2023 (7) TMI 10 - AT - Income Tax

Reopening of assessment u/s 147 - review v/s reopening - tangible material to initiate reopening -original return of income as scrutinized u/s 143(3) - case was reopened within 4 years - HELD THAT - The perusal of assessment order would show that Ld. AO has not referred to any tangible material coming into his possession which would lead to formation of a belief that certain income escaped assessment in the hands of the assessee. Apparently, reassessment has been initiated on the same set of material as available before Ld. AO during the course of original assessment proceedings. This being so, the reassessment proceedings would be nothing would review of the order which is impermissible. The case law of Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT support the case of the assessee wherein it was held that in the absence of any new tangible material, the case could not be reopened on mere change of opinion. Reasons must have a live link with formation of belief. Thus we would hold that the reassessment proceedings were nothing but the review exercise undertaken by Ld. AO which is impermissible. Therefore, the reassessment proceedings are bad in law and hence, liable to be quashed. Decided in favour of assessee.

Summary

Issues:
Reopening of Assessment

Summary:
The appeal by the assessee for Assessment Year 2004-05 challenged the first appellate order passed by the Commissioner of Income Tax (Appeals) in the matter of an assessment framed by the Assessing Officer under section 143(3) read with section 147. The assessee contended that the reopening of assessment under section 147 was based on a change of opinion and lacked fresh material indicating income escapement. The CIT(A) failed to consider judicial decisions holding such assessments invalid. On the merits, the CIT(A) confirmed additions related to credits in the books of M/s Jaya Printers, rent received from a property, and advertisement advances, which the assessee argued were unjustified.

Reassessment Proceedings Validity:
The original return of income was scrutinized under section 143(3), and the case was reopened within 4 years. The reassessment was initiated without tangible new material, amounting to a review impermissible under Explanation-1 to Section 147. Citing the case law of Kelvinator of India Ltd., it was held that reassessment without new tangible material is invalid. The reassessment proceedings were deemed a review exercise and were quashed. The case law of Cognizant Technology Solutions India (P.) Ltd. vs. ACIT was distinguished as it involved relevant information not considered by the Assessing Officer, unlike the present case.

Merits of the Case:
As the reassessment proceedings were deemed invalid, delving into the merits of the case became irrelevant. The appeal was allowed based on the quashing of the reassessment proceedings.

Judges:
Hon'ble Shri V. Durga Rao, Judicial Member, and Hon'ble Shri Manoj Kumar Aggarwal, Accountant Member.