2019 (9) TMI 762 - AT - Income Tax

Validity of reopening u/s. 148 - non-filing of Report from the Accountant as required u/s. 92E - change of opinion - HELD THAT - A perusal of reasons recorded for reopening reveal that the AO invoked the provisions of section 148 as the assessee has not filed requisite Report in Form No. 3CEB along with the return of income for the impugned assessment year. In the absence of such Report, the return was held as invalid. AO was of the view that assessment has been made on invalid return. The fact that the assessee has not filed Report from Accountant in Form No. 3CEB was in the knowledge of Assessing Officer even at the time of making original assessment. This fact is very much evident as the Assessing Officer passed order levying penalty u/s. 271BA of the Act for non-filing of Report from the Accountant as required u/s. 92E on 25-04-2011. The assessment order u/s. 143(3) is subsequent to the order levying penalty u/s. 271BA. Thus, no new incriminating material has come to the knowledge of Assessing Officer for reopening the assessment. It is a clear case of change of opinion. The Hon‟ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT has held that invoking the provisions of section 148 r.w.s. 147 by Assessing Officer on change of opinion is not permissible. Thus, we find merit in the grounds raised by the assessee by way of application under Rule 27. - Decided in favour of assessee.

Summary

Issues:
1. Validity of carry forward of loss without filing mandatory audit report in Form No. 3CEB.
2. Justification of reopening assessment based on absence of Form No. 3CEB.
3. Consideration of section 92E & Section 139(9) (e) of the IT Act.
4. Validity of return filed without Form No. 3CEB.
5. Validity of reopening assessment based on absence of Form No. 3CEB.

Issue 1: Validity of carry forward of loss without filing mandatory audit report in Form No. 3CEB
The Revenue challenged the Commissioner of Income Tax (Appeals) decision to allow the carry forward of loss without the mandatory audit report in Form No. 3CEB. The Revenue argued that the return filed without the required reports should be considered invalid. However, the assessee contended that the absence of Form No. 3CEB did not render the return defective as per the provisions of section 139(9) Explanation (e) of the IT Act. The Tribunal held that the Assessing Officer must provide an opportunity to rectify any defects in the return before deeming it invalid. As no such notice was issued in this case, the Tribunal dismissed the Revenue's grounds.

Issue 2: Justification of reopening assessment based on absence of Form No. 3CEB
The Revenue sought to justify the reopening of the assessment due to the absence of Form No. 3CEB along with the return of income. The assessee argued that the Assessing Officer had prior knowledge of this absence as evidenced by a penalty order issued earlier. The Tribunal found that there was no new incriminating material to warrant the reopening of the assessment. Citing the case law Commissioner of Income Tax Vs. Kelvinator of India Ltd., the Tribunal held that reopening based on a change of opinion is impermissible. Consequently, the Tribunal allowed the assessee's application under Rule 27 and dismissed the Revenue's appeal.

Issue 3: Consideration of section 92E & Section 139(9) (e) of the IT Act
The dispute centered on whether the provisions of section 92E and Section 139(9) (e) of the IT Act were adequately considered in the assessment process. The Revenue contended that the absence of Form No. 3CEB rendered the return invalid, while the assessee argued that the Audit Report filed was sufficient. The Tribunal emphasized the necessity for the Assessing Officer to notify the assessee of any defects in the return before deeming it invalid. As no such intimation was provided, the Tribunal ruled in favor of the assessee.

Issue 4: Validity of return filed without Form No. 3CEB
The validity of the return filed without Form No. 3CEB was a key point of contention. The Revenue insisted that this absence rendered the return invalid, while the assessee maintained that the Audit Report filed was compliant. The Tribunal clarified that the absence of Form No. 3CEB did not automatically invalidate the return, especially without prior intimation from the Assessing Officer to rectify any defects. Consequently, the Tribunal dismissed the Revenue's arguments on this issue.

Issue 5: Validity of reopening assessment based on absence of Form No. 3CEB
The justification for reopening the assessment based on the absence of Form No. 3CEB was scrutinized. The Revenue's stance was that the original assessment was made on an invalid return, while the assessee highlighted that the Assessing Officer was aware of this absence during the initial assessment. The Tribunal concurred with the assessee, emphasizing that the reopening was a result of a change of opinion, which is impermissible as per legal precedents. Therefore, the Tribunal allowed the assessee's application under Rule 27 and dismissed the Revenue's appeal.

This detailed analysis of the legal judgment comprehensively covers all the relevant issues involved in the case, providing a thorough understanding of the Tribunal's decision and the arguments presented by both parties.