2015 (12) TMI 34 - AT - Income Tax

Reopening of assessment - Reopening on audit objection - Held that - In this case, an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer did not make any addition in the assessment order. Respectfully following Honourable Delhi high court in CIT V Usha International ( 2012 (9) TMI 767 - DELHI HIGH COURT) in such situations, it should be accepted that the issue was examined but the Assessing Officer, did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer, had formed an opinion in the original assessment, whether or not he had recorded his reasons in the assessment order. Therefore we do not have any hesitation to hold that the reopening in this case is initiated solely on the basis of Change of Opinion which cannot be sustained. - Decided in favour of assessee

Summary

Issues Involved:
1. Wrongful denial of advances written off.
2. Wrongful addition on account of depreciation.
3. Re-opening of assessment.

Issue-wise Detailed Analysis:

1. Wrongful Denial of Advances Written Off:
The assessee contended that the CIT (A) erred in holding that the appellant failed to provide evidence to show that amounts were already offered to tax in earlier years. Additionally, the CIT (A) ignored the fact that the AO added back the said amount treating it as capital in nature. The Tribunal did not specifically address this issue as it became infructuous due to the quashing of the reassessment proceedings.

2. Wrongful Addition on Account of Depreciation:
The assessee argued that the CIT (A) erred in confirming the action of the AO by allowing depreciation at 15% instead of 25% on cables laid down for running machinery. The Tribunal did not specifically address this issue as it became infructuous due to the quashing of the reassessment proceedings.

3. Re-opening of Assessment:
The Tribunal first addressed the issue of reopening the assessment, which was challenged by the assessee on the grounds that it was based on a mere change of opinion without any new material fact or information. The Tribunal noted that the assessee had filed its return of income, and the original assessment was completed under section 143(3). A notice under section 148 was issued, and the reasons recorded by the AO included discrepancies in deductions, advances written off, royalty charges, and depreciation claims.

The Tribunal examined the arguments and found that:
- There was no evidence that the reopening was initiated at the behest of the audit party.
- The reasons recorded for reopening did not indicate any new material coming into the possession of the AO after the original assessment.
- The issues raised in the reopening notice were already examined during the original assessment proceedings, and no new tangible material was available.

The Tribunal relied on several judicial precedents, including the Supreme Court's decision in CIT vs. Kelvinator of India Ltd. and the Delhi High Court's decisions in Madhukar Khosla v. ACIT and CIT v. Orient Craft Ltd., which emphasized that reassessment must be based on new tangible material and not on a mere change of opinion. The Tribunal concluded that the reopening was invalid as it was based on a change of opinion and quashed the reassessment proceedings.

Separate Judgments:
The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings and rendering other grounds of the appeal infructuous. Consequently, the appeal of the revenue challenging the deletion of Rs. 25,78,900/- on account of royalty was also dismissed as it emerged from the same reopening proceedings.

Conclusion:
The Tribunal allowed the appeal of the assessee and dismissed the appeal of the revenue, holding that the reassessment proceedings were not sustainable in the absence of new tangible material and were based on a mere change of opinion. The order was pronounced in the court on 18.11.2015.