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2013 (11) TMI 1323 - AT - Income TaxReasons to believe under section 148 of the Income Tax Act Held that - Reliance has been placed upon the judgment in the case of Kelvinator of India Ltd 2010 (1) TMI 11 - SUPREME COURT OF INDIA and also on the judgment in the case of Orient Craft Ltd 2013 (1) TMI 177 - DELHI HIGH COURT In the present case, entire details of interest paid to Binani Cement Ltd. was available with the AO at the time of original assessment and the present AO, reopening the assessment, has recorded the reasons from the perusal of assessment records and also found discrepancy and not escapement of income, which is the mandate of section 147 of the Act - There is no whisper in the reasons recorded of any tangible material which has come to the possession of AO subsequent to the assessment Decided against the Revenue.
Issues Involved:
1. Whether the CIT(A) erred in quashing the notice under section 148 of the Income Tax Act on the grounds of reopening being based on a mere change of opinion within four years. 2. Whether the CIT(A) erred in annulling the reassessment order under section 143(3)/147 despite the reassessment being conducted as per the Income Tax Act. Issue-wise Detailed Analysis: 1. Quashing of Notice under Section 148: The primary issue revolves around whether the CIT(A) was correct in quashing the notice issued under section 148 of the Income Tax Act on the grounds that the reopening of assessment was based on a mere change of opinion within four years. The original assessment for AY 2005-06 was completed under section 143(3) on 23.03.2007, and the reassessment notice was issued on 29.08.2008. The assessee had disclosed all relevant details during the original assessment, including interest paid to Binani Cement Ltd. (BCL) without TDS deduction, which was scrutinized and assessed by the AO. The CIT(A) relied on the Supreme Court's decision in CIT Vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), which established that reopening an assessment based on the same facts and materials, without new tangible material, constitutes a change of opinion and is impermissible. The CIT(A) concluded that the AO had no new material and had merely changed his opinion regarding the applicability of TDS provisions on the interest paid to BCL, thus quashing the notice under section 148. 2. Annulling the Reassessment Order: The second issue concerns whether the CIT(A) was justified in annulling the reassessment order under section 143(3)/147. The AO had disallowed the interest payment of Rs. 8,59,78,653/- to BCL under section 40(a)(ia) due to non-deduction of TDS. The reassessment was based on the AO's review of the same records and facts that were available during the original assessment, without any new tangible material. The CIT(A) annulled the reassessment order, reiterating that the AO's action was based on a change of opinion, which is not a valid ground for reopening an assessment. The CIT(A) emphasized that the AO had scrutinized the interest payment details during the original assessment, and there was no new evidence to justify the reassessment. The Supreme Court in Kelvinator of India Ltd. had clarified that reassessment must be based on tangible material indicating income escapement, not merely a change of opinion. Arguments and Conclusion: The revenue argued, citing the Delhi High Court's decision in CIT Vs. Usha International Ltd. (2012) 348 ITR 485 (Del), that the principle of change of opinion does not apply when the original assessment did not form an opinion on the specific issue. However, the CIT(A) and the assessee contended that all relevant details were disclosed during the original assessment, and the AO had scrutinized these details, forming an opinion. The Tribunal upheld the CIT(A)'s decision, agreeing that the reassessment was based on a change of opinion without new tangible material. The Tribunal emphasized that the AO's reasons for reopening must have a live link with the formation of belief of income escapement, which was absent in this case. Consequently, the Tribunal dismissed the revenue's appeal, maintaining that the reassessment was invalid and quashing the notice under section 148. Judgment: The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to quash the notice under section 148 and annul the reassessment order under section 143(3)/147, as the reopening was based on a mere change of opinion without new tangible material.
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