2018 (11) TMI 791 - AT - Income Tax

Reopening of assessment - deduction u/s 80P(2) - proceedings initiated u/s 154 - Held that - The reassessment notice has been issued for virtually the same reasons for which rectification proceedings had earlier been initiated but dropped. AO has not disclosed any new materials for reopening assessment. Assessment cannot be reopened merely on change of opinion, as has apparently been done in this case. AO on being satisfied that there was no apparent error in computation of income, on the basis of existing records, dropped the rectification proceedings. In the absence of any new and/or fresh materials and in the absence of any reason for formation of belief that even otherwise, income had escaped assessment even though there was no apparent mistake or error, the Assessing Officer lacked jurisdiction to issue the impugned notice. See BERGER PAINTS INDIA LTD. VERSUS COMMISSIONER OF INCOME-TAX 2004 (2) TMI 4 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of proceedings initiated under Section 148 of the Income Tax Act, 1961.
2. Legality of assessment under Section 143(1) and subsequent assessment under Section 148.
3. Legality of concurrent proceedings under Sections 154 and 148.
4. Eligibility for exemption under Section 80P(2)(a)(vi) of the Income Tax Act, 1961.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 148:
The assessee challenged the initiation of proceedings under Section 148, arguing that the proceedings under Section 154 were not concluded, and therefore, the notice under Section 148 was invalid. The Tribunal referred to the decision of the Calcutta High Court in Berger Paints India Ltd. v. Assistant Commissioner of Income Tax, which held that reassessment proceedings under Section 148 cannot be initiated based on the same reasons for which rectification proceedings under Section 154 were dropped. The Tribunal noted that the Assessing Officer had already dropped the proceedings under Section 154, thus there were no concurrent proceedings. Consequently, the Tribunal quashed the reassessment made by the Assessing Officer under Section 148, following the precedent set by the Calcutta High Court.

2. Legality of Assessment Under Section 143(1) and Subsequent Assessment Under Section 148:
The assessee argued that there was no regular assessment under Sections 143 or 144, and that the assessment made under Section 143(1) was wrong and illegal. The Tribunal did not specifically address this issue in detail, as the decision on the first issue rendered the subsequent grounds moot. However, it is implicit in the Tribunal’s decision that the reassessment under Section 148 was invalid due to the improper initiation of proceedings, thus rendering any assessment under Section 143(1) or subsequent assessment under Section 148 irrelevant.

3. Legality of Concurrent Proceedings Under Sections 154 and 148:
The assessee contended that two parallel proceedings under Sections 154 and 148 were not warranted by law. The Tribunal found that the proceedings under Section 154 had been dropped by the Assessing Officer, and therefore, there were no concurrent proceedings. This finding was crucial in the Tribunal’s decision to quash the reassessment under Section 148, as it aligned with the legal precedent that reassessment cannot be initiated on the same grounds as dropped rectification proceedings.

4. Eligibility for Exemption Under Section 80P(2)(a)(vi):
The assessee, a cooperative society, claimed exemption under Section 80P(2)(a)(vi) for promoting the economic interest of manual laborers. The Assessing Officer withdrew the deduction, and the Commissioner of Income Tax (Appeals) upheld this decision, stating that the assessee did not prove that the expenses claimed were solely for the collective disposal of the labor of its members. The Tribunal did not adjudicate this issue separately, as the decision on the first ground (quashing the reassessment under Section 148) rendered further consideration unnecessary.

Conclusion:
The Tribunal allowed the appeal of the assessee, quashing the reassessment made under Section 148 of the Income Tax Act, 1961, based on the precedent that reassessment cannot be initiated on the same grounds as dropped rectification proceedings under Section 154. As a result, the other grounds of appeal were not adjudicated. The order was pronounced in the open court on 13/11/2018.