2018 (12) TMI 968 - AT - Income Tax

Reopening of assessment u/s 147 - change of opinion - entitled to benefit of section 12A - Held that - The assessee furnished audited financial statement for the year ending 31/03/2008, computation of total income and other relevant material for making its claim. It is not the case that any new tangible material came to the notice of the AO at the later stage. Rather, it is a case, where the AO incorrectly applied the provision of the Act, therefore, on the same set of facts/claim, merely on the basis of change of Opinion the completed assessment under section 143(3) is not permissible. It is noteworthy that at the relevant time, the assessee was entitled to benefit of section 12A of the Act, therefore, from this angle also, AO was not within the legal parameters to reopen the completed assessment. Thus, so far as, reopening is concerned, we are of the view that it was wrongly reopened, consequently, this ground of the assessee is allowed

Issues Involved:
1. Validity of reopening of assessment under section 147/148 of the Income Tax Act, 1961.
2. Assessment based on "Change of Opinion."

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147/148:
The assessee challenged the reopening of the assessment by the Assessing Officer (AO) under section 147/148 of the Income Tax Act, 1961, arguing that it was based on a "Change of Opinion" and not on any new tangible material. The AO had initially assessed the total taxable income at ?2,30,72,774/- under section 143(3) on 19/11/2010. Later, the AO reopened the assessment, claiming that the taxable income had escaped assessment due to an incorrect claim of deduction under section 35DDA. The AO issued a notice under section 148 on 01/03/2012 after obtaining approval from the Additional DIT(E), Range-II, Mumbai.

2. Assessment Based on "Change of Opinion":
The assessee argued that the reopening was merely based on a change of opinion, as the details were already available with the AO during the original assessment. The Tribunal examined the provisions of section 147, which allows the AO to reassess income if there is reason to believe that income chargeable to tax has escaped assessment. However, it was emphasized that the reopening should not be based on a mere change of opinion but should be supported by new tangible material.

Key Judicial Precedents:
- CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (Supreme Court): The Supreme Court held that the AO cannot reopen an assessment based on a mere change of opinion.
- CIT vs ICICI Bank Ltd. [2012] 349 ITR 482 (Bom.): The Bombay High Court ruled that reopening within four years requires new tangible material and not just a change of opinion.
- NYK Line (India) Ltd. [2012] 346 ITR 361 (Bom.): The court emphasized that reassessment should be based on new facts emerging in subsequent assessments, not on a change of opinion.
- NDT Systems & Another vs Income Tax Officer [2014] 363 ITR 603 (Bom.): The court quashed the reassessment notice issued merely on a change of opinion and not based on new tangible material.

Tribunal's Findings:
The Tribunal found that the AO had reopened the assessment without any new tangible material and solely based on a change of opinion. The original assessment had considered the claim under section 35DDA, and the AO had formed an opinion on the matter. The Tribunal emphasized that reopening an assessment based on a change of opinion is not permissible under the law. The Tribunal also noted that the assessee had furnished all relevant details during the original assessment, and there was no failure on the part of the assessee to disclose material facts.

Conclusion:
The Tribunal concluded that the reopening of the assessment was invalid as it was based on a change of opinion and not on any new tangible material. Consequently, the Tribunal allowed the appeal of the assessee, setting aside the reassessment proceedings initiated by the AO. The order was pronounced in the open court on 04/10/2018.

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