2023 (1) TMI 1125 - AT - Income Tax

Reopening of assessment u/s 147 - Assessment u/s 143(3) Completed - deduction u/s 80IA - HELD THAT - While completing the original assessment, the Assessing Officer has called for various details, which were duly furnished by the assessee and by accepting the explanations/details of the assessee, the assessment was completed under section 143(3) - On perusal of the details furnished by the assessee, it is amply clear that the assessee has very well furnished earlier years returns along with complete details vide its letter dated 12.07.2016 against the notice issued under section 142(1) of the Act dated 14.06.2016. Therefore, the contention of the Department that the reopening was carried out on totally a new issue that was detected at a later stage while studying the earlier year s return data, appears to be change in opinion. Again, vide notice under section 142(1) Assessing Officer has called for the copies of agreement relating to maintaining and operating of Industrial Park at S. No. 3 as well as explanation towards large increase of unsecured loans during the year assessee filed detailed reply and the same were reproduced hereinabove. Having applied his mind, the AO came to a conclusion that the same does not addition thereby proceeded to frame the original assessment by disallowing the claim made under section 80IA of the Act alone. Thus, the interest disallowance proposed in the reasons for reopening of assessment is nothing but change of opinion. Thus we are of the considered opinion that the Assessing Officer reopened the assessment, which is mere change of opinion, which is not permissible as per the law laid down in the case of CIT v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT wherein, it was held that an assessment cannot be reopened on a mere change of opinion; reason to believe that the income chargeable to tax has escaped assessment is one of the conditions precedent for invoking the jurisdiction of the Assessing Officer to reopen the assessment under section 147 - Assessing Officer had power to re-assess but no power to review. If the concept of change of opinion is removed, review would take place in the garb of reopening of assessment. In the instant case, since no new material was brought on record after completion of assessment under section 143(3) of the Act, the reopening of assessment was not on account of fresh material or change of law, the reopening of assessment is liable to be quashed. Accordingly, we set aside the order of the ld. CIT(A) and quash the assessment order passed under section 143(3) r.w.s. 147 - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act, 1961.
2. Allegation of change of opinion by the Assessing Officer.
3. Requirement of fresh tangible material for reopening the assessment.
4. Business expediency and utilization of borrowed funds.

Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income Tax Act, 1961:
The appeal concerns the reopening of the assessment for the assessment year 2014-15. The original assessment was completed under section 143(3) on 21.12.2016, where the income was assessed at Rs. 2,23,38,137/-. Subsequently, the Assessing Officer issued a notice under section 148 on 30.03.2019, believing that income chargeable to tax had escaped assessment. The reassessment was completed on 06.12.2019, disallowing Rs. 64,01,313/- towards proportionate interest burden on a deposit made with M/s. Prince Foundations Ltd.

2. Allegation of Change of Opinion by the Assessing Officer:
The assessee challenged the reopening, arguing that it was based on a mere change of opinion. During the original assessment, the assessee had provided detailed explanations regarding the increase in unsecured loans and the deposit with M/s. Prince Foundations Ltd. The Assessing Officer had accepted these explanations, and no new material was brought on record to justify the reopening. The Tribunal found that the reopening was indeed a change of opinion, which is not permissible under the law.

3. Requirement of Fresh Tangible Material for Reopening the Assessment:
The Tribunal emphasized that for reopening an assessment, there must be fresh tangible material. The Department's claim that the previous year's data constituted fresh material was rejected. The Tribunal noted that the Assessing Officer had already examined the same data during the original assessment. The reopening was based on the same material, which amounted to a review rather than a reassessment. The Tribunal referred to the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which held that an assessment cannot be reopened on a mere change of opinion without fresh material.

4. Business Expediency and Utilization of Borrowed Funds:
The Assessing Officer questioned the business expediency of the Rs. 5 crore deposit with M/s. Prince Foundations Ltd. and disallowed the proportionate interest on borrowed funds. The Tribunal found that during the original assessment, the Assessing Officer had already examined the increase in unsecured loans and the utilization of funds. The assessee had provided detailed explanations, and the Assessing Officer had accepted them. The Tribunal concluded that the reassessment on the same grounds was not justified.

Conclusion:
The Tribunal quashed the reassessment order, holding that the reopening was based on a mere change of opinion without fresh tangible material. The appeal filed by the assessee was allowed, and the original assessment order was restored. The Tribunal's decision emphasized the importance of fresh material for reopening assessments and upheld the principle that reassessment cannot be used as a tool for reviewing previously accepted positions.