2017 (10) TMI 1306 - AT - Income Tax

Reopening of assessment u/s.148 - validity of reason to believe - change of opinion - Held that - On perusal of the recorded reasons shows that nowhere it records any fresh tangible information, which came to the notice of the Assessing Officer after completion of assessment under section 143(3) on 30.12.2009 for the assessment year 2007-08 and on 29.12.2010 for the assessment year 2008-09 and before recording of aforesaid reasons. The recorded reasons show that the reasons have been recorded based on very same materials which were already available before the Assessing Office prior to completion of assessment u/s.143(3) on 30.12.2009 for the assessment year 2007-08 and on 29.12.2010 for the assessment year 2008-09. It shows that on the basis of very same materials, the Assessing Officer has now formed a different opinion. In our considered view, the above action of the Assessing Officer cannot be sustained - Decided in favour of assessee

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Disallowance of expenditure under Section 40(a)(i) of the Act for payments to non-residents.
3. Disallowance under Section 43B of the Act concerning electricity duty deposits.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act, 1961:

The primary issue raised by the assessee was the initiation of reassessment proceedings under Section 147 based on a mere change of opinion without any fresh tangible material. The assessee argued that the original assessment was completed under Section 143(3) after detailed scrutiny, and no new information had come to the AO's knowledge to justify the reassessment. The Tribunal noted that the reasons recorded for reopening the assessment were based on the same materials available during the original assessment. The Tribunal relied on the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which held that a mere change of opinion cannot justify reopening an assessment. The Tribunal concluded that the reassessment proceedings were invalid as they were based on a change of opinion without any new tangible material.

2. Disallowance of Expenditure under Section 40(a)(i) of the Act for Payments to Non-Residents:

The assessee contended that the disallowance under Section 40(a)(i) for payments made to non-residents was unjustified as these payments were not chargeable to tax in India, and hence, no tax was deductible under Section 195. The Tribunal observed that the AO had failed to demonstrate how the payments to non-residents were chargeable to tax in India. The Tribunal also noted that the AO had previously disallowed similar payments during the original assessment, indicating that the AO had already formed an opinion on this matter. Consequently, the reassessment on this issue was deemed to be based on a change of opinion, which is not permissible.

3. Disallowance under Section 43B of the Act Concerning Electricity Duty Deposits:

For the assessment year 2008-09, the AO disallowed the deduction of electricity duty deposits under Section 43B, arguing that the deposits made in a non-lien account did not constitute actual payment. The assessee argued that the liability had crystallized and was discharged by depositing the amount as per the High Court's directions. The Tribunal found that the AO's action was again based on the same material available during the original assessment. The Tribunal reiterated that reassessment based on a change of opinion without new tangible material is not valid.

Conclusion:

The Tribunal set aside the reassessment orders for both assessment years 2007-08 and 2008-09, declaring them invalid due to the absence of fresh tangible material and the reliance on a mere change of opinion. Consequently, the appeals of the assessee were allowed, and the appeals of the revenue were dismissed. The Tribunal did not adjudicate on the merits of the additions as the reassessment orders were set aside.

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