2019 (2) TMI 1580 - HC - Income Tax

Reopening of assessment - Assessment order passed u/s 143(3)- tangible material - audit objection - amount claimed on account of forex gain not allowable expenditure being revenue in nature - HELD THAT - Following Kelvinator (2010 (1) TMI 11 - SUPREME COURT OF INDIA) decided by the Supreme Court held that change of opinion is impermissible. Revenue clearly barred by provisions of Section 147/148 of the Act. In view of the above discussion, the impugned re-assessment notice dated 30.03.2017, cannot be sustained. It is hereby quashed; all consequential proceedings issued and conducted pursuant to the said re-assessment notice are also hereby quashed. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for Assessment Year 2010-11 based on reassessment due to Forex Gain on Certegry claimed as deduction.

Analysis:
The petitioner challenges a notice issued under Section 148 of the Income Tax Act for Assessment Year 2010-11, citing that the original return was assessed under scrutiny with an addition of &8377; 31.13 crores. The reassessment notice was issued based on an audit conducted on the petitioner, pointing out that a deduction claimed on account of Forex Gain on Certegry (Interest Income) was not allowable as it was revenue in nature. The Assessing Officer concluded that the income of &8377; 3,11,80,117/- had escaped assessment for the said assessment year due to this error. The AO relied on case laws to support the reopening of the case under Section 147/148, indicating that the income had indeed escaped assessment.

The petitioner argued that reassessment was akin to revisiting the merits of the original scrutiny assessment, which is impermissible. They relied on previous judgments to support their contention that tangible material must be made available to the revenue for a complete scrutiny review. The revenue, on the other hand, asserted that the amount claimed on account of Forex Gain was not an allowable expenditure as per accounting standards. The Court noted that reliance on a subsequent audit report alone cannot be considered tangible material for reassessment.

Citing the Carlton case, the Court emphasized that a subsequent audit objection does not constitute tangible material for reassessment. It was reiterated that a mere change of opinion does not warrant action under Section 147/148 of the Act. The Court held that the audit objection was merely informative and did not provide new or fresh material for reassessment. Relying on precedents, the Court concluded that the impugned reassessment notice could not be sustained, quashing it along with all consequential proceedings.

In conclusion, the Court held that the reassessment notice dated 30.03.2017 was invalid and quashed. The Court found that the revenue was barred by the provisions of Section 147/148 of the Act, emphasizing that a change of information for reassessment is impermissible. The writ petition was disposed of accordingly, and the pending application was also disposed of.