2022 (3) TMI 1186 - AT - Income Tax

Reopening of assessment u/s 147 - applicability of Section 2(22)(e) - change of opinion - HELD THAT - AR brought to our notice that in the reasons for reopening it is mentioned that J.M.Cotton Ginning Pressing Co. Pvt. Ltd., is 100% subsidiary of the assessee and Krishin Dhan Cattle Feeds Pvt. Ltd. has 81.45% shareholding of the assessee, these facts the AO has mentioned from the assessment records of the original assessment. AR further pointed that in the Audit Report it is clearly mentioned that J.M.Cotton Ginning Pressing Co. Pvt. Ltd., is subsidiary and Krishin Dhan Cattle Feeds Pvt. Ltd., is a related party. CIT(DR) has not rebutted the claim of assessee. Also, in the reasons, the AO has not claimed that it has received the information regarding shareholding of the assessee company in the lender companies after the original assessment was completed. Therefore, the prima facie, we have to accept the submission of the ld.AR of the assessee that shareholding of the appellant company in the lender company were submitted during the original assessment proceedings. Thus, during the original assessment proceedings, the AO was having knowledge that assessee company has taken loans from J.M.Cotton Ginning Pressing Co. Pvt. Ltd., and Krishi Dhan Cattle Feeds Pvt. Ltd. AO was also having knowledge about shareholding of the assessee company in these lender companies. During the original assessment proceedings, the appellant had submitted the Balance Sheets of the lenders companies. AO had specifically asked the questions about the unsecured loans. Thus, after considering the submission AO arrived at the decision. Therefore, in this scenario it will be inappropriate to say that the AO has not considered the applicability of Section 2(22)(e) As observed that all the facts, which are required to decide applicability of section 2(22)(e)were in the knowledge of the AO. Therefore, initiating reopening proceedings on the same facts, is nothing but change of opinion. Thus, we are of the considered opinion that in this case the reopening proceeding was merely based on the change of opinion. Therefore, the notice u/s 148 dated 29/10/2012 is without jurisdiction and we set aside the same. - Decided in favour of assessee.

Issues Involved:

1. Validity of the re-assessment order.
2. Non-passing of a specific speaking order by the Assessing Officer.
3. Re-assessment based on a change of opinion.
4. Disclosure of shareholding information.
5. Disclosure of transactions with related parties.
6. Original assessment completed in a routine manner.
7. Confirmation of initiation of reassessment proceedings.
8. Deemed dividend under Section 2(22)(e) of the Income Tax Act.
9. Applicability of Sections 234B, 244A, and 234D.
10. Disallowance of carried forward speculation loss.

Detailed Analysis:

1. Validity of the Re-assessment Order:
The appellant argued that the re-assessment order should be annulled based on the decision in Atma Ram Properties Pvt. Ltd. v. Dy. CIT. The Tribunal noted that the original assessment was completed on 22.12.2010, and the re-assessment was initiated within four years from the end of the assessment year. Therefore, the requirement to establish that income escaped assessment due to the assessee's failure to disclose material facts was not applicable.

2. Non-passing of a Specific Speaking Order:
The appellant contended that no specific speaking order was passed by the AO on the objections raised against the reasons recorded for issuing notice under Section 148. The Tribunal found that the AO had communicated the reasons for reopening and addressed the objections raised by the appellant, albeit briefly, thus complying with the procedural requirements.

3. Re-assessment Based on Change of Opinion:
The Tribunal observed that during the original assessment proceedings, the AO had access to all relevant documents, including details of loans, shareholding patterns, and financial statements of the assessee and its subsidiaries. The Tribunal concluded that the re-assessment was based on the same facts already considered during the original assessment, amounting to a change of opinion, which is not permissible under Section 147.

4. Disclosure of Shareholding Information:
The appellant provided evidence that the shareholding information of its subsidiaries was disclosed during the original assessment proceedings. The Tribunal accepted this submission, noting that the AO had mentioned the shareholding details in the reasons recorded for reopening, indicating that this information was already on record.

5. Disclosure of Transactions with Related Parties:
The Tribunal found that the appellant had disclosed transactions with related parties during the original assessment proceedings. The AO had access to the financial statements and other relevant documents, which included details of these transactions.

6. Original Assessment Completed in a Routine Manner:
The Tribunal noted that the original assessment involved specific queries and detailed submissions by the appellant. Therefore, it could not be considered as completed in a routine manner without proper application of mind by the AO.

7. Confirmation of Initiation of Reassessment Proceedings:
The Tribunal held that the initiation of reassessment proceedings was based on a change of opinion, as the AO had already considered the relevant facts during the original assessment. Consequently, the initiation of reassessment proceedings was deemed invalid.

8. Deemed Dividend under Section 2(22)(e):
The Tribunal observed that the AO had all the necessary information regarding loans, shareholding, and accumulated profits of the subsidiaries during the original assessment. Since the AO did not invoke Section 2(22)(e) at that time, reopening the assessment on the same grounds constituted a change of opinion.

9. Applicability of Sections 234B, 244A, and 234D:
Given that the reassessment was held invalid, the Tribunal did not specifically adjudicate on the applicability of Sections 234B, 244A, and 234D, as these issues became academic in nature.

10. Disallowance of Carried Forward Speculation Loss:
Similarly, the issue of disallowance of carried forward speculation loss was not adjudicated, as it became academic following the annulment of the reassessment.

Conclusion:
The Tribunal concluded that the reassessment proceedings were invalid as they were based on a change of opinion. Consequently, the reassessment order dated 25.03.2014 was set aside, and the appeal of the assessee was partly allowed. The other grounds of appeal were not adjudicated as they became academic in nature.

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