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2018 (12) TMI 633 - AT - Income TaxReopening of assessment - change of opinion - validity of reasons to believe - proof of escapement of income - Held that - In the case of CIT vs Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA as held that after the amendment made with effect from 1st April, 1989 in the relevant provisions, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on the mere change of opinion. Explaining further, as observed the concept of change of opinion must be treated as in-built test to check the abuse of power and hence the Assessing Officer, even after the amendment made in the relevant provisions from April 1, 1989, has the power to reopen an assessment provided that there is tangible material to come to the conclusion that there was escapement of income from assessment - we find ourselves in agreement with the ld. CIT(Appeals) that the reopening of assessment made by the Assessing Officer in the present case was bad in law as the same was based merely on the change of opinion and the assessment completed by him under section 143(3)/147 in pursuance thereof was liable to be cancelled being invalid. - Decided in favour of assessee.
Issues Involved:
1. Validity of re-assessment under section 147. 2. Failure to disclose material facts. 3. Requirement of prior sanction under section 151. 4. Change of opinion in re-opening assessment. Issue-wise Detailed Analysis: 1. Validity of Re-assessment under Section 147: The Revenue appealed against the orders of the Commissioner of Income Tax (Appeals) [CIT(A)], which annulled the re-assessment orders under section 147. The primary contention was whether the re-assessment was valid. The CIT(A) found that the re-assessment was initiated beyond the permissible period of four years without any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, rendering it invalid under the first proviso to section 147. The Tribunal upheld this view, noting that the Assessing Officer (AO) did not point out any such failure by the assessee, thus confirming the CIT(A)'s annulment of the re-assessment for A.Y. 2006-07. 2. Failure to Disclose Material Facts: For A.Y. 2006-07, the AO re-opened the assessment on the grounds that the interest income from deposits with scheduled banks was incorrectly treated as business income, allowing set-off of brought forward business loss. The Tribunal observed that the AO failed to demonstrate any failure by the assessee to disclose fully and truly all material facts necessary for assessment. Consequently, the re-assessment was deemed barred by limitation and invalid, supporting the CIT(A)'s decision to annul the re-assessment. 3. Requirement of Prior Sanction under Section 151: The CIT(A) also annulled the re-assessment on the grounds that the AO did not obtain the required prior sanction from the concerned authority under the proviso to sub-section (1) of section 151. The Tribunal upheld this annulment, reinforcing the necessity of adhering to procedural requirements for re-assessment. 4. Change of Opinion in Re-opening Assessment: For A.Y. 2007-08, the AO re-opened the assessment based on the same material available during the original assessment. The CIT(A) annulled the re-assessment, terming it as a mere change of opinion. The Tribunal agreed, citing the Supreme Court's ruling in CIT vs Kelvinator of India Ltd., which prohibits re-opening an assessment based solely on a change of opinion without any new tangible material. The Tribunal upheld the CIT(A)'s decision, confirming that the re-assessment was invalid due to the lack of new material and reliance on the same facts previously considered. Conclusion: Both appeals by the Revenue were dismissed, with the Tribunal affirming the CIT(A)'s annulment of the re-assessment orders for A.Y. 2006-07 and A.Y. 2007-08. The Tribunal emphasized the importance of adhering to statutory provisions and procedural requirements in re-assessment proceedings, particularly the necessity of demonstrating failure to disclose material facts and obtaining prior sanction under section 151. The Tribunal also reinforced the principle that re-assessment cannot be based on a mere change of opinion without new tangible material.
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