2013 (10) TMI 415 - AT - Income Tax

Re-opening of assessment u/s 147 after the period of 4 years Held that - Nothing new which has come to the notice of the Assessing officer after the original assessment u/s 143(3) - The accounts had been furnished by the petitioner when called upon - Thereafter, the assessment was completed under section 143(3) of the Income-tax Act - The proviso to section 147 of the Income-tax Act requires a failure on the part of the Assessee to make a proper return - In the present case, no such case is made out on the record - Reopening is based on a mere relook of the same set of facts and documents which were already available before the AO at the time of original assessment and it was merely a change of opinion - The Assessing officer also has not pointed out what was the failure on the part of the Assessee to disclose fully and truly the particulars required for making the assessment - It is a well settled principle that reopening after 4 years from end of the relevant Assessment year, when the Assessment under sec 143(3) has been completed and the Assessee had furnished full facts, is not permissible under proviso to sec 147(1) Reliance has been placed upon the judgment in case of CIT Vs M/s Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - Reopening is without jurisdiction and hence invalid Decided in favor of Assessee.

Issues Involved:
1. Reopening of assessment under Section 147 of the Income Tax Act.
2. Merits of the addition made by the Assessing Officer (AO) regarding the disallowance of unrealized interest on Non-Performing Assets (NPAs).

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147:

The core issue in these appeals is the reopening of assessments for the Assessment Years (AYs) 2002-03, 2003-04, and 2004-05 under Section 147 of the Income Tax Act. The Assessee originally filed returns and the assessments were completed under Section 143(3). Subsequently, the AO reopened the assessments by issuing notices under Section 148, citing reasons recorded under Section 147.

For AY 2002-03, the reasons for reopening included the need to verify the Assessee's claim of depreciation on securities under the categories "Available for Sale" and "Held for Trading," and the disallowance of unrealized interest on NPAs amounting to Rs. 5.16 crores. Similar reasons were recorded for the other years.

The Assessee contested the reopening on the grounds that there was no failure on its part to furnish details during the original assessment under Section 143(3). The ITAT, in its order, referenced its previous decision for AY 2001-02, where it held that reopening was without jurisdiction as it was based on a mere change of opinion. The ITAT emphasized that the AO had all the necessary information during the original assessment and that there was no new material to justify the reopening. The reopening was thus deemed invalid as it was a review of the same set of facts and documents, which is not permissible under the proviso to Section 147(1).

2. Merits of the Addition Made by the AO:

The second issue pertains to the merits of the addition made by the AO concerning the disallowance of unrealized interest on NPAs. The Assessee argued that the disallowance was incorrect as the unrealized interest on NPAs was adjusted in the interest income offered during the year based on RBI guidelines.

The CIT(A) upheld the disallowance, but the ITAT found that the issue was already settled in favor of the Assessee in previous years. The ITAT referred to its decision for AY 2001-02, where it held that the disallowance of unrealized interest was covered by decisions such as CIT vs. Industrial Financial Corporation India Ltd. and Union Bank of India vs. ACIT. The ITAT concluded that the Assessee's claim was valid and that there was no reason to reopen the assessment or make the disallowance on merits.

Conclusion:

The ITAT held that the reopening of assessments under Section 147 was invalid as it was based on a mere change of opinion without any new material. The Assessee had furnished all necessary details during the original assessment, and there was no failure on its part to disclose material facts. Additionally, the ITAT found that the disallowance of unrealized interest on NPAs was incorrect on merits. Consequently, the appeals were allowed, and the reassessment orders were set aside.

Judgment:

The judgment concluded with the ITAT allowing all three appeals under consideration, setting aside the impugned orders of reassessment, and pronouncing the decision in the open court on 04-10-2013.

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