2019 (2) TMI 530 - HC - Income Tax

Reopening of assessment - proof of fresh material or evidence brought on record - assessee did not disclose the details with regard to the reinsurance ceded to Indian Reinsurance Companies and Foreign Reinsurance Companies - Held that - The information regarding reinsurance which was ceded by the assessee to both Indian and Foreign Reinsurance Companies were disclosed explicitly in Schedule 1A, 1B and 1C to the profit and loss account and information on foreign currency outgo during the respective years was disclosed in the director s report forming part of the financial statements which were filed along with return of income of respective years. The tax audit reports for the respective years also contained verification statement of auditor certifying the compliance by the assessee with TDS provisions. Thus, when the scrutiny assessment was completed by the AO u/s 143(3) of the Act, the information provided by the assessee in the aforementioned schedule to the profit and loss account was perused, the legal position was noted and the assessment was completed and therefore, in our considered view the Tribunal rightly set aside the reopening of the assessment on the ground that there was no fresh material or evidence brought on record and what was done was solely based on change of opinion. - Decided against revenue.

Summary

Issues:
Validity of reopening of assessment for the assessment years 2002-2003 to 2005-2006 based on lack of tangible material post scrutiny assessment under Section 143(3) of the Income Tax Act.

Analysis:
The High Court of Madras addressed the issue of the validity of reopening the assessment for the years 2002-2003 to 2005-2006 without substantial additional material post scrutiny assessment under Section 143(3) of the Income Tax Act. The main contention was whether the Tribunal was justified in holding that the reopening of assessment was not justified due to the absence of tangible material after the initial assessment. The reasons for reopening the assessment for the year 2002-2003 included the failure to deduct tax on payments made to non-resident reinsurers. The Assessing Officer believed that the assessee did not comply with TDS provisions, leading to the disallowance of reinsurance premium ceded outside India under Section 40(a)(i) of the Income Tax Act.

The assessee objected to the reopening, citing the explicit disclosure of reinsurance details in financial statements and compliance with TDS provisions during the original assessment under Section 143(3). The objections were not accepted by the Assessing Officer, and the assessment was completed. On appeal, the Commissioner of Income Tax (Appeals) did not delve into the objections raised by the assessee, which were crucial to the case. The High Court noted that the information on reinsurance ceded to Indian and Foreign Reinsurance Companies was explicitly disclosed in the financial statements and tax audit reports, indicating compliance with TDS provisions during the initial assessment.

The Court concluded that the reopening of the assessment without fresh material or evidence was based on a change of opinion, which was impermissible under reassessment proceedings. Citing a similar decision in another case, the Court found the Tribunal's order valid and legal. Consequently, the Court dismissed the tax case appeals, stating that there was no substantial question of law to consider. The connected miscellaneous petitions were also closed.