2018 (3) TMI 956 - AT - Income Tax

Reassessment order passed u/s.147 - validity of reasons to believe - independent application of mind by AO - Held that - Assessing Officer has initiated reassessment proceedings on the same facts which were available before him at the time of making assessment u/s.143(3) of the Act and no new tangible material has come on the basis of which it could be said that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose truly and fully material of facts in the assessment. Assessing Officer has not brought on record any new tangible material to initiate reassessment proceedings but relied only on tax audit report and financial statements, which were already filed before the Assessing Officer in the scrutiny proceedings. Thus we are inclined to set aside the order of the CIT(A) on this ground and quash the reassessment order. - Decided in favour of assessee

Summary

Issues Involved:
1. Reopening of assessment under Section 147.
2. Non-deduction of tax at source.
3. Valuation of closing stock.
4. Depreciation on brought forward Written Down Value (WDV) of earlier years.
5. TDS under Section 195(1) on foreign currency remittance.
6. Disallowance under Section 43B.
7. Claim of expense towards penalty for service tax.

Detailed Analysis:

Reopening of Assessment under Section 147:
The primary issue was whether the CIT(A) was justified in confirming the reassessment order passed under Sections 147/251/154/143(3) of the Act. The assessee filed its return for the assessment year 2009-2010, which was later revised. The Assessing Officer (AO) noticed that income chargeable to tax had escaped assessment due to various reasons, including incorrect valuation of closing stock and incorrect allowance of depreciation, among others. Consequently, a notice under Section 148 was issued. The assessee objected, arguing that the reassessment was based on a change of opinion without new facts. The Tribunal found that the AO had initiated reassessment proceedings based on the same facts available during the original assessment under Section 143(3). Citing judicial precedents, the Tribunal held that the reassessment was invalid as it was based on a mere change of opinion without any new tangible material. Thus, the reassessment order was quashed.

Non-deduction of Tax at Source:
The AO noted that no tax was deducted at source for IICM charges and rehabilitation charges paid to Coal India Limited. This non-deduction attracted the provisions of Section 40(a)(ia). The Tribunal observed that this issue was already considered during the original assessment, and no new material was presented to justify reopening. Therefore, this ground for reassessment was invalid.

Valuation of Closing Stock:
The AO found that the stock of coal was undervalued as it was valued unit-wise instead of as a whole. The Tribunal noted that this valuation method was disclosed in the financial statements reviewed during the original assessment. Since no new facts emerged, this could not justify reopening the assessment.

Depreciation on Brought Forward WDV of Earlier Years:
The AO allowed depreciation on brought forward WDV of capital expenses and deduction under Section 35E during rectification under Section 154. The Tribunal found that these expenses were not disallowed during the original assessment, and no new material was presented. Hence, this ground for reassessment was also invalid.

TDS under Section 195(1) on Foreign Currency Remittance:
The AO noted that no tax was deducted under Section 195(1) for expenses incurred in foreign currency. The Tribunal observed that this issue was apparent from the financial statements reviewed during the original assessment. Therefore, reopening on this ground was unjustified.

Disallowance under Section 43B:
The AO found that certain statutory dues were unpaid by the due date, which should have been disallowed under Section 43B. The Tribunal noted that this information was available during the original assessment, and no new material justified reopening.

Claim of Expense Towards Penalty for Service Tax:
The AO disallowed the penalty for service tax under Section 37(1) as it was not an allowable expense. The Tribunal found that this issue was apparent from the tax audit report reviewed during the original assessment. Hence, reopening on this ground was also unjustified.

Conclusion:
The Tribunal concluded that the AO had not brought any new tangible material to justify reopening the assessment. The reassessment was based on the same facts available during the original assessment, constituting a mere change of opinion. Therefore, the reassessment order was quashed, and the appeal by the assessee was partly allowed, while the appeal by the revenue was dismissed.