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2017 (9) TMI 238 - AT - Income TaxValidity of Reopening of assessment u/s 148 - reassessment on basis of audit objection raised by revenue audit party- reasons recorded alone is foundational fact to be examined while evaluating validity of reopening u/s 147 - without application of mind by AO - Held that - There is no application of mind of the Assessing Officer from the materials already available on record and he has blindly gone by the observation of the audit party which cannot be reckoned as conclusive finding or opinion but mere suggestion. The Assessing Officer after having receiving the information in form of audit objection has to apply his mind independently from the records as to whether such an objection and suggestion by the audit party is actually tenable or not. Reopening in the present case is bad in law, firstly, no tangible material has come on record having live link nexus with the income alleged to have escaped assessment; and secondly, the issue which has been raised in the reasons recorded was already on record and duly considered by the AO in the course of original assessment proceedings, which amounts to change of opinion , impermissible in law. Accordingly, the assessment order passed in pursuance of such reasons is liable to be quashed. - Decided in favour of assessee.
Issues Involved:
1. Validity of reopening of assessment under section 147/148. 2. Deletion of addition made by the Assessing Officer on account of valuation of closing stock of E-class content. Issue-wise Detailed Analysis: 1. Validity of Reopening of Assessment under Section 147/148: The assessee challenged the reopening of the assessment under section 147, arguing that the notice under section 148 was issued based on an audit objection and not on new tangible material. The original assessment was completed under section 143(3), and the reopening was based on the same set of facts already considered. The "reasons recorded" by the Assessing Officer (AO) did not refer to any new information or material but merely reappraised existing records. The Tribunal noted that the AO's reasons for reopening the assessment were based on a "perusal of the record" and not on any new tangible material, thus constituting a "change of opinion," which is impermissible in law. The Tribunal referenced the Hon'ble Jurisdictional High Court's judgment in DIT (Intl. Tax) vs. Rolls Royce Industrial Power India Ltd., which held that revisiting the same material amounts to a change of opinion and cannot justify reopening the assessment. Consequently, the Tribunal quashed the reopening of the assessment as invalid. 2. Deletion of Addition Made by the Assessing Officer on Account of Valuation of Closing Stock of E-class Content: The revenue's appeal challenged the deletion of the addition of ?2,07,62,305 made by the AO on account of the valuation of closing stock of E-class content. The CIT (Appeals) had deleted the addition, concluding that the valuation shown by the assessee was correct. The Tribunal upheld the CIT (Appeals)'s decision, noting that the AO had not brought any specific documents or facts to dispute the assessee's contention that the E-class software was finished goods and not work-in-progress. The Tribunal emphasized that the AO's observations were general and lacked specific findings. Additionally, the Tribunal noted that the consistent method of accounting followed by the assessee would balance out the impact of valuation over the years. Therefore, the Tribunal found no reason to disturb the CIT (Appeals)'s findings and upheld the deletion of the addition. Conclusion: The Tribunal allowed the assessee's appeal, quashing the reopening of the assessment under section 147/148 as invalid due to the absence of new tangible material and the impermissible change of opinion. Consequently, the revenue's appeal became infructuous and was dismissed. The order was pronounced in the open court on 30.8.2017.
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