2021 (2) TMI 900 - AT - Income Tax

Reopening of assessment u/s 147 - un-reconciled gold of 17.319 kgs of gold - HELD THAT - AO is well aware of the fact of receipt of gold by the assessee as metal loan from its family members. This fact has been accepted in AY 2005-06 and in the earlier years. Hence, we are of the view that the AO does not have any reason to doubt the genuineness of explanations given by the assessee with regard to the un-reconciled gold of 17.319 kgs of gold. In our view, the expression unreconciled itself is a misnomer, since the revenue is aware of the receipt of gold from family members since 2001 itself, i.e., from the date of earlier survey operations. AO has re-opened the assessment on mere change of opinion, because it is the assessing officer who took a different view at the time of reopening of assessment, i.e., he has entertained an opinion that the family members should have transferred the gold to the assessee firm and then the assessee firm should have held the gold on its own account. There should not be any dispute that there is no material brought on record to support the above said view of the AO. Under these circumstances, we have no other option but to hold that the assessing officer does not have any reason to believe that there was escapement of income in any of the years under consideration. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961.
2. Assessment of un-reconciled gold stock.
3. Consistency in accounting practices of the assessee.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147 of the Income-tax Act, 1961:
The assessee challenged the reopening of assessments for the years 2006-07 to 2012-13. The primary legal issue was whether the Assessing Officer (AO) had valid "reason to believe" that income had escaped assessment, which is a prerequisite for invoking Section 147. The Tribunal noted that the AO had not alleged any specific escapement of income but merely formed an opinion that the un-reconciled gold stock of 17.319 kgs should be brought to tax. The Tribunal emphasized that "reason to believe" must have a rational connection and cannot be a mere change of opinion. The AO's acceptance of the gold belonging to family members negated the notion of it being un-reconciled stock. The Tribunal concluded that the reopening was based on a change of opinion and lacked tangible material, rendering it invalid.

2. Assessment of Un-reconciled Gold Stock:
During a survey operation on 25.09.2012, the AO found excess gold stock termed as "un-reconciled gold." The assessee explained that 17.319 kgs of gold belonged to family members and customers, taken as metal loans and not included in the book stock. The AO, however, believed this gold should be accounted for in the assessee's books and that capital gains should have been declared by the family members. The Tribunal found that the AO's view was subjective and not supported by any new tangible material. The Tribunal highlighted that the AO's reasoning did not establish any escapement of income but was merely an opinion on how the gold should be accounted for, which is insufficient for reopening assessments.

3. Consistency in Accounting Practices of the Assessee:
The Tribunal observed that the assessee had consistently followed the same accounting practice for many years, including the method of recording gold received from family members as metal loans. This practice had been accepted by the AO in previous assessments, including a survey conducted in 2001. The Tribunal noted that the AO was aware of these practices and had allowed deductions for user fees paid to family members for the gold. The Tribunal concluded that the AO had no reason to doubt the genuineness of the assessee's explanations regarding the gold stock, and the reopening of assessments was unwarranted.

Conclusion:
The Tribunal held that the reopening of assessments for the years under consideration was invalid as it was based on a mere change of opinion without any new tangible material. The orders passed by the tax authorities were quashed, and the appeals of the assessee were allowed. The Tribunal did not adjudicate the grounds on merits since the reopening itself was deemed invalid. The decision emphasized the importance of objective reasoning and consistency in accounting practices in tax assessments.