2017 (8) TMI 117 - AT - Income Tax

Reopening of assessment - Sale tax liability - Held that - From the reasons recorded, it is apparent clear that nothing new material has came in the notice of AO, subsequently in the course of assessment proceeding. The assessee in the Note of Tax Audit Report has clearly mentioned this fact. Moreover, the assessee in its objection dated 05.10.2010 clearly stated that the Sales tax liability to the extent of ₹ 1,88,98,732/- was offered for taxation for AY 2007-08. The same AO taxed the Sale tax collected in earlier year in the AY 2007-08. As per our considered opinion the Revenue is not entitled to tax the same amount twice. Hon ble Apex Court in CIT vs. Excel Industries Ltd. 2013 (10) TMI 324 - SUPREME COURT held that when the rate of tax remain the same and the assessee has paid the tax in the subsequent accounting year then the dispute raised by the Revenue is entirely academic and therefore, there is no need for Revenue to continue with the litigation when it is quite clear that not only it was fruitless but also that it meaning have added anything must to the public coffer. From the factual discussion and the legal position, we hold that no income was escaped from the assessment. Moreover, the impugned income (Sale tax liability) was offered by assessee in the subsequent AY was merely a change of opinion. The re-opening based on change of opinion cannot per se be reasons of re-opening u/s 147 thus it was invalid. Thus we accepted the appeal of the assessee on ground No.2. As we have held that re-opening of the assessment as invalid. Hence, the discussion on other grounds of appeal is become academic. In the result the appeal of the assessee is allowed.

Summary

Issues:
1. Validity of re-assessment order under section 143(3) read with section 147 of the Income Tax Act.
2. Taxability of sales tax refund and deduction under section 10A.

Issue 1: Validity of Re-assessment Order:
The case involved a re-assessment proceeding under section 147 of the Income Tax Act for AY 2006-07. The Assessing Officer (AO) re-opened the assessment based on the belief that income had escaped assessment due to the non-taxation of a sales tax refund amounting to ?1,88,98,732. The assessee objected to the re-opening, arguing that the tax liability had already been offered for taxation in AY 2007-08. The dispute centered around whether there was sufficient tangible material for the AO to form a belief about the income escapement. The Tribunal examined the reasons for re-opening and concluded that there was no new material to support the re-assessment. The Tribunal held that the re-opening was based on a change of opinion and not valid under section 147, thereby allowing the appeal of the assessee on this ground.

Issue 2: Taxability of Sales Tax Refund and Deduction under Section 10A:
The AO disallowed the claim of deduction under section 10A by the assessee, citing an excess deduction of ?3,43,53,853. The AO also included the sales tax refund amount in the tax liability for AY 2006-07. On appeal, the CIT(A) upheld the taxability of the sales tax refund but allowed the deduction under section 10A. The Tribunal, after ruling the re-assessment invalid, deemed the discussion on other grounds, including the taxability of the sales tax refund and the deduction under section 10A, as academic. Consequently, the Tribunal allowed the appeal of the assessee and dismissed the appeal filed by the Revenue.

In summary, the Tribunal held that the re-assessment order was invalid as it was based on a change of opinion rather than new material, leading to the allowance of the assessee's appeal. The Tribunal also dismissed the Revenue's appeal, considering the consequential additions/disallowances as academic due to the invalid re-assessment.