2014 (1) TMI 1318 - AT - Income Tax

Annulment of re-assessment proceedings u/s 147 of the Act Allowability of sponsorship expenses Held that - The decision in CIT Vs. Orient Craft Limited 2013 (1) TMI 177 - DELHI HIGH COURT followed - The Assessing Officer reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under Section 143(1) without scrutiny, and nothing more - This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer - a less strict interpretation of the words reason to believe vis-a-vis an intimation issued under section 143(1) can cause to the tax regime -There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147 - Even if there is no regular assessment, the review of the earlier proceedings is not possible - original assessment was completed under Section 143(3) and during the course of assessment proceedings, the Assessing Officer examined the aspect of sponsorship expenditure Decided against Revenue.

Summary

Issues:
Reassessment proceedings based on change of opinion regarding 'allowability of Sponsorship Expenses' and addition of Rs.2.0 Crore on account of accommodation entries - Validity of reopening of assessment under Section 147 - Jurisdictional High Court's recent decision on similar matter.

Issue 1: Reassessment proceedings based on change of opinion regarding 'allowability of Sponsorship Expenses'

The original assessment under Section 143(3) was completed, but the Assessing Officer later issued a notice under Section 148 for reassessment. The learned CIT(A) cancelled the reopening, stating it was done purely based on a change of opinion. The Revenue challenged this decision, arguing that the CIT(A) erred in annulling the re-assessment proceedings under Section 147 without delving into the merits of the additions, including the Rs.2.0 Crore accommodation entries. The Revenue contended that the reopening was valid due to the change of opinion regarding the 'allowability of Sponsorship Expenses.'

Issue 2: Validity of reopening of assessment under Section 147

During the hearing, the assessee's counsel highlighted that the assessment was reopened solely based on a change of opinion regarding the sponsorship expenses, which had already been examined during the original assessment proceedings. The Assessing Officer had raised queries about the expenses, and the assessee had responded. The Tribunal noted that the reopening was indeed based on a change of opinion by the Assessing Officer, as the reasons for reopening indicated that the issue of sponsorship expenses was already part of the original assessment record. Citing a recent decision of the Jurisdictional High Court, the Tribunal emphasized that a less strict interpretation of the words "reason to believe" in Section 147 could lead to an abuse of power and arbitrary exercise by the Assessing Officer. The Tribunal found that the Jurisdictional High Court's decision was directly applicable to the present case, where the original assessment was completed under Section 143(3), and thus upheld the CIT(A)'s order annulling the reassessment.

Issue 3: Jurisdictional High Court's recent decision on similar matter

The Tribunal referred to a recent decision of the Jurisdictional High Court in the case of CIT Vs. Orient Craft Limited, where the Court dismissed the appeal of the Revenue, emphasizing that a review of earlier proceedings without tangible material post-intimation was an abuse of power. The Court held that even in the absence of a regular assessment, a review of earlier proceedings was impermissible. The Tribunal applied this decision to the present case, where the Assessing Officer's reopening was solely based on a change of opinion regarding sponsorship expenses, which had already been addressed during the original assessment. Consequently, the Tribunal upheld the CIT(A)'s decision and dismissed the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decision annulling the reassessment proceedings under Section 147, as the reopening was based on a mere change of opinion by the Assessing Officer regarding the 'allowability of Sponsorship Expenses,' which had already been examined during the original assessment. The Tribunal relied on the Jurisdictional High Court's decision to emphasize the impermissibility of a review of earlier proceedings without tangible post-intimation material, ultimately dismissing the Revenue's appeal.