2023 (1) TMI 1376 - AT - Income Tax

Reopening of assessment u/s 147 - Reassessment v/s review - disallowance of spill over mutual fund expenses and d isallowance of SEBI registration fees - HELD THAT - AO is only entitled to reopen the assessment, but he cannot review an assessment in the sense that there cannot be a rethinking or different opinion on the same material, which was the subject matter of the original assessment proceedings. Thus, bearing these principles in mind, if we examine the case on hand, we need to scrutinize as to whether the reopening was a change of opinion and was there any attempt to review the original order of assessment. There cannot be adjudication into the merits or roving enquiry into the merits of the assessment to come to a conclusion as to whether the reopening was justified or not. Prima facie, AO should be able to establish that the reopening of assessment was not on account of change of opinion, be it within four years or beyond four years. When a regular order of assessment was passed u/s 143(3) a presumption could be raised that such an order had been passed on application of mind and if it was to be held that an order, which had been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without anything further, the same would amount to giving premium to the Authority exercising quasi-judicial function to take benefit of his own wrong. If such is the position, in the absence of any allegation that there was any fresh material to come to a conclusion that income escaped assessment, the AO cannot now take a stand that the claim made by the assessee u/s 37 which was acceded to by the AO was incorrect and the expenditure is not allowable. If this is the observation and reason for reopening, it would be a clear case of change of opinion. What the AO purported to do is to review his earlier decision. As held by the Hon'ble Supreme Court, in a plethora of judgements, it is not for the assessee to tell as to how the AO has to complete the assessment. The duty of the assessee is to make a full and true disclosure of all materials. If the assessee is put on notice calling for additional materials, the assessee is duty bound to fully and truly disclose all materials and thereafter, it is for the AO to take a call on the materials. We are satisfied that whatever be the concern, it was to be traced in the assessment u/s 143(3) of the Act, the details in the understanding of the AO were called for and the details were placed by the assessee and thereafter, the assessment has been completed. Therefore, we find that the reopening was wholly without jurisdiction. As pointed out earlier, the AO, while disposing of the objections, has not touched upon the issue relating to jurisdiction. Appeal of the assessee is allowed.

Summary

Issues involved:
The judgment involves issues related to reassessment proceedings u/s 147 of the Income Tax Act, disallowance of spill over mutual fund expenses, and disallowance of SEBI registration fees.

Reassessment Proceedings u/s 147:
The appeal was against the order of Commissioner of Income Tax (Appeals) confirming the action of the Assessing Officer in initiating reassessment proceedings u/s 147 without appreciating the fact that it was done without fresh application of mind. The appellant contended that there was no failure to disclose necessary facts for the original assessment u/s 143(3). The Tribunal found that the reopening of the assessment was a change of opinion and not justified, as the original assessment was based on full disclosure of materials. Citing relevant case laws, the Tribunal allowed the grounds raised by the assessee, declaring the assessment order beyond jurisdiction.

Disallowance of Spill Over Mutual Fund Expenses:
During reassessment proceedings, the Assessing Officer added back mutual fund expenses and SEBI registration fees. The appellant objected to these additions, arguing that the expenses were incurred for the business purpose as per Sec. 37(1) of the Act. The Tribunal noted that the expenses claimed by the assessee were allowed during the original assessment u/s 143(3) and were consistent with claims made in previous assessment years. The Tribunal held that the disallowance of these expenses was unjustified and without jurisdiction, ultimately allowing the appeal of the assessee.

SEBI Registration Fees Disallowance:
Similarly, the disallowance of SEBI registration fees was challenged by the appellant, contending that the expenses were incurred wholly and exclusively for the business purpose. The Tribunal observed that the expenses were in line with SEBI regulations and had been consistently claimed in previous assessment years without disallowance. Considering the principles of full disclosure and application of mind during assessment, the Tribunal found the disallowance of SEBI registration fees to be unjustified and beyond jurisdiction. As a result, the appeal of the assessee was allowed.

Separate Judgement by Judges:
The judgment was pronounced by the Appellate Tribunal ITAT Mumbai, with the order being delivered on January 24, 2023, allowing the appeal of the assessee based on the above findings and legal reasoning.