2022 (8) TMI 1264 - AT - Income Tax

Reopening of assessment u/s 147 - whether assumption of jurisdiction for re-assessment by invoking the provisions of first proviso to section 147 of the Act by the Ld. AO is valid in the eye of law? - Addition of STCG - HELD THAT - We have no hesitation in holding that the assessee had disclosed all primary facts to which the Ld. AO applied his mind and accepted the claim of the assessee that she had earned STCG which was brought to tax. The reasons recorded for reopening the assessment contain ample proof in itself to show that there was no new material in the possession of the Ld. AO. He scrutinized the same documents which were already available on records for seeking to reopen the assessment which, in our view, amounts to re-appraisal of the same facts and change of opinion. In ITO vs. Mir Barkat Ali Khan Bahadur 1974 (10) TMI 1 - SUPREME COURT held that having second thoughts on the same material cannot be a ground for valid and proper initiation of reassessment proceedings. Much stress has been laid by the Revenue on the principle of res-judicata which does not apply to income-tax proceedings. Suffice is to say that when the facts are not different it is necessary to maintain consistency as held by the Hon ble Supreme Court in Union of India vs. Kumudini Narayan Dalal 2000 (12) TMI 101 - SC ORDER and CIT vs. Narendra Doshi 2001 (7) TMI 10 - SUPREME COURT The contention of the Revenue that Explanation I to section 147 has been overlooked is devoid of any merit. The provisions contained in the present Explanation I were contained earlier in the then Explanation 2 prior to substitution of section 147 w.e.f. 01.04.1989. While interpreting the Explanation 2 the Hon ble Calcutta High Court in Imperial Chemical Industries Ltd. 1974 (10) TMI 9 - CALCUTTA HIGH COURT observed that what the Explanation II refers to are voluminous account books and similar other documents which requires very careful scrutiny and from which material evidence cannot be discovered inspite of due diligence being exercised. Such is not the case of the assessee before us. On the contrary, facts reveal that books of account and other necessary documents were submitted before the AO during assessment proceedings and after scrutinizing them with reference to his queries, he called for further documents for the purpose of finalizing assessment. In such a fact scenario, in our view, Explanation I relied upon by the Revenue, is not applicable. The case of the assessee is outside the scope of Explanation I to section 147. - Decided against revenue.

Summary

Issues Involved:
1. Whether the reopening of assessment under section 147 of the Income Tax Act is ab initio void.
2. Whether the Assessing Officer (AO) had any rationale to deviate from the consistent position taken by the department.
3. Applicability of Explanation 1 to section 147 regarding disclosure of material facts.

Detailed Analysis:

Issue 1: Reopening of Assessment under Section 147
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which declared the reopening of the assessment under section 147 as ab initio void. The assessee had filed a return for AY 2008-09, which was initially processed and accepted under section 143(3). The assessment was later reopened without any new material, relying on documents already submitted during the original assessment. The CIT(A) observed that the reopening was based on a change of opinion by the AO without new material evidence, which is not permissible. The Tribunal upheld this view, emphasizing that the AO must have tangible material to justify reopening, which was absent in this case.

Issue 2: Deviation from Consistent Position
The CIT(A) noted that in the preceding and succeeding assessment years (2007-08 and 2009-10), the department had accepted the income from the sale of shares as capital gains. The AO's decision to treat the income as business income in AY 2008-09 was inconsistent and lacked substantial reasoning. The Tribunal supported this finding, highlighting the need for consistency in tax treatment unless there is a significant change in facts or new material evidence.

Issue 3: Explanation 1 to Section 147
The Revenue argued that the CIT(A) overlooked Explanation 1 to section 147, which states that mere production of account books or other evidence does not amount to disclosure of material facts. However, the Tribunal found that the assessee had fully disclosed all necessary details during the original assessment, including script-wise details of capital gains, which were scrutinized by the AO. The Tribunal cited several judgments, including those from the Delhi High Court and the Supreme Court, to assert that reassessment based on the same set of facts constitutes a change of opinion and is not justified. The Tribunal concluded that Explanation 1 was not applicable in this case, as the assessee had disclosed all primary facts, and the reopening was merely a reappraisal of the same facts.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the reopening of the assessment was void and the AO's deviation from the consistent position was unjustified. The Tribunal emphasized the importance of tangible material for reassessment and the necessity of maintaining consistency in tax treatment.