2016 (5) TMI 1522 - AT - Income Tax

Reopening of assessment - validity of reason to believe - disallowance towards repairs and maintains expenses incurred by the assessee - HELD THAT - AO on going through the records noticed that assessee claimed certain expenditure towards repairs and maintenance and according to him this is not an admissible expenditure. Therefore he was of the opinion that there is escapement of income within the meaning of Sec. 147 of the Act by the assessee. On going through the reasons recorded, we find that no tangible materials have come on record after completion of assessment so as to believe that the income of the assessee has escaped assessment. It is only from the records the Assessing Officer came to the conclusion that the expenses are not allowable and therefore there is escapement of income. This is only a mere change of opinion of the Assessing Officer to reopen the assessment based on the materials already available on record which it is not permissible under law. See RALLIS INDIA LTD. VERSUS ASSISTANT COMMISSIONER OF INCOME-TAX AND ANOTHER 2010 (3) TMI 164 - BOMBAY HIGH COURT - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment by the Assessing Officer.
2. Disallowance towards repairs and maintenance expenses incurred by the assessee.

Reopening of Assessment:
The appeal was filed against the order of the Ld. CIT(A) challenging the reopening of assessment by the Assessing Officer. The Counsel for the assessee argued that there were no tangible materials after the initial assessment to justify the reassessment. The reasons for reopening were based on expenses disallowed by the Assessing Officer. The Departmental Representative contended that this ground was not raised before the Ld. CIT(A). The Tribunal held that the legal issue of reopening could be raised before them without the need for fresh facts, citing the decision in National Thermal Power Corpn. Ltd Vs CIT (229 ITR 383). The reasons for reopening highlighted that certain repair and maintenance expenses were disallowed by the Assessing Officer, leading to the belief of income escapement. However, the Tribunal concluded that there were no tangible materials post-initial assessment to warrant the reassessment. Citing legal precedents, including the judgment in Rallis India Ltd, the Tribunal deemed the reassessment as a mere change of opinion without tangible material, rendering it impermissible under the law. Consequently, the reassessment was held as bad in law, and the appeal on this ground was allowed.

Disallowance of Repairs and Maintenance Expenses:
Since the Tribunal found the reopening of assessment to be invalid, they did not delve into the merits of the disallowance of repairs and maintenance expenses. The Tribunal considered this aspect as academic due to the primary issue of reopening being decided in favor of the assessee. Consequently, the appeal filed by the assessee was allowed, and the order was pronounced on 27th May 2016.