2015 (1) TMI 307 - AT - Income Tax

Validity of re-opening of assessment - Change of opinion - Held that - assessee vide letter enclosed the documents which are available on the letter and vide document No.5 product-wise break-up of unearned commission was furnished, the explanation of which was made available at Page-2 of the paper book. The product wise break-up is further available at page-5 of the paper book which was made available to the AO during original assessment proceedings. The AO raised various queries to which the assessee vide letter dated 26/12/2005 furnished a detailed reply - The totality of facts are clearly indicating that during original assessment proceedings the material facts were produced and satisfactorily explained by the assessee which were duly examined by the AO. - Even during original proceedings the AO did not make any addition/disallowances, meaning thereby, he was satisfied with the explanation of the assessee. When the primary facts necessary for assessment are fully and truly disclosed, the ITO is not entitled to re-open the proceedings merely on the basis of change of opinion. Having second thought on the same material and omission to draw the correct legal presumption during original assessment do not warrant the initiation of proceeding u/s. 147 of the Act. Provisions of section 147, as amended with effect from 1.4.1989 are contextually different and the cumulative conditions spelt out in clauses (a) and (b) of sec. 147, prior to its amendment, are not present in the amended provision. The only condition for action is that the AO should have reason to believe that income has escaped assessment. Viewed in that angle, power to re-open the assessment is much wider under the amended provision. However, such power is not unbridled one. It is hedged with several safeguards conceived in the interest of eliminating room for abuse of this power by the AO. - undisputedly the material facts were available before the AO during original assessment proceedings itself. Therefore, in our humble opinion the ld. AO was unjustified to re-open the assessment which was framed on due application of mind after examining the facts. - Decided against Revenue.

Summary

Issues involved:
Re-opening of assessment based on change of opinion, ignoring Explanation - 1 to section 147 of the Income tax Act, 1961.

Analysis:
The judgment revolves around the appeal filed by the Revenue against the order of the First Appellate Authority, challenging the re-opening of assessment as bad in law. The crux of the issue lies in whether the re-opening was justified or if it amounted to a change of opinion. The Revenue contended that there was no change of opinion as the entire insurance commission was received in the relevant year. Conversely, the Assessee argued that the re-opening was based on the same facts already considered during the original assessment, thus constituting a change of opinion. The Assessee provided detailed explanations through letters dated 23/9/2005 and 26/12/2005 regarding unearned commission, which were duly examined by the Assessing Officer (AO) during the original assessment proceedings.

The Tribunal carefully analyzed the submissions and the material on record, emphasizing that during the original assessment, the Assessee had disclosed all necessary facts, which were satisfactorily explained and examined by the AO. The Tribunal cited various judicial precedents to support the view that re-opening an assessment based on a change of opinion is impermissible when all relevant facts were disclosed during the original assessment. The Tribunal highlighted that the power to re-open assessments is not unlimited and is subject to safeguards to prevent abuse by the AO. Referring to legal precedents, the Tribunal reinforced the principle that re-assessment based on the same facts or due to ignorance of law is not justified.

In light of the arguments presented and the legal principles cited, the Tribunal concluded that the AO was unjustified in re-opening the assessment, as the original assessment was made after due consideration of all facts. The Tribunal dismissed the appeal of the Revenue, upholding the decision of the First Appellate Authority. The judgment underscores the importance of disclosing all relevant facts during the original assessment to prevent re-opening based on a mere change of opinion. The decision serves as a reminder of the limitations on the AO's power to re-open assessments and the need for a valid reason to believe that income has escaped assessment.