2016 (8) TMI 681 - AT - Income Tax

Reopening of assessment - disallow the deduction under section 80-IB - Held that - We find that the original assessment was made by the Assessing Officer under section 143(3) on March 7, 2006, and the reasons recorded on March 26, 2008, there is not even a whisper of the original assessment order and the disallowances made therein. We also note that the deduction under section80-IB amounting to ₹ 10,13,828 had been disallowed in the original assessment itself. As per the reasons recorded under section 148, the reopening was made to disallow the same deduction of ₹ 10,13,828 under section 80-IB which had already been disallowed in the original assessment. Thus, there was no income which has escaped assessment. This is also evident from the fact that the total income determined in the original assessment as well as the reassessment is the same, i.e., ₹ 20,64,503. It is a settled law that in the absence of any income escaping assessment, no reassessment can be made. We note that the Assessing Officer in the reasons recorded has referred to the record as well as case law which were already available at the time of original assessment. No fresh or tangible material came into the hands of the Assessing Officer when reasons were recorded. In the circumstances, the reopening was sought to be made only to review the original assessment which was actuated by change of opinion by the Assessing Officer, which is clearly impermissible - Decided in favour of assessee

Summary

Issues Involved:

1. Validity of reopening the assessment under section 143(3) of the Income-tax Act.
2. Reopening of assessment while the Revenue's appeal on the same issue was pending.
3. Reopening based on a change of opinion.
4. Validity of proceedings initiated under section 147.
5. Confirmation of disallowance of deduction under section 80-IB.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment:
The assessee argued that the Commissioner of Income-tax (Appeals) erred in upholding the validity of reopening the assessment, as there was no income that had escaped assessment. The disallowance of ?10,13,828 under section 80-IB had already been made in the original assessment. The Tribunal noted that the original assessment was completed under section 143(3) on March 7, 2006, and the reasons recorded for reopening on March 26, 2008, did not mention the original assessment order or the disallowances made therein. The reassessment was made to disallow the same deduction that had already been disallowed, indicating no income had escaped assessment. The Tribunal concluded that in the absence of any income escaping assessment, no reassessment could be made.

2. Reopening of Assessment While Revenue's Appeal Was Pending:
The assessee contended that the reopening of the assessment was erroneous as the Revenue's appeal against the original assessment order under section 143(3) on the same issue of deduction under section 80-IB was pending before the Income-tax Appellate Tribunal. However, the Tribunal did not find it necessary to adjudicate this issue separately, as the primary ground for reopening was found invalid due to the absence of escaped income.

3. Reopening Based on a Change of Opinion:
The assessee argued that the reopening was based on a mere change of opinion, as the issue of deduction under section 80-IB had been specifically examined and disallowed in the original assessment. The Tribunal agreed, noting that the reassessment sought to review the original assessment without any fresh or tangible material and was actuated by a change of opinion. The Tribunal cited the Supreme Court's decision in CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), which held that reassessment must be based on tangible material indicating income escaping assessment and not on a mere change of opinion.

4. Validity of Proceedings Initiated Under Section 147:
The assessee claimed that the assessment order under section 147/143(3) was invalid as the initiation of proceedings under section 147 itself was invalid. The Tribunal found that the reasons recorded for reopening did not indicate any fresh material or income escaping assessment. The Tribunal emphasized that the Assessing Officer had no power to review the original assessment and could only reassess based on new tangible material, which was absent in this case.

5. Confirmation of Disallowance of Deduction Under Section 80-IB:
The Tribunal noted that since the reassessment proceedings were quashed, there was no need to adjudicate the issue of disallowance of deduction under section 80-IB on merits. The Tribunal allowed the appeal filed by the assessee, quashing the reassessment proceedings and the orders of the authorities below.

Conclusion:
The Tribunal quashed the reassessment proceedings on the grounds that there was no income escaping assessment and the reopening was based on a change of opinion, which is impermissible. The appeal filed by the assessee was allowed. The order was pronounced in the open court on June 2, 2016.