2018 (4) TMI 1521 - AT - Income Tax

Reopening of assessment by issuance of notice u/s.148 - validity of reasons to believe - Held that - A perusal of the recorded reasons shows that nowhere it records any fresh tangible information, which came to the notice of the Assessing Officer after completion of assessment under section 143(3) on 31.12.2011 for the assessment year 2009-10 and before recording of aforesaid reasons. Rather, the recorded reasons show that the reasons have been recorded based on very same materials which were already available before the Assessing Office prior to completion of assessment u/s.143(3) on 31.12.2011. Hon ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., (2010 (1) TMI 11 - SUPREME COURT OF INDIA ) has held that the concept of change of opinion must be treated as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen an assessment, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. - Decided in favour of assessee

Summary

Issues:
1. Reopening of assessment under Section 147 of the Income Tax Act, 1961 based on change of opinion without fresh tangible material.
2. Validity of the reassessment order for the assessment year 2009-2010.

Detailed Analysis:
Issue 1: Reopening of assessment under Section 147
The case involved cross-appeals by the assessee and the revenue against the order of the CIT(A) for the assessment year 2009-2010. The assessee challenged the reopening of assessment, arguing that it was based on a mere change of opinion without any valid reason to believe that income had escaped assessment. The original assessment was completed under Section 143(3) of the Act, and the reassessment was initiated on the grounds of undisclosed import expenditure and a discrepancy in the closing stock of chrome ore. The CIT(A) upheld the reopening, stating that it was not based on a change of opinion but on issues not considered during the original assessment. However, the Tribunal disagreed, citing the Supreme Court's ruling that a reassessment must be supported by tangible material to establish income escapement. The Tribunal found that the reasons for reopening were based on the same materials available during the original assessment, leading to a different opinion without fresh tangible information. Consequently, the Tribunal set aside the reassessment order, emphasizing the need for a live link between the reasons and the belief of income escapement.

Issue 2: Validity of the reassessment order
The Tribunal, after analyzing the arguments presented by the assessee and the revenue, concluded that the reassessment order for the assessment year under appeal was invalid due to the lack of fresh tangible material to support the belief of income escapement. Relying on the decision in the case of CIT vs. Kelvinator of India Ltd., the Tribunal emphasized that a reassessment cannot be solely based on a change of opinion without new tangible information. As a result, the Tribunal allowed the appeal of the assessee and dismissed the appeal of the revenue, setting aside the reassessment order for the assessment year in question. Consequently, other grounds of appeal on the merits of the additions were not addressed as they became irrelevant due to the setting aside of the reassessment order.

In conclusion, the Tribunal's judgment highlighted the importance of tangible material and a live link between reasons and the belief of income escapement in the context of reassessment under Section 147 of the Income Tax Act, 1961. The decision serves as a reminder that a reassessment cannot be initiated solely on a change of opinion without fresh tangible information, ensuring the protection of taxpayers' rights and preventing arbitrary exercise of power by the Assessing Officer.