2013 (7) TMI 447 - HC - Income Tax

Reassessment - Validity of notice u/s 148 - disallowances of expenses under Section 14A - short payment of fringe benefit tax. - addition of un-utilized CENVAT on raw materials in the valuation of the closing stock Held that - The Tribunal correctly held that any attempt on the part of the Assessing Officer to re-examine such issues would only amount to a change of opinion - in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition- the same authority cannot re-examine the issue under reopening- the crucial requirement under proviso to Section 147 of the Act for issuing notice beyond four years from the end of relevant assessment year of income escaping the assessment due to the failure on the part of the assessee to disclose truly and fully all material facts in cases other than in case of non filing of the returns, is absent appeal decided against the department.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Reopening of assessment under Section 147 based on previously examined issues.
3. Specific provisions for fringe benefits tax (FBT) under Section 115WG.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The core issue pertains to the validity of a notice issued by the Assessing Officer (AO) under Section 148 of the Income-tax Act, 1961, to reopen the scrutiny assessment for the Assessment Year 2008-09. The respondent-assessee contested the validity of this notice. The AO proceeded with the reassessment despite the objections, leading to additions, particularly concerning fringe benefits. The Commissioner of Income Tax (Appeals) [CIT(A)] allowed the assessee's appeal, stating that the AO had already examined the issues during the original assessment. The Tribunal upheld this view, noting that reopening the assessment based on the same issues amounted to a mere change of opinion, which is not permissible under the law.

2. Reopening of Assessment under Section 147 Based on Previously Examined Issues:
The Tribunal observed that the AO had recorded three reasons for reopening the assessment: disallowances under Section 14A, addition of un-utilized CENVAT in the valuation of closing stock, and short payment of fringe benefits tax (FBT). The first two issues had been scrutinized during the original assessment, with the AO raising queries and the assessee providing responses. The Tribunal concluded that any attempt to re-examine these issues would amount to a change of opinion, which is not permissible. The Tribunal's decision was supported by various judgments, including the Supreme Court's ruling in CIT v. Kelvinator of India, which held that reopening based on a change of opinion is not justified.

3. Specific Provisions for Fringe Benefits Tax (FBT) under Section 115WG:
The Tribunal also addressed the issue of FBT, noting that there is a specific provision under Section 115WG for reopening assessments related to fringe benefits. The Tribunal held that notice under Section 148 could not be issued for FBT, as there is a distinct section (115WG) governing the reassessment of fringe benefits escaping assessment. This view was supported by the detailed provisions in Chapter XII-H of the Act, which includes specific guidelines for filing returns, assessing, and reassessing fringe benefits tax. The Tribunal concluded that the general provisions of Section 148 could not be applied in such cases, and the reopening of the assessment on this ground was invalid.

Conclusion:
The High Court dismissed the Revenue's appeal, affirming the Tribunal's decision. The Court agreed that the AO's attempt to reopen the assessment based on previously examined issues was a change of opinion, which is not permissible. Additionally, the Court upheld the Tribunal's view that specific provisions for FBT under Section 115WG precluded the use of Section 148 for reopening assessments related to fringe benefits tax. The Court's decision reinforced the principle that reopening assessments must be based on new material or facts, not merely a change of opinion by the AO.