2018 (3) TMI 1827 - AT - Income Tax

Reopening of assessment u/s 147 - HELD THAT - As the findings of the learned CIT(A) in the impugned order do not invite any interference at our end which says that during the regular assessment proceedings, the aspects now raised by issuing notice u/s 148 were considered, as such, the reopening of the proceedings for the very same purpose is bad in law - Appeal of the revenue is dismissed.

Summary

Issues:
Challenging reassessment order under section 147 clause (c) of explanation 2 of the Income Tax Act.

Analysis:
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) quashing the assessment, alleging that the reassessment order was bad in law. The original return declaring a loss was scrutinized, and assessment was completed at the returned loss. However, a notice under section 148 was issued based on the belief that income had escaped taxation due to diversion of funds through interest payments. The assessee contended that all necessary details were already provided during the original assessment and that the interest was paid on borrowed capital for business purposes. Despite this, the AO disallowed the interest and made an addition to the income. The CIT(A) held that reopening the proceedings for the same purpose was unjustified as the aspects were already considered during the original assessment. The Revenue challenged this finding, leading to the appeal.

The CIT(A) found that all details regarding interest payments were furnished during the original assessment, and the reasons recorded for reassessment were based on information already available. The Revenue's argument was refuted by citing legal precedents that restrict the power of reassessment to cases where fresh material is available, not for improving upon the original assessment without new evidence. The Tribunal concurred with the CIT(A)'s findings, stating that the reassessment was merely an attempt to review the original assessment without additional grounds, constituting a change of opinion. Consequently, the Tribunal upheld the CIT(A)'s decision, dismissing the appeal as lacking merit. The appeal of the Revenue was ultimately dismissed, affirming the CIT(A)'s order.

In conclusion, the Tribunal's judgment emphasized that reassessment under section 147/148 of the Income Tax Act cannot be used to enhance the original assessment without new material. The decision underscored the importance of adhering to legal principles and precedents to prevent arbitrary reassessment based on a mere change of opinion without substantive grounds.