2018 (7) TMI 290 - AT - Income Tax

Reopening of assessment - wrong name given in the notice - curable mistake u/s 292B - notice in the name of legal heir after assessee s death - disallowance of service tax liability u/s 43B - Held that - Hon ble Supreme Court s decision in the case of Sky Light Hospitality LLP Vs. ACIT 2018 (4) TMI 529 - SUPREME COURT OF INDIA supports the view that wrong name given in the notice is merely a clerical error which could be corrected u/s 292B of I.T.Act. In the instant case the legal heir was given sufficient opportunity and he has submitted the required information. Hence, we hold that mentioning the name of the assessee, a dead person, on the assessment order is a mere clerical error which is curable u/s 292B of I.T.Act, since the notice was issued correctly in the name of legal heir. Accordingly, we set a side the order of the Ld.CIT(A) and uphold the assessment made by the AO, on this issue and reject the objections raised by the assessee. Plain reading of the reasons recorded by the AO shows that the service tax was shown in the liabilities grouping under sundry creditors which is to be disallowed u/s 43B of I.T.Act., and not an allowable expenditure. Thus, the AO formed the belief that the income chargeable to tax, has escaped assessment and accordingly issued the notice u/s 148 of I.T.Act. Though the AO has mentioned decision of CIT Vs. Associated Pigments Ltd. 1993 (6) TMI 249 - CALCUTTA HIGH COURT in the reasons to take the support, the AO has not relied on the decision of Associated Pigments Ltd., for forming the belief. The verification of original assessment order passed u/s 143(3) shows that the AO has not examined the issue at the time of making the assessment u/s 143(3) on 31.12.2008. AO has not examined the issue and taken a stand regarding the allowability of unpaid service tax which was grouped under the head sundry creditors. From the above, it is established that the AO has not formed any opinion at the time of original assessment, hence it cannot be called as change of opinion. We hold that there is no change of opinion in the assesseee s case and the action of the AO in reopening the assessment is upheld. Accordingly, we set aside the order of the CIT(A) and uphold the reopening of assessment. - decided against assessee.

Summary

Issues Involved:
1. Validity of the assessment made on a dead person.
2. Validity of the reopening of assessment under Section 147 of the Income Tax Act.

Detailed Analysis:

1. Validity of the Assessment Made on a Dead Person:
The assessee passed away, and the AO issued a notice under Section 148 to the legal heir, Sri D.V. Subba Rao. However, subsequent notices and the assessment were incorrectly addressed to the deceased, C.D.S. Prakasa Rao. The legal heir responded to these notices and participated in the proceedings without objection. The AO's error of addressing the deceased was deemed a clerical mistake curable under Section 292B of the Income Tax Act, as the intent and purpose of the Act were fulfilled by involving the legal heir in the assessment process. The Tribunal cited several cases, including the Hon’ble Supreme Court's decision in Sky Light Hospitality LLP Vs. ACIT, to support this view. Therefore, the assessment was upheld despite the initial clerical error.

2. Validity of the Reopening of Assessment Under Section 147:
The AO reopened the assessment based on an audit objection regarding unpaid service tax grouped under sundry creditors, which should have been disallowed under Section 43B of the Income Tax Act. The CIT(A) quashed the notice under Section 148, holding that the reopening was based on a change of opinion without new material. However, the Tribunal found that the AO had not examined the issue during the original assessment, meaning there was no change of opinion. The Tribunal referenced the Hon’ble Supreme Court's decision in CIT Vs. P.V.S. Beedies Pvt. Ltd., which permits reopening based on audit objections pointing out factual errors. The Tribunal also cited the Hon’ble Supreme Court's decision in Rajesh Jhaveri Stock Brokers P. Limited, emphasizing that the AO's belief of income escapement within four years suffices for reopening. Consequently, the Tribunal upheld the reopening of the assessment and remitted the matter back to the CIT(A) to decide on the merits of the case.

Conclusion:
The Tribunal upheld the assessment despite the clerical error of addressing the deceased, considering it a curable mistake under Section 292B. The reopening of the assessment was also upheld, as it was based on a factual error pointed out by an audit objection and not a change of opinion. The case was remitted back to the CIT(A) for a decision on the merits.