2015 (4) TMI 866 - AT - Income Tax

Reopening of assessment - Change in Opinion based on same set of facts - Held that - The learned CIT(A) upheld the reassessment proceedings merely on the reasoning that the Assessing Officer had not assigned any reason for accepting the capital gains made out of sale of shares as short term capital gains. This, in our view, cannot be a valid reason. If a claim made by the assesee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus completed. Further, framing of the assessment order is not in the control of the assessee, therefore, for any omissions or commissions in the assessment order cannot be attributable to the assesee. In this connection, we rely on the decision of Hon ble Gujarat High Court in the case of Gujarat Power Corporation Ltd. 2012 (9) TMI 69 - Gujarat High Court . Further, there was no reference to any fresh material suggesting the escapement of income. In other words, the Assessing Officer was merely guided by change of opinion based on the same set of facts available on record at the time of framing the original assessment. It is settled proposition of law that even after the amendment in the provisions of Section 147/148 of the Act w.e.f. 01.04.1989 mere change of opinion cannot give rise to the valid reassessment proceedings. We are fortified by the view of Hon be Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT OF INDIA . Respectfully following the ratio laid down in the above cited case, we are of the opinion that even in the present case, in the absence of any fresh material as well as the proper reasons recorded, we have no hesitation to quash the reassessment proceedings. - Decided against the revenue.

Summary

Issues Involved:
1. Validity of the reopening of assessment under Section 147/148 of the Income Tax Act, 1961.
2. Classification of income from the sale of shares as business income or short-term capital gains.

Detailed Analysis:

1. Validity of the Reopening of Assessment:

The assessee company challenged the reopening of the assessment, which was initially completed under Section 143(3) of the Income Tax Act, 1961. The original assessment had classified the income from the sale of shares as short-term capital gains. However, the Assessing Officer (AO) issued a notice under Section 148, proposing to reassess this income as business income. The assessee contended that this reopening was invalid since the same issue had already been considered during the original assessment. The CIT(A) upheld the reassessment proceedings but maintained the classification of the income as short-term capital gains.

The Tribunal examined whether the reassessment proceedings were initiated based on a mere change of opinion, which is not permissible under the law. The Tribunal noted that the AO had not presented any fresh tangible material to justify the belief that income had escaped assessment. The reasons recorded by the AO were found to be mere conclusions without reference to new material facts. The Tribunal cited the decision of the Hon'ble Supreme Court in CIT Vs. Kelvinator of India Ltd., emphasizing that reassessment must be based on "tangible material" and not on a mere change of opinion. Consequently, the Tribunal quashed the reassessment proceedings, modifying the order of the CIT(A).

2. Classification of Income from the Sale of Shares:

The Revenue's appeal challenged the CIT(A)'s finding that the profit from the sale of shares should be classified as short-term capital gains rather than business income. Since the Tribunal quashed the reassessment proceedings, it found it unnecessary to adjudicate on the merits of this issue. As a result, the Revenue's appeal was dismissed.

Conclusion:

The Tribunal allowed the cross-objection filed by the assessee, quashing the reassessment proceedings due to the absence of fresh material and the improper recording of reasons by the AO. Consequently, the Revenue's appeal was dismissed, and the decision was pronounced in the open court on 10th April 2015.