedings under S.143(3), the reopening of the assessment on the same issue was based on a mere change of opinion, which is not permissible in law, as held inter alia in the case of Kelivinator India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA ). We therefore, find no infirmity in the impugned order of the learned CIT(A) holding the assessment made by the Assessing Officer under S.143(3) read with S.147 as invalid and upholding the same, we dismiss the appeal filed by the Revenue. - Decided in favour of assesse.

Summary

Issues:
Validity of reopening assessment based on alleged under-valuation of closing stock.

Analysis:
The appeal involved the Revenue challenging the order of the Commissioner of Income-tax(Appeals) regarding the reopening of assessment and addition made on account of under-valuation of closing stock. The assessee, a partnership firm in the real estate business, filed its return for the year declaring total income. The assessment was reopened by the Assessing Officer under S.148, alleging under-valuation of closing stock. The assessee objected to the reopening, citing that the issue was thoroughly examined during the original assessment under S.143(3). The Assessing Officer made an addition to the total income, leading to an appeal by the assessee before the CIT(A).

The CIT(A) held that the reopening of assessment was invalid as it was based on a mere change of opinion. The assessment made by the Assessing Officer was canceled. The CIT(A) did not delve into the issue of under-valuation of closing stock due to the invalidity of the assessment. The Revenue appealed against the CIT(A)'s decision, contending the assessment was not examined during the original proceedings. The assessee argued that all relevant details were provided during the original assessment, and the valuation of closing stock was duly examined.

The Tribunal reviewed the submissions and material on record. It noted that the Assessing Officer had examined the valuation of closing stock during the original assessment, as evidenced by order sheet entries and correspondence. The Tribunal agreed with the CIT(A) that the reopening of assessment based on the same issue was a mere change of opinion, not permissible in law. Citing the Supreme Court's decision, the Tribunal upheld the CIT(A)'s order, dismissing the Revenue's appeal.

Regarding the cross objection by the assessee, the Tribunal found it unnecessary to decide on the addition made on the under-valuation of closing stock due to the invalidity of the assessment. The cross objection was dismissed. In conclusion, both the Revenue's appeal and the assessee's cross objection were dismissed.

This detailed analysis highlights the core issue of the validity of reopening the assessment based on alleged under-valuation of closing stock. The judgment emphasizes the importance of thorough examination during original assessments and the legal principles governing the reopening of assessments.