2015 (6) TMI 497 - HC - Income Tax

Reopening of assessment - assessee had not furnished the details relating to working of MODVAT which resulted in failure on the part of the assessee by not disclosing fully and truly all material facts - Held that - Having furnished the details of the working of the MODVAT Credit in Annexure 1(A) to the Tax Audit Report which is a mandate as per the provisions of the Act and the Assessing Officer has considered the said issue in the order passed under Section 143(3) of the Income Tax Act the Commissioner of Income Tax (Appeals) has given a clear finding that the details of MODVAT credit working were considered by the Assessing Officer during the assessment proceedings under Section 143(3) and the re-assessment is initiated on a mere change of opinion on the same material on record. When the Assessing Officer had failed to record anywhere his satisfaction or belief that the income chargeable to tax had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment the notice issued under Section 147 of the Income Tax Act beyond the period of four years was wholly without jurisdiction and cannot be sustained.Hence we have no hesitation in holding that reopening is bad. Accordingly we uphold the findings of the Tribunal that it is a case of mere change of opinion on the same material already available on record which has been submitted by the assessee in Annexure 1A of the Tax Audit Report at Point No.12(b) of the return of income. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.
2. Failure to disclose material facts by the assessee regarding MODVAT credit.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147 of the Income Tax Act:

The reassessment proceedings initiated by the Assessing Officer (AO) under Section 147 were challenged. The original assessment was completed under Section 143(3), and the reassessment notice under Section 148 was issued beyond four years. The Commissioner of Income Tax (Appeals) [CIT(A)] and the Income Tax Appellate Tribunal (ITAT) both held that the reassessment was invalid as it was based on a mere change of opinion without any fresh material. The CIT(A) relied on the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which stated that reopening of an assessment based on a change of opinion is not permissible. The Tribunal concurred, emphasizing that all necessary details were available during the original assessment, and no new material had surfaced to justify the reassessment.

2. Failure to Disclose Material Facts by the Assessee Regarding MODVAT Credit:

The AO contended that the assessee failed to disclose fully and truly all material facts necessary for assessment, particularly relating to MODVAT credit. The CIT(A) found that the details of MODVAT credit were provided in Annexure 1(A) of the Tax Audit Report, which was available during the original assessment. The reassessment was initiated on the same material, indicating a mere change of opinion. The Tribunal upheld this view, noting that the reassessment proceedings lacked any fresh material evidence and were based on the same information already considered during the original assessment.

Detailed Judgment Analysis:

Background and Initial Proceedings:

The assessee, engaged in manufacturing and software development, filed its return for the assessment year 2001-2002, which was processed under Section 143(1) and later assessed under Section 143(3). The AO issued a notice under Section 148 to reopen the assessment, alleging that the assessee had not disclosed fully and truly all material facts necessary for assessment, particularly regarding MODVAT credit.

CIT(A) Findings:

The CIT(A) held that the reassessment was invalid as the original assessment was completed after obtaining all necessary details, including the MODVAT credit details provided in the Tax Audit Report. The reassessment was initiated beyond four years based on the same material, constituting a change of opinion, which is not permissible as per the Supreme Court's ruling in CIT v. Kelvinator of India Ltd.

ITAT Findings:

The ITAT concurred with the CIT(A), emphasizing that the reassessment proceedings were initiated without any fresh material or evidence. The details of MODVAT credit were already available during the original assessment, and the reassessment was merely a change of opinion on the same material.

Court's Analysis:

The court examined the scope of Section 147 and the first proviso, which restricts reassessment beyond four years unless there is a failure to disclose fully and truly all material facts necessary for assessment. The court found no such failure by the assessee, as the details of MODVAT credit were disclosed in the Tax Audit Report and considered during the original assessment. The court reiterated that reassessment based on a change of opinion is not permissible, citing the Supreme Court's decision in CIT v. Kelvinator of India Ltd.

Conclusion:

The court upheld the findings of the CIT(A) and the ITAT, concluding that the reassessment was invalid as it was based on a mere change of opinion without any fresh material. The court dismissed the Revenue's appeal, affirming that the reassessment notice issued beyond four years was without jurisdiction and could not be sustained.

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