2008 (1) TMI 525 - AT - Income Tax

Summary

Issues Involved:
1. Admissibility of Additional Ground
2. Legality of Reassessment Notice u/s 148
3. Validity of Reopening Assessment Beyond Four Years
4. Change of Opinion and Proviso to Section 147

Summary:

1. Admissibility of Additional Ground:
The learned counsel for the assessee argued for the admissibility of the additional ground, stating it is a purely legal issue with facts emerging from the assessment records. The Tribunal admitted the additional ground, citing the Hon'ble Gujarat High Court's decision in P. V. Doshi vs. CIT and the Hon'ble apex Court's decision in NTPC Ltd. vs. CIT, which allow raising new grounds if they arise from the facts on record and bear on the tax liability of the assessee.

2. Legality of Reassessment Notice u/s 148:
The reassessment was initiated by issuing a notice u/s 148 on 9th March 1998, for the assessment year 1991-92. The assessee challenged the reopening, arguing it was beyond four years and constituted a mere change of opinion. The Tribunal noted that the original assessment was completed u/s 143(3) on 7th Feb 1994, and the AO had allowed a deduction of Rs. 7,33,388 for price variation in raw materials for export.

3. Validity of Reopening Assessment Beyond Four Years:
The Tribunal examined whether the case fell under the proviso to section 147 or Explanation to section 147. It was found that the AO had considered the deduction during the original assessment, and the reopening was based on the same facts. The Tribunal referred to the Hon'ble apex Court's decision in CIT vs. Foramer France and the Hon'ble Delhi High Court's decision in Jindal Photo Films Ltd. vs. Dy. CIT, which held that reopening beyond four years is not permissible unless there is a failure to disclose fully and truly all material facts.

4. Change of Opinion and Proviso to Section 147:
The Tribunal concluded that the reopening was merely a change of opinion, as the AO had already considered the deduction during the original assessment. The Tribunal emphasized that reopening beyond four years is not allowed unless there is a failure to disclose material facts, which was not the case here. The Tribunal quashed the reassessment, declaring it bad in law.

Conclusion:
The Tribunal allowed the appeal of the assessee, deciding the issue of jurisdiction against the Revenue and in favor of the assessee. Consequently, it did not adjudicate the issue on merits.