2015 (2) TMI 820 - HC - Income Tax

Reopening of assessment - assessee is following the exclusive method of accounting for CENVAT, thus the assessee had not included the amount of ₹ 4,69,54,465 in its closing stock - Held that - AO has sought to reopen the assessment previously framed. The very issue of accounting treatment that the unutilized Cenvat credit should receive for the purpose of valuing the closing stock has been examined by the Assessing Officer. Entire relevant materials had been placed before him. No addition on this count was made, without of course, giving any reasons. In other words, the Assessing Officer, for whatever reasons has chosen not to opine after having made the scrutiny on the very issue of the accounting method. In the absence of any tangible material that existed already before the Assessing Officer, the notice for reopening issued by the Assessing Officer should be held to have been based on a mere change of opinion. In the instant case, we are of the firm opinion that the Assessing Officer cannot be permitted to go ahead with the reassessment proceedings, in view of the fact that he raised the query as to why the unutilized Cenvat credit should not be included in the closing stock. He was aware fully regarding the accountability of the Cenvat credit, its utilization and the fact that no wrong benefit was availed of by the assessee. He still preferred not to make any addition on account of the accountant ability of such credit and, hence, he must be held to have formed an opinion and this exercise is nothing but an attempt to review its own order, which is impermissible under the law. -Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961.
2. Reopening of assessment based on the same material already scrutinized.
3. Issuance of notice based on audit objections.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the validity of the notice dated March 12, 2012, issued under Section 148 of the Income-tax Act, 1961, for the assessment year 2008-09, on the grounds that the income had escaped assessment. The court examined whether the notice was issued within the permissible period and if the reasons provided for reopening were adequate. It was observed that the notice was issued within four years from the end of the relevant assessment year. However, the court found that the Assessing Officer had already scrutinized the issue of the accounting method for CENVAT credit during the original assessment, and no new tangible material was presented to justify the reopening. Therefore, the notice was deemed invalid as it was based on a mere change of opinion, which is not permissible under the law.

2. Reopening of assessment based on the same material already scrutinized:
The court emphasized that the Assessing Officer had thoroughly scrutinized the petitioner's accounting method for CENVAT credit during the original assessment. The petitioner had provided detailed responses and supporting documents, which were considered by the Assessing Officer. Despite this, no additions were made on this count in the original assessment order. The court referred to the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which held that reopening of assessment based on a mere change of opinion is not permissible. The court concluded that the reassessment notice was issued without any new tangible material and was merely an attempt to review the original assessment, which is impermissible.

3. Issuance of notice based on audit objections:
The petitioner argued that the reassessment notice was issued solely based on audit objections without independent application of mind by the Assessing Officer. The respondent contended that the notice was issued after independent examination of the material. The court noted that since the notice was already found to be invalid on the first ground, it was unnecessary to delve further into the issue of audit objections. However, it was implied that reliance on audit objections alone, without independent verification, would not justify the reopening of assessment.

Conclusion:
The court held that the reassessment notice dated March 12, 2012, was neither valid nor sustainable as it was based on a mere change of opinion without any new tangible material. The original assessment had already scrutinized the issue of the accounting method for CENVAT credit, and no additions were made. The court emphasized that reassessment should not be used as a tool for reviewing the original assessment. Consequently, the notice of reopening the assessment was set aside with all consequential orders.