2016 (5) TMI 407 - AT - Income Tax

Reopening of assessment - reason to believe and concealment of fact that i.e. Sales and stock transfer - Held that - As during the assessment proceeding the assesse produced all the books of a/c with detail require by A.O., which have been dully examined & checked and discussed in the original assessment order. The detail chart of sale with stock transfer along with consolidate Audit balance sheet of Company head office Delhi and branch office / factory Pondicherry, which was dully filed during the assessment proceeding. The sale and stock transfer declare in the detail chart were dully verified from the Audit balance sheet of consolidated as well as individual of the company that is Head Office Delhi and branch office / factory Pondicherry. Even During the original assessment proceeding it was duly explained the difference in the stock transfer to branch and vice-versa and credited in the books of accounts There was difference of stock transfer to branch in the books of branch office which has shown credited their stock less by ₹ 29,65,101/-. We find force in the assessee s counsel version that because this unit is covered under Excise Act therefore to claim MODVAT as per excise law in the stock transfer. It segregated excise duty and CST in separate head in their books of account. We also find that a notice dated 4.4.2008 u/s 154/155 of I.T. Act was received for clarification of sales assessment year 2004-05 including stock transfer shown in the Balance Sheet and Profit & Losses Account filed from Delhi to branch Pondicherry, which contain element of stock transfer from Delhi to branch Pondicherry and vice- versa and in response thereto the assessee has filed the reply of the notice on 30.4.2008 explaining the detail of sale which contain detail element of transfer of stock and credited in the books of accounts which has been accepted by the Department and no further query was asked by the AO and sent the notice u/s. 147 on account of income escaping assessment when there is no reason to believe and concealment of fact i.e. Sales and Stock transfer it mere change of opinion after the original assessment completed. We find that all the facts were duly discussed and verified, hence, there is no new facts or concealment of any facts as per section 147. - Decided in favour of assessee

Summary

Issues Involved:
Reopening of assessment u/s 147, Addition of income, Validity of notice u/s 148, Change of opinion, Failure to disclose material facts, Time limitation for notice issuance, Approval for notice u/s 148, Fresh material for reassessment, Judicial interpretation of evidence, Excessive additions, Legal and factual correctness of observations.

Reopening of Assessment u/s 147:
The assessee challenged the reopening of assessment u/s 147, arguing that all necessary details were provided during the original assessment. The AO added income due to discrepancies in stock transfers, but the assessee contended that the additions were based on excise duty and CST, which were accounted for as per the law. The Tribunal found the reassessment was a mere change of opinion without fresh material, contrary to legal principles. Citing relevant case laws, the Tribunal quashed the reassessment, emphasizing the importance of a valid reason to believe income had escaped assessment.

Addition of Income:
The AO added income of ?29,65,101, alleging underassessment due to discrepancies in stock transfers. The assessee argued that the additions were explainable, as excise duty and CST were accounted for correctly. The Tribunal agreed with the assessee, stating that the additions lacked legal basis and were unjustified. Moreover, the Tribunal noted that the AO failed to provide tangible material to support the additions, leading to the allowance of the assessee's appeal on this issue.

Validity of Notice u/s 148:
The assessee contended that the notice u/s 148 was illegal, as it was issued beyond the time limit and without proper approval. The Tribunal examined the reasons recorded by the AO and found the notice lacked substantive grounds for reopening the assessment. Relying on legal precedents, the Tribunal held that the notice was invalid and quashed the reassessment proceedings, emphasizing the necessity of tangible material for issuing notices u/s 148.

Change of Opinion and Disclosure of Material Facts:
The Tribunal analyzed the original assessment details and the reasons for reopening the assessment. It concluded that the reassessment was based on a change of opinion without any new material. The assessee had disclosed all relevant facts during the original assessment, and the AO's actions were deemed unjustified. The Tribunal emphasized that a mere change of opinion is impermissible under the law and cited relevant case laws to support its decision to quash the reassessment.

Judicial Interpretation of Evidence and Excessive Additions:
The Tribunal reviewed the documentary evidence presented by both parties and assessed the validity of the additions made by the AO. It found that the AO's conclusions were not supported by the evidence and that the additions were excessive. The Tribunal highlighted that the evidence and explanations provided by the assessee were not properly considered, leading to the decision to allow the appeal and quash the reassessment proceedings.

Legal and Factual Correctness of Observations:
The Tribunal scrutinized the observations made by the AO and the CIT(A) and found them to be legally unsound and factually incorrect. It emphasized the importance of basing decisions on concrete evidence and legal principles. By quashing the reassessment proceedings, the Tribunal rectified the erroneous observations made by the lower authorities, ensuring a fair and just outcome for the assessee.