2020 (4) TMI 287 - AT - Income Tax

Reopening of assessment u/s 147 - Whether AO has reopened the assessment merely on the basis of change of opinion? - HELD THAT - AO has passed the original assessment order after taking into consideration the details/explanations furnished by the assessee in response to the queries raised by him from time to time. Moreover, the AO has not pointed out any new fact or tangible material on the basis of which he formed a belief that income of the assessee has escaped. Hence, we find substance in the contention of the Ld. counsel that the AO has changed his opinion on the basis of facts and details made available by the assessee during the course of original assessment proceedings. On the basis of the material on record it can be concluded that in the present case, the AO has formed his belief on the basis of material already available on record which amounts to change of opinion. As per the ratio laid down by the Hon ble Bombay High Court in the case of CIT vs. Jet Speed Audio P. Ltd. 2015 (2) TMI 766 - BOMBAY HIGH COURT reopening on the basis of change of opinion is not permissible under the law. Hence, allow this ground of the appeal of the assessee and quash the order passed by the AO holding that the AO has initiated the proceedings u/s 147 r.w.s. 148 on the basis of change of opinion. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reassessment under Section 147 of the Income Tax Act
2. Income under the head Prior Period Adjustments
3. Additions under Sundry Receipts
4. Adjustment to calculate Turnover
5. Disallowance of Expenses
6. Levy of Interest under Section 234D

Detailed Analysis:

Issue 1: Reassessment under Section 147 of the Income Tax Act
The assessee argued that the jurisdictional pre-conditions for invoking Section 147 were not met, making the reassessment order illegal. The Tribunal noted that the Assessing Officer (AO) reopened the assessment based on a change of opinion, which is impermissible under law. The AO's reasons for reopening, such as the inclusion of certain receipts in the turnover for computing income under the tonnage tax scheme, were based on material already on record during the original assessment. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator India Ltd. and other relevant judgments, concluding that the AO's action was based on a mere change of opinion without any new tangible material. Consequently, the reassessment order was quashed.

Issue 2: Income under the head Prior Period Adjustments
The assessee contended that the CIT (A) erred in upholding the AO's action of assessing prior period income of ?19.30 crore, arguing that it constituted profits from core activities and should not be taxed. However, since the reassessment order was quashed on legal grounds, the Tribunal did not adjudicate this issue on merits.

Issue 3: Additions under Sundry Receipts
The assessee challenged the CIT (A)'s decision that sundry receipts of ?11.75 crore were not from core activities and thus not covered under the tonnage tax scheme. The assessee also argued for deductions related to expenses incurred for earning such income. Similar to the prior issue, this was not adjudicated on merits due to the quashing of the reassessment order.

Issue 4: Adjustment to calculate Turnover
The CIT (A) upheld the AO's adjustment of turnover by reducing sundry receipts and profit on the sale of ships. The assessee argued this was erroneous. This issue was also not adjudicated on merits due to the quashing of the reassessment order.

Issue 5: Disallowance of Expenses
The assessee contended that interest income of ?80.23 crore and dividend income of ?3.71 crore should be considered as profits from core activities and not taxed. Alternatively, if taxed, deductions for related expenses should be allowed. This issue was not adjudicated on merits due to the quashing of the reassessment order.

Issue 6: Levy of Interest under Section 234D
The assessee argued against the levy of interest under Section 234D. This issue was not adjudicated on merits due to the quashing of the reassessment order.

Separate Judgment:
The revenue's appeal raised issues regarding the inclusion of sundry credits, excess provisions written back, and prior period income under the tonnage tax provisions. However, since the reassessment order was quashed, the revenue's appeal was dismissed as infructuous.

Conclusion:
The Tribunal quashed the reassessment order passed by the AO under Section 147 r.w.s. 148 of the Income Tax Act, holding that it was based on a change of opinion. Consequently, the other grounds raised by the assessee were not adjudicated on merits, and the revenue's appeal was dismissed as infructuous.