2018 (7) TMI 2278 - HC - Income Tax

Reopening of assessment u/s 147 - fresh or tangible material to initiate reopening - HELD THAT - As in the absence of any fresh or tangible material outside of the existing record the respondents could not have issued the re-assessment notice impugned in the present case. They cite Commissioner of Income Tax v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT in support of the proposition that re-assessments to the extent that they are a revision of opinion are impermissible. The respondent submits that the re-assessment was necessitated on account of the careful scrutiny of the profit and loss statement for the concerned year. As submitted that the AO had cogent reasons to believe that the income chargeable to tax had escaped assessment having regard to the fact that apparently no tax deductions were made in respect of the same payouts and that the original order did not express any opinion on the subject. The decision in Kelvinator (supra) is conclusive. In order that an AO can belatedly reopen a concluded assessment a scrutiny assessment u/s 143(3) as is the present case there ought to exist tangible material outside of the existing record that may be in the form of information received directly or incidentally in the course of other collateral proceedings such as searches seizure or even subsequent to other assessment year s materials. None of these conditions which trigger a valid re-assessment exist on the record. The Revenue is clearly seeking to revisit the concluded issues in the pretext of stating that they were not either appreciated fully or not at all. Kelvinator (supra) is conclusive even on that aspect. Thus the impugned re-assessment notice cannot be sustained.

Summary

Issues:
1. Re-opening of assessment under Sections 147/148 of the Income Tax Act for AY 2010-11.
2. Validity of the reasons for re-opening the assessment.
3. Requirement of tangible material for re-assessment.
4. Application of the decision in Commissioner of Income Tax v. Kelvinator of India Ltd.
5. Sustenance of the re-assessment notice for AY 2010-11.

Analysis:

The High Court dealt with the issue of the re-opening of assessment under Sections 147/148 of the Income Tax Act for AY 2010-11. The petitioner challenged the re-opening, arguing that without fresh material, the re-assessment notice was invalid. The respondent justified the re-assessment based on a scrutiny of the profit and loss statement, claiming income had escaped assessment due to lack of tax deductions. The petitioner relied on the decision in Commissioner of Income Tax v. Kelvinator of India Ltd., asserting that re-assessments based solely on a revision of opinion are impermissible.

The Court analyzed the requirement of tangible material for re-assessment, emphasizing the need for information beyond the existing record. It stated that for a valid re-assessment, tangible material such as information from collateral proceedings or subsequent assessment years must exist. The Court found that in this case, no such material was present, and the Revenue was attempting to revisit concluded issues under the pretext of lack of full appreciation, contrary to the principles established in the Kelvinator case.

Ultimately, the Court held that the impugned re-assessment notice for AY 2010-11 could not be sustained. It quashed the re-assessment notice and all further proceedings related to it. The writ petition was allowed in favor of the petitioner, highlighting the importance of tangible material and adherence to legal principles in re-opening assessments under the Income Tax Act.