2019 (8) TMI 1724 - AT - Income Tax

Reopening of assessment u/s 147 - Bogus purchases addition - HELD THAT - In this case, the assessment was framed u/s.143(3) of the Act vide order dt.31-10-2011. We note that during the original assessment proceedings, the AO specifically raised a query vide letter dt.08-09-2011 in para 2, directing the assessee to furnish the sales and purchases, which was replied by assessee vide letter dt.18-10-2011, giving party-wise sales and purchases. All the Hawala parties qua which the reopening proceedings were resorted to u/s.147 r.w.s.148 of the Act were originally furnished before the AO and thus, the reopening is done on the basis of same materials in respect of the same parties, which were examined by the AO by calling for specific details from the assessee. In our opinion the case of assessee was reopened on the change of opinion only as all the parties were verified by the AO during the course of original assessment proceedings. This is a mere change of opinion by the AO, which is not permissible under the Act. The case of assessee is squarely covered by the decision of CIT V. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT - Appeal of assessee is allowed.

Summary

Issues:
1. Jurisdiction of the Assessing Officer to reopen the assessment u/s.147 r.w.s.148 of the Income Tax Act.

Detailed Analysis:
The appellant challenged the jurisdiction of the Assessing Officer (AO) to reopen the assessment under section 147 r.w.s.148 of the Income Tax Act. The AO reopened the case based on information received from DGIT(Inv.) Wing, Mumbai, alleging that the appellant was a beneficiary of Hawala purchase entries. The appellant provided bills, vouchers, and other evidence to prove the genuineness of the purchases. However, the AO concluded that the purchases were Hawala transactions, estimating the profit at 12.50% and making an addition to the income. The appellant contended that the reopening was based on the same material already before the AO during the original assessment, which amounted to a change of opinion. The CIT(A) upheld the reopening, stating that specific material received from the investigation wing was not verified during the original assessment, leading to the dismissal of the appeal on this technical issue.

The appellate tribunal observed that during the original assessment proceedings, the AO had already sought details of sales and purchases, which were duly provided by the appellant. The parties identified as Hawala parties in the reopening proceedings were originally disclosed to the AO during the original assessment. The tribunal found that the reopening was based on the same material concerning the same parties that were previously examined by the AO. Consequently, the tribunal concluded that the reopening was a mere change of opinion by the AO, which is impermissible under the law. Citing the decision in CIT v. Kelvinator of India Ltd., the tribunal held that the assessment proceedings were flawed and therefore quashed. As a result, the appeal of the assessee was allowed on legal grounds, rendering further adjudication unnecessary.

In conclusion, the tribunal found that the AO's decision to reopen the assessment was based on the same material already before the AO during the original assessment, constituting a change of opinion. The tribunal held that such a reopening was impermissible under the law, following legal precedents and ultimately allowing the appeal of the assessee on legal grounds.