2018 (5) TMI 231 - AT - Income Tax

Validity of reassessment proceedings - original assessment was completed as per the provisions of section 153A - non-payment of leave encashment amount - Held that - A perusal of the notice reveal that it is a case where the original assessment was completed u/s. 143 (3) r. w. s. 153A, that reopening was done after a period of four years, that the basis for issuing notice u/s. 148 was non-payment of leave encashment amount, that an entry in the Tax Audit Report was the reason for initiating the reassessment proceedings. Now, if fact of filing of Tax Audit Report is taken into consideration it becomes clear that necessary details were made available to the AO, during original assessment proceedings. As the Tax Audit Report was available to the AO during assessment proceedings, so, the observation made, that the assessee had not filed necessary details, is factually incorrect. Considering the above, we are of the opinion that no new tangible material was relied upon by the AO for issuing notice u/s. 148 of the Act. In other words, same material was used to initiate the reassessment proceedings. Thus, it is a case of mere change of opinion. Also section 43B(f) would apply only to those cases where an employer would be any amount to an employee out of leave salary standing to credit of employees. In the case under consideration provision was made on the basis of actuarial valuation. Therefore, the provision for leave encashment would not fall under the preview of clause(f)to section 43 B of the Act. Thus t reopening has to be quashed on jurisdictional issue as well as on merits - Decided in favour of assessee

Summary

Issues involved:
Challenge to the validity of reassessment proceedings based on the notice issued under section 148 of the Income Tax Act.

Analysis:

1. Issue: Validity of reassessment proceedings initiated by the Assessing Officer (AO).

Analysis: The AO completed the original assessment under section 143(3) read with section 153A of the Act, assessing the total income at a specific amount. Subsequently, the AO issued a notice under section 148 of the Act, claiming that taxable income had escaped taxation. The First Appellate Authority (FAA) considered the case and held that the reassessment was invalid, citing lack of fresh tangible material for initiating the proceedings. The FAA referred to previous judgments and concluded that the reopening was unjustified due to a mere change of opinion by the AO. The Tribunal also noted that the Tax Audit Report was available during the original assessment proceedings, indicating that necessary details were provided to the AO. Consequently, the Tribunal upheld the FAA's decision, dismissing the appeal raised by the AO.

2. Issue: Interpretation of the concept of "change of opinion" in reassessment proceedings.

Analysis: The Tribunal referred to the judgment in the case of Kelvinator India, emphasizing that the Assessing Officer cannot reopen an assessment solely based on a change of opinion. The Tribunal highlighted the importance of tangible material to establish income escapement. In this case, the AO failed to demonstrate any mistake or omission by the assessee in disclosing necessary facts during the original assessment. Additionally, the Tribunal cited the case of Calcutta Chromotype Ltd., where the High Court ruled that the assessee had fulfilled its duty to disclose all material facts, and the AO's attempt to reopen the assessment was based on a different opinion rather than new facts. Consequently, the Tribunal quashed the reassessment on jurisdictional and merit-based grounds.

3. Issue: Application of section 43B(f) in the context of leave encashment provision.

Analysis: The Tribunal discussed the applicability of section 43B(f) concerning leave encashment provisions. It noted that the provision for leave encashment in this case was based on actuarial valuation and did not fall under the preview of section 43B(f). The Tribunal's analysis supported the argument that the reassessment proceedings lacked a valid basis, further strengthening the decision to dismiss the appeal filed by the AO.

In conclusion, the Appellate Tribunal upheld the decision of the First Appellate Authority, ruling that the reassessment proceedings were invalid due to a lack of fresh tangible material and constituted a mere change of opinion by the Assessing Officer. The Tribunal's detailed analysis and reliance on relevant legal precedents led to the dismissal of the appeal, emphasizing the importance of adherence to legal requirements in initiating reassessment proceedings under the Income Tax Act.