2018 (12) TMI 990 - HC - Income Tax

Reopening of assessment - receipt as business income - assessee had entered into a Lease Agreement with its sister concern for letting out premises for business purpose alongwith furnitures, fixtures and equipments for the compensation - Held that - The particular claim which the Assessing Officer wants to revisit through the reassessment proceedings, is not a new one. It was started by the assessee for the first time in the Assessment Year 2000-2001 and was accepted by the Department. Without there being any other change, such issue could not have been reissued in the present assessment year, particularly when the claim was also accepted after scrutiny in the Assessment Year 2001-2002. Thus it can be seen that the reason for reopening the assessment lacks validity or in other words, the Assessing Officer did not have reason to believe that income chargeable tax had escaped assessment. - Decided in favour of assessee.

Summary

Issues: Validity of reassessment notice under section 147 of the Income Tax Act for the Assessment Year 2002-2003

Analysis:
1. The primary issue in this case revolves around the validity of the notice of reassessment issued by the Assessing Officer against the Respondent-Assessee for the Assessment Year 2002-2003. The Tribunal held that the reopening of assessment was invalid based on the grounds that there was no failure on the part of the assessee to disclose all material facts and no new material or information was available to the Assessing Officer after the completion of the assessment.

2. The Tribunal highlighted that the assessee had entered into a Lease Agreement with its sister concern for letting out premises for business purposes, which included furnitures, fixtures, and equipment for a specific compensation amount. This receipt was consistently shown as business income since the Assessment Year 2000-2001. The Department had accepted this claim during assessments for the years 2000-2001 and 2001-2002.

3. The Revenue contended that the Tribunal erred in invalidating the reassessment notice based on the absence of failure of disclosure or new material with the Assessing Officer, especially since the original assessment was conducted under Section 143(1) of the Income Tax Act. However, the Tribunal emphasized that the particular claim in question had been consistently presented by the assessee and accepted by the Department in previous assessments, indicating no change in circumstances to warrant reassessment.

4. The Court noted that without any significant alteration in the claim that had already been accepted after scrutiny in previous years, there was no valid reason for the Assessing Officer to reopen the assessment for the current year. The absence of a reasonable belief that income chargeable to tax had escaped assessment further weakened the justification for reassessment in this case.

5. Consequently, the Court dismissed the Tax Appeal, affirming the Tribunal's decision regarding the invalidity of the reassessment notice under section 147 of the Income Tax Act for the Assessment Year 2002-2003. The judgment underscores the importance of substantive grounds and new material considerations for initiating reassessment proceedings, especially when the issue in question has been previously examined and accepted by the tax authorities.