2022 (6) TMI 1116 - AT - Income Tax

Reopening of assessment u/s 147 - tangible material to reopening of assessment - change of opinion - HELD THAT - Hon ble Gujarat High Court in the case of Ami Ashis Shah 2021 (3) TMI 1174 - GUJARAT HIGH COURT observed that the re-opening of assessment u/s 147 of the Act is held to be unsustainable since the original ITR was processed u/s 143(1)a of the Act and no new tangible material was found and notice was given on the ground that the assessee did not offer to tax certain income. As in the case of Commissioner of Income Tax v. Kelvinator India Limited 2010 (1) TMI 11 - SUPREME COURT wherein, it has been held that, one needs to give a schematic interpretation to the words reason to believe , failing which, Section 147 of the Act would give arbitrary powers to the Assessing Officer to reopen the assessment on the basis of mere change of opinion , which cannot be per se reason to reopen. Reappraisal of same facts/documents/information means change of opinion. AO has no power to review his order. Order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Thus alleged re-assessment proceedings are bad in law and liable to be quashed - Decided in favour of assessee.

Summary

Issues Involved:
Challenging re-assessment proceedings under section 147 of the Income Tax Act, 1961 and addition for cessation of liability.

Analysis:

1. Re-Assessment Proceedings:
The appeal filed by the assessee challenged the re-assessment proceedings under section 147 of the Income Tax Act, 1961. The notice under section 148 was issued after six years without providing reasons to the assessee. The assessee contended that the original return should be treated as filed under section 148. The reason for re-assessment was the deduction of Rs. 50,46,367 not offered to tax. However, it was argued that there was no new material to show non-disclosure of facts by the assessee. The re-opening was beyond the permissible four-year limit for such actions. The Tribunal referred to legal precedents, including the Ami Ashis Shah case, where re-opening without new tangible material was deemed unsustainable. Citing the Kelvinator India Limited case, the Tribunal emphasized the importance of "reason to believe" for re-assessment. Ultimately, the Tribunal held the re-assessment proceedings as bad in law and quashed them.

2. Addition for Cessation of Liability:
The assessee also challenged the addition made for cessation of liability amounting to Rs. 50,46,367. During the re-assessment proceedings, the assessee explained that the amount was mistakenly entered in the wrong column and was a write-off of a capital liability not chargeable to tax. However, since the re-assessment proceedings were quashed, the Tribunal deemed the discussion on the merits of this issue as academic and dismissed it as infructuous.

3. General Grounds:
The Tribunal noted that the fifth ground raised by the assessee was of a general nature and did not require adjudication. Consequently, the appeal filed by the assessee was allowed, and the Tribunal's decision was in favor of the assessee.

In conclusion, the Appellate Tribunal at Kolkata, comprising Sri Manish Borad and Sri Sonjoy Sarma, allowed the appeal filed by the assessee, quashing the re-assessment proceedings and dismissing the grounds related to the addition for cessation of liability on the basis of legal arguments and precedents cited during the proceedings.