2017 (6) TMI 1358 - AT - Income Tax

Validity of reopening of assessment u/s 147 - addition on account of actuarial surplus - change of opinion - Whether A.O. has not brought any tangible materials on record to indicate that there was an omission or failure on the part of the assessee company to disclose fully and truly all material facts necessary for the assessment - HELD THAT - As during the assessment proceedings the assessee furnished actuarial report Form-I which shows the negative reserve. The AO made the addition of 81, 000/- during the original assessment proceeding on account of actuarial surplus. The negative reserve was a part of the documents furnished during the assessment. Thus it cannot be said that there was non-disclosure of material fact relevant for assessment. The assessing officer while passing the assessment order the AO referred the actuarial report as reflected in para-2 of assessment order passed under section 143(3) - thus it is not the case where the assessing officer has not made inquiry in respect of negative reserve which has been shown in report under Form-I (Actuarial Report). After examining the Actuarial Report made the addition of 81, 000/- while passing the order of assessment. The assessment order was passed with due application of mind. The assessing officer has not brought any tangible material on record to show that there was any failure on the part of assessee to disclose fully and truly all material on record necessary for assessment. As per our considered view it was merely a change of opinion of assessing officer. On merit we have seen that similar issue arose in AY 2005-06 and the assessee filed appeal before Tribunal. The Tribunal on the basis of order of High Court in ICICI Prudential Life Insurance Co 2015 (7) TMI 1259 - BOMBAY HIGH COURT remanded the issue to the file of AO - The AO in pursuance of order of Tribunal deleted the additions on account of negative reserve its order. - Decided against revenue.

Summary

Issues involved:
1. Validity of reopening assessment u/s 147 of the Income-tax Act.
2. Disallowance of negative reserve of ?1,55,05,000 made by the Assessing Officer.
3. Jurisdictional issue and merit of the case regarding the appeal raised by the Revenue.

Issue 1: Validity of reopening assessment u/s 147:
The appeal by the Revenue challenged the order of the ld. Commissioner of Income Tax (Appeals) regarding the reopening of assessment for the Assessment Year 2003-04. The Revenue contended that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Assessing Officer had re-opened the assessment based on the existence of negative reserves that were not part of the actuarial surplus, resulting in income escaping assessment. The assessee argued that there was no failure in disclosure as all relevant information was provided during the original assessment. The Tribunal held that the re-opening was merely a change of opinion by the Assessing Officer, supported by the fact that the negative reserve was part of the documents furnished during the assessment. The Tribunal cited the decision of the Hon'ble Bombay High Court to support its conclusion, ultimately dismissing the appeal by the Revenue.

Issue 2: Disallowance of negative reserve:
The Assessing Officer had disallowed ?1,55,05,000 on account of negative reserve, which the assessee contested before the ld. CIT(A) and succeeded. The Revenue appealed this decision. The Tribunal noted that similar issues had arisen in previous assessment years, and the Tribunal had granted relief to the assessee based on the decision of the Hon'ble Bombay High Court. The Tribunal found that the issue was covered in favor of the assessee by previous judgments and dismissed the appeal by the Revenue.

Issue 3: Jurisdictional issue and merit of the case:
The ld. AR of the assessee argued on jurisdictional issues and merit of the case. On jurisdiction, it was contended that the re-opening was invalid due to full disclosure during the original assessment. The Tribunal agreed with the assessee, citing previous decisions and the lack of tangible material indicating failure to disclose. On merit, the Tribunal found that the issue was covered in favor of the assessee by previous judgments and decisions of the Hon'ble Bombay High Court. The Tribunal accepted the submissions of the AR for the assessee on both jurisdictional issues and the merit of the case, ultimately dismissing the grounds of appeal raised by the Revenue.

In conclusion, the Appellate Tribunal ITAT MUMBAI dismissed the appeal by the Revenue, upholding the decisions of the lower authorities regarding the validity of reopening assessment, disallowance of negative reserve, and the jurisdictional and merit issues raised in the case. The Tribunal found in favor of the assessee based on the full disclosure of material facts and previous judgments supporting the assessee's position.