2016 (3) TMI 40 - AT - Income Tax

Reopening of assessment u/s 115WG - change of opinion - reason to believe that value of fringe benefits had escaped assessment - Held that - We find from the records, orders of authorities below that the issue of contribution to superannuation fund was duly considered by the AO at the time of framing the assessment u/s 115WE(3) of the Act by raising specific query which was replied vide letter dated 25-09-2008 AO has reopened already completed assessment qua fringe benefit on the basis of old material which was before him at the time of framing original assessment. We, therefore, of the considered view that such reopening based on the material which was considered by the AO at the time of passing the original assessment is bad in law and we, therefore, find no infirmity or see any reason to interfere in the order of the CIT(A) which is passed after following ratio laid down in the case of CIT vs. Kelvinator of India Limited (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) - Decided against revenue

Summary

Issues:
Reopening of assessment u/s 115WG of the IT Act based on fringe benefits value of Rs. 2,66,000/- escaping assessment.

Analysis:
The appeal by the revenue challenged the order of the Commissioner of Income Tax (Appeals) annulling the reopening of assessment for the assessment year 2006-07. The main issue raised was regarding the justification of annulling the reopening of assessment u/s 115WG of the IT Act based on the belief that the value of fringe benefits amounting to Rs. 2,66,000/- had escaped assessment. The initial assessment was completed, and later, the case was reopened due to the claimed deduction of Rs. 2,66,000/- towards a superannuation fund, which was not subjected to FBT. The AO framed the reassessment order by adding this amount to the taxable value of fringe benefits. The CIT(A) allowed the appeal of the assessee, emphasizing that the reopening was incorrect as the information was already available, and the payment towards superannuation fund had been made in the subsequent year, resulting in no escapement of fringe benefits.

The CIT(A) held that the reopening of assessment was not justified as the AO based it on information already present in the original return, which was considered during the initial assessment. The High Court's decision in a similar case was cited to support the view that reopening based on audit objections is not valid. Additionally, it was noted that the FBT on the contribution towards the superannuation fund had been paid in the following assessment year, negating any escapement of fringe benefits. The CIT(A) concluded that the reopening of assessment was incorrect in law and annulled the reassessment order.

During the appeal, the revenue argued that the reassessment was valid as the contribution to the superannuation fund had indeed escaped assessment. However, the assessee contended that the AO could not reopen the assessment based on a mere change of opinion and that all relevant information had been disclosed during the original assessment. The Tribunal found that the AO had considered the contribution to the superannuation fund during the original assessment and that the reopening based on the same material was not permissible. Relying on various legal precedents, the Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision to annul the reassessment order.

In conclusion, the Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to annul the reassessment order. The reassessment based on old material already considered during the original assessment was deemed invalid, and the appeal was dismissed accordingly.