2017 (5) TMI 196 - AT - Income Tax

Reopening of assessment - claim of deduction u/s 80HHC - Held that - We find from the facts of the case that the assessee has claim deduction u/s 80HHC of the Act at ₹ 97,06,022/- as disclosed in the audit report in form No.10 CCAC. The assessee has considered profits and gains in business amounting to ₹ 3,24.40 lakhs which includes income on account of exchange rate difference amounting to ₹ 2.58 crore and an amount of ₹ 4.47 lakhs on account of interest from bank and insurance claim etc. The AO during the course of original proceeding examine the working of the claim of deduction u/s 80HHC of the Act and framed assessment u/s 143(3) of the Act. Admittedly, the AO reopened the assessment after expiry of four years from the end of relevant AY by issuing notice u/s 148 of the Act dated 14-12-2010. It was claimed that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of the assessee. There is no allegation in the reasons recorded that there is any failure on the part of the assessee to disclose any material fact, fully and truly, necessary for the assessment of the assessee. Once there is no failure on the part of the assessee to disclose the material facts, the assessment could not be reopened by invoking the provisions of section 147 r.w.s. 148 of the Act as that will tantamount the change of opinion. Accordingly, we confirm the order of CIT(A) quashing the re-assessment for the reason that the assessee s case falls under proviso to section 147 of the Act. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of the notice issued under section 148 of the Income Tax Act before the transfer of jurisdiction.
2. Legality of reopening the assessment under section 147 of the Income Tax Act based on a change of opinion.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 Before Transfer of Jurisdiction:
The Revenue challenged the CIT(A)'s decision to quash the reassessment proceedings. The CIT(A) observed that the notice under section 148 was issued by the DCIT Circle-9, Surat on 14-12-2010, just before the jurisdiction was transferred to ACIT Circle 16(3), Mumbai on 15-12-2010. However, the notice was served on 31-03-2011, after the transfer of jurisdiction. The CIT(A) held that the DCIT Circle-9, Surat, lacked jurisdiction to serve the notice after 15-12-2010, making the notice invalid. The Tribunal upheld this view, emphasizing that the ACIT 16(3), Mumbai, should have issued a new notice under section 148 after the jurisdiction transfer.

2. Legality of Reopening the Assessment Under Section 147 Based on a Change of Opinion:
The CIT(A) quashed the reassessment proceedings on the grounds that the reopening was based on a change of opinion. The original assessment under section 143(3) allowed the deduction under section 80HHC after considering all relevant facts, including the exchange rate difference and other incomes. The reassessment was initiated after more than four years, and there was no failure on the part of the assessee to disclose material facts fully and truly. The Tribunal confirmed that the reopening was not justified as it was based on a change of opinion and lacked any new material evidence.

The Tribunal referenced the Supreme Court's decision in CIT vs. Foramer France, which held that reopening beyond four years is barred unless there is a failure to disclose material facts fully and truly. The Tribunal reiterated that the notice under section 148 was invalid because it did not meet the conditions stipulated in the first proviso to section 147.

Conclusion:
The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s order to quash the reassessment proceedings. The reassessment was deemed invalid due to the improper issuance of the notice under section 148 after the transfer of jurisdiction and the reopening based on a change of opinion without any new material evidence. The Tribunal's decision aligns with the Supreme Court's precedent in CIT vs. Foramer France, emphasizing the importance of adhering to the legal conditions for reopening assessments.