2014 (3) TMI 213 - AT - Income Tax

Reassessment - Validity of order of the CIT(A) quashing the re-assessment Mere change of opinion Held that - The decision in Commissioner of Income Tax Versus Kelvinator Of India Limited 2002 (4) TMI 37 - DELHI High Court and circular no.549 of CBDT followed - on mere change of opinion of AO cannot be a ground for re-assessment and that amendment of sec. 147 w.e.f. 01.04.89 has not altered the position - In Garden Silks Mills Pvt. Ltd. Versus Deputy Commissioner Of Income-Tax 1998 (11) TMI 108 - GUJARAT High Court it has been held that however wide the scope of taking action u/s 148 of IT Act, it does not confirm jurisdiction on change of the interpretation of a particular provision earlier adopted by the assessing authority - For coming to the conclusion that there has been excessive loss or depreciation allowance or that there has been under assessment or assessment at a lower rate or for applying other provisions of explanation 2 to sec. 147, it must be on material and it should have nexus for holding such opinion contrary to what has been expressed earlier - Even after the amendment of sec. 147, mere change of opinion does not confirm jurisdiction on the ITO to initiate proceeding for reassessment merely by resorting to explanation 1 to sec. 147. The AO is not justified in reopening the assessment on mere change of opinion - The assessee filed explanation and evidences before the AO at original assessment stage explaining the investment in the properties thus, the seized material which is basis of reopening of assessment was considered at the original assessment stage in the light of the explanation of the assessee supported by evidences. The propriety demands that the AO should not have resorted to proceedings to reopen assessment on identical facts - All facts were all along were within the knowledge of the AO at original assessment stage, therefore, re-appreciation of evidence at subsequent re-assessment proceedings is not permitted on mere change of opinion by subsequent AO - The re-assessment proceedings have been initiated again on similar issue and totally on identical facts regarding investment in property which have already been considered in the original assessment proceedings - It is a case of change of opinion and such a change of opinion for reopening of section 147 is not permitted under law - The AO in the re-assessment order himself has mentioned that addition is made on account of unexplained expenditure/investment in the properties in the original assessment order - Such facts recorded by the AO in the reassessment order clearly strengthen the stand of the assessee for quashing of reassessment proceedings - No new material or fresh information have been received at the re-assessment stage. The re-appreciation of seized material in subsequent proceedings by the AO is wholly unjustified particularly when such a seized material was not considered worthy by the CIT(A) in the original appellate proceedings deleting the addition on the seized material thus, there is no question of re-appreciating the same facts which have been duly considered by the first appellate authority prior to reopening of assessment - The CIT(A) on proper appreciation of facts and material on record, rightly quashed the reassessment proceedings thus, there was no infirmity in the order of the CIT(A) Decided against Revenue.

Issues Involved:
1. Validity of Reopening Assessment under Section 147
2. Alleged Unexplained Expenditure and Investments
3. Principle of Change of Opinion
4. Application of Section 69C of the Income-tax Act, 1961

Issue-wise Detailed Analysis:

1. Validity of Reopening Assessment under Section 147:
The primary issue in this case revolves around the reopening of assessment under Section 147 of the Income-tax Act, 1961. The original assessment was completed under Section 143(3) on 29.12.2006. The reassessment was initiated on 10.09.2009 based on the same seized documents (Annexure A-1) which were already considered during the original assessment. The Assessing Officer (AO) recorded reasons to believe that income had escaped assessment due to unexplained expenditure recorded in the seized documents. However, the reassessment was challenged on the grounds that it was initiated on the same set of facts and documents already examined, constituting a mere change of opinion.

2. Alleged Unexplained Expenditure and Investments:
The AO initially made additions based on the seized documents, estimating the assessee's income from property business and unexplained investments in properties. The total unexplained expenditure was calculated to be Rs.96,17,600, with specific amounts attributed to different properties. The AO in the reassessment proceedings made further additions, arguing that the original assessment did not fully account for the unexplained expenditure. However, the assessee contended that all investments and expenditures had been explained during the original assessment, and the reassessment was merely a reappraisal of the same facts.

3. Principle of Change of Opinion:
The reassessment was annulled by the CIT(A) on the grounds that it was based on a mere change of opinion. The CIT(A) emphasized that the original assessment had already considered the seized documents, and the AO had formed an opinion based on the explanations provided by the assessee. The reassessment did not bring any new material or fresh information to light. The CIT(A) relied on judicial precedents, including the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which held that reassessment based on a mere change of opinion is not permissible. The CIT(A) also referenced the Delhi High Court's decision in CIT vs. Usha International Ltd., which clarified that reassessment is invalid if it is based on issues already examined and decided upon in the original assessment.

4. Application of Section 69C of the Income-tax Act, 1961:
The AO invoked Section 69C, which pertains to unexplained expenditure, arguing that the assessee had not disclosed the sources of the expenditures recorded in the seized documents. However, the CIT(A) found that the original assessment had already addressed these expenditures, and the AO had made specific additions based on the explanations provided. The reassessment did not present any new evidence or material to justify the invocation of Section 69C again. The CIT(A) concluded that the reassessment was invalid as it was merely a reappraisal of the same facts without any new tangible material.

Conclusion:
The appeal by the Revenue was dismissed, and the reassessment order was annulled on the grounds that it was based on a mere change of opinion without any new material or evidence. The CIT(A) and the Tribunal upheld the principle that reassessment under Section 147 cannot be initiated merely to reappraise the same facts and documents already considered in the original assessment. The application of Section 69C was also found to be unjustified as the original assessment had already addressed the unexplained expenditures.

← Previous Next →