2019 (2) TMI 1723 - HC - Income Tax

Reassessment proceedings u/s 147/148 - Whether reasons to re-open the assessment proceedings for AY 2002-03 amounted to a second opinion or review of the previous view expressed? - HELD THAT - Reassessment proceedings were initiated on the premise that the scrutiny assessment originally completed was in ignorance of a binding decision of Supreme Court in Southern Switchgears Ltd. v. CIT 1997 (12) TMI 105 - SC ORDER . The reassessment was completed and the amounts were added back. The assessee appealed both on merits and on the issue of reopening. The CIT(A) concurred with the view of the Assessing Officer (AO). However the Tribunal following the decision of the Supreme Court in CIT v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT and other decisions was of the view that since this scrutiny assessment had gone into the taxability of amounts in question the AO could not have revisited the same issue on the pretext that a binding decision was overlooked. This Court is of the opinion that the impugned order is sound and reasonable and in accord with the judgment of the Supreme Court. Further in somewhat circumstances where reassessment proceedings were sought to be initiated on the ground of expenditure wrongly allowed in ignorance or overlooking Southern Switchgears 1997 (12) TMI 105 - SC ORDER this Court in Xerox Modicorp Ltd. v. DCIT 2013 (1) TMI 160 - DELHI HIGH COURT held that reassessment proceedings were unauthorised by law

Summary

Issues:
1. Reassessment proceedings under Sections 147/148 of the Income Tax Act, 1961.
2. Allowance of capital expenditure by way of royalty.
3. Validity of reassessment based on a binding decision overlooked during original assessment.
4. Applicability of Supreme Court judgments in similar cases.
5. Legality of reassessment proceedings.

Analysis:

1. The appellant challenged the reassessment proceedings under Sections 147/148 of the Income Tax Act, 1961, arguing that the reasons for reopening the assessment for AY 2002-03 amounted to a second opinion or review of the previous view expressed. The Tribunal rejected the Revenue's appeal, leading to the current dispute.

2. The original assessment allowed the assessee's claim under Section 37(1) for allowance of capital expenditure by way of royalty for technical knowledge and depreciation of fixed assets. However, reassessment was initiated based on the premise that the original assessment was in ignorance of a binding decision of the Supreme Court. Subsequently, the reassessment added back the amounts previously allowed.

3. The CIT(A) supported the Assessing Officer's view, but the Tribunal disagreed. Citing the Supreme Court's decision in CIT v. Kelvinator of India Ltd., the Tribunal held that since the scrutiny assessment had already addressed the taxability of the amounts in question, revisiting the issue based on an overlooked decision was not permissible.

4. The High Court found the Tribunal's order to be reasonable and in line with the Supreme Court's judgment. Referring to a previous case, Xerox Modicorp Ltd. v. DCIT, the Court emphasized that reassessment proceedings initiated due to expenditure wrongly allowed in ignorance of a binding decision were unauthorized by law.

5. Ultimately, the High Court dismissed the appeal, concluding that no substantial question arose regarding the legality of the reassessment proceedings. The decision highlighted the importance of adhering to legal precedents and the limitations on revisiting issues already addressed during scrutiny assessments.