2016 (10) TMI 583 - AT - Income Tax

Validity of reopening of assessment - unexplained investment - Held that - As while completing the original assessment, the facts with regard to surrender statement of the assessee during the course of survey of ₹ 10,12,000 as unexplained investment in excess stock was available before the AO, but he did not act on it for the reasons best known to him. But once he has already applied his mind to these facts and has opted not to make an addition in this regard, he cannot make addition of the same by resorting to the procedure for reopening of assessment u/s. 147 of the Act. If it is allowed to be done, it would amount to reopening on account of change of opinion which is not permissible in the eyes of law. It has also been held by the various High Courts that once the AO has applied his mind on particular facts, the same facts cannot be used for reopening of the assessment. Therefore, I find no merit in reopening of the assessment. Accordingly hold that since the reopening of assessment is on account of change of opinion, it is bad in law and is not sustainable in the eyes of law. - Decided in favour of assessee.

Issues:
1. Validity of reopening of assessment based on change of opinion.
2. Addition of undisclosed investment in excess stock.
3. Justification of the addition made by the Assessing Officer.

Issue 1: Validity of reopening of assessment based on change of opinion

The appeal challenged the validity of reopening the assessment, arguing that all information was available before the Assessing Officer during the original assessment. The Tribunal noted that a survey conducted earlier revealed the excess stock admission by the assessee, which was not included in the return. The AO reopened the assessment based on the unreported investment. The Tribunal held that if the AO had already considered the information during the original assessment and chose not to make an addition, reopening the assessment on the same grounds amounted to a change of opinion, which is impermissible in law. The Tribunal concluded that the reopening was unjustified and quashed the assessment.

Issue 2: Addition of undisclosed investment in excess stock

The Assessing Officer made an addition of undisclosed investment in excess stock during the reassessment. The CIT(Appeals) upheld this addition as the assessee did not report the investment in the return. The Tribunal observed that the surrender statement of the assessee regarding the investment was available during the original assessment, but no addition was made then. The Tribunal noted that the AO's decision to add the investment during reassessment was based on the same facts previously considered. The Tribunal found no merit in the addition and ruled in favor of the assessee, setting aside the CIT(Appeals) order.

Issue 3: Justification of the addition made by the Assessing Officer

The Tribunal analyzed the actions of the Assessing Officer in making the addition of undisclosed investment in excess stock during reassessment. The Tribunal observed that the AO had the opportunity to add the investment during the original assessment but chose not to. The Tribunal emphasized that once the AO had considered the facts and decided against an addition, reopening the assessment solely on the same grounds was not permissible. The Tribunal concluded that the addition made during reassessment lacked merit and ruled in favor of the assessee, quashing the assessment.

In conclusion, the Tribunal allowed the appeal, holding that the reopening of assessment based on a change of opinion was unjustified. The addition of undisclosed investment in excess stock during reassessment was deemed unwarranted as the AO had already considered the same information during the original assessment. The Tribunal set aside the CIT(Appeals) order and quashed the assessment.

← Previous Next →