2020 (2) TMI 1354 - AT - Income Tax

Reopening of assessment u/s 147 - valid reason to believe - HELD THAT - Reasons recorded by the AO are replied by the assessee in response to notice u/s. 148 and rebutted that the admission of Rs. 7, 00, 000/- during the course of survey and submitted that he has not made any excess investment of Rs. 7, 00, 000/- and other queries are also replied. No tangible materials before the AO for reopening the assessment u/s.147 . As regards to the contention of Ld. D.R. that there was audit objection as perused the assessment records and find that there is no such mention of audit objection in the satisfaction note. In the absence of any fresh material the reappraisal of same material to initiate reassessment proceedings tantamounts to change of opinion and hence bad in law - Reassessment proceedings and first appellate order are dismissed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reopening assessment under section 147/148 of the Income Tax Act, 1961 based on change of opinion without new tangible material.
2. Whether reassessment proceedings were justified in the absence of fresh material or audit objection.
3. Compliance with statutory obligations by the assessee regarding disclosure of material facts necessary for assessment.

Analysis:
Issue 1: The appeal challenged the reopening of assessment for the assessment year 2009-2010 under section 147/148 of the Income Tax Act, 1961. The assessee contended that the assessment was reopened on the basis of a change of opinion without any new tangible material. The Assessing Officer issued a notice citing discrepancies found during a survey operation. The assessee objected, stating that all material facts were disclosed, and no excess investment was made. The reassessment order disallowed various claims. The CIT(A) upheld the validity of the notice and assessment. The tribunal quashed the reassessment, citing the lack of tangible material for reopening and the absence of fresh information, deeming it a change of opinion.

Issue 2: The tribunal considered whether the reassessment proceedings were justified in the absence of fresh material or audit objection. The tribunal noted that the law requires tangible material indicating income escapement for reopening assessments. It referenced the Delhi High Court and Supreme Court judgments emphasizing the need for a live link between reasons and belief for reopening. The tribunal found no tangible material before the Assessing Officer, rejecting the argument of audit objection as it was not supported by the assessment records. Consequently, the tribunal quashed the reassessment, deeming it a change of opinion and bad in law.

Issue 3: The counsel for the assessee argued that all material facts were disclosed, complying with statutory obligations. The assessee denied making any excess investment as alleged during the survey. The tribunal found the reassessment lacked tangible material and was based on a change of opinion. Citing legal precedents, the tribunal emphasized the importance of a live link between reasons and belief for reopening assessments. As the reassessment lacked fresh material, it was quashed on legal grounds. Other grounds on the merits of the case became irrelevant due to this decision.

In conclusion, the tribunal allowed the appeal, quashing the reassessment proceedings and dismissing the first appellate order based on the absence of tangible material for reopening the assessment under section 147/148 of the Income Tax Act, 1961.