2021 (9) TMI 1456 - AT - Income Tax

Reopening of assessment u/s 147 - Reason to believe - Change of opinion - HELD THAT - We are in Assessment Year 2010-11 wherein the AO had framed his section 143(3) regular assessment followed by recording of the foregoing reasons culminating in issuance of section 148. This impugned reopening therefore has been initiated beyond the specified period of four years from the end of the relevant assessment year in light of section 147(1) 1st proviso. The said proviso stipulates that such a reopening would only be initiated if it is found that the assessee had not disclosed all the relevant particulars fully and truly before the AO in the first round. CIT DR to dispute that the AO s sole reopening reason has placed reliance on the assessee s books only regarding reversal on account of cancellation and price revision . We therefore quote hon ble Bombay high court s landmark decision in Hindustan Lever Limited Vs. R.B. Wadekar 2004 (2) TMI 41 - BOMBAY HIGH COURT that an AO s reopening reasons have to be read on standalone basis; as it is without any scope of further improvement at a latter stage by way of addition deletion or substitution therein. We thus quote that to conclude that the impugned reopening has been rightly quashed by the CIT(A) as a mere change of opinion only. Revenue s appeal is dismissed.

Summary

Issues Involved:
1. Reopening of assessment due to 'change of opinion'.
2. Failure to disclose fully and truly material facts necessary for the assessment.
3. Admission of additional evidence without remanding to the Assessing Officer.

Issue-wise Detailed Analysis:

1. Reopening of Assessment Due to 'Change of Opinion':
The Revenue contended that the CIT(A) erred in allowing the ground of the assessee pertaining to the reopening of the assessment on account of 'change of opinion'. The CIT(A) observed that the Assessing Officer (AO) had already examined the issue of 'Reversal on account of price revision and cancellation' during the original assessment proceedings, as evidenced by the questionnaire in the notice under Section 142(1) of the Income Tax Act. The AO had verified the details and accepted the assessee's submissions. Therefore, reopening the case on the same issue without any fresh or additional information amounted to a 'change of opinion', making the reopening invalid and bad in law.

2. Failure to Disclose Fully and Truly Material Facts Necessary for the Assessment:
The CIT(A) found that there was no new material brought on record by the AO that was not already available in the revised returns of income. The original assessment under Section 143(3) was completed after verifying the relevant information. The reassessment notice was issued without any fresh evidence suggesting escapement of income. The CIT(A) concluded that the AO's failure to address the assessee's objections regarding the validity of the reassessment proceedings further proved that the reopening was invalid and bad in law.

3. Admission of Additional Evidence Without Remanding to the Assessing Officer:
The Revenue argued that the CIT(A) erred in admitting additional evidence without remanding it to the AO, contravening the provisions of Rule 46A. However, the CIT(A) allowed the assessee's grounds on merits, noting that the AO had already examined the issue during the original assessment. The CIT(A) found that the price revision and cancellations were due to economic recession and other factors, and the reversal of revenue was justified as per prudent accounting principles and the percentage completion method followed by the assessee.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, noting that the reopening of the assessment was based on a 'change of opinion' and lacked fresh tangible material. The Tribunal also found that the AO had not provided any specific findings countering the assessee's claims regarding price revisions and cancellations. Consequently, the Tribunal dismissed the Revenue's appeal, concluding that the reopening of the assessment was invalid and the addition of Rs. 113,19,93,808/- on account of reversal of revenue was not justified.