2020 (8) TMI 763 - HC - Income Tax

Reopening of assessment u/s 147 - failure on the part of the assessee to disclose fully and truly all material facts OR not ? - CIT (Appeals)15, Chennai came to the conclusion that in the original assessment proceedings, no opinion was formed by the Assessing Officer - Tribunal cancelling the reopening proceedings - HELD THAT - A perusal of the order of the Commissioner of Income Tax (Appeals) would make it clear that he has been persuaded to pass the orders as if there was no change of opinion, as, according to him, no opinion was formed by the Assessing Officer. However, the fact remains that the original assessment order was passed by the Assessing Officer after forming the opinion. Reassessment proceeding under Section 147 was made to form change of opinion and therefore, it would clearly amount to reviewing the original order of assessment u/s147 under the pretext of reassessment. We make it clear that in the reassessment proceedings u/s 147, the original assessment order cannot be reviewed. Proceedings also cannot be initiated merely because there is a possibility of change of opinion. No review on the original assessment order is permissible in the reassessment proceedings initiated under Section 147. Therefore, we are of the view that the Tribunal had rightly set aside the impugned reassessment made under Section 147 - Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the Appellate Tribunal was right in canceling the reopening of assessment under Section 147 of the Income Tax Act.
2. Whether the Tribunal's finding was perverse regarding the assessee's claim of sale of shares as "capital gains" in one year and "business loss" in the next.
3. Whether the Tribunal overlooked binding decisions in similar cases while canceling the reopening of assessment.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The primary issue was whether the Appellate Tribunal was correct in canceling the reopening of the assessment under Section 147. The appellant argued that the assessee failed to disclose fully and truly all material facts necessary for the assessment year 2006-07. The reassessment was initiated because the assessee claimed a loss on the sale of shares as revenue expenditure in 2006-07, while in the previous year, the profit from the sale of shares was shown as "capital gains." The Tribunal held that the details of the loss on the sale of shares were clearly disclosed in the profit and loss account during the original assessment, and the Assessing Officer had made a thorough scrutiny before passing the original assessment order. Therefore, the reassessment order under Section 147 was deemed improper.

2. Tribunal’s Finding on Sale of Shares:
The appellant contended that the Tribunal's finding was perverse as the assessee showed inconsistency by claiming the sale of shares as "capital gains" in one year and "business loss" in the next. The Tribunal noted that the loss on the sale of shares was disclosed in the original return of income and scrutinized by the Assessing Officer. The Tribunal concluded that the original assessment was done after forming an opinion based on the available material, and no new tangible material was presented to justify the reassessment.

3. Overlooking Binding Decisions:
The appellant argued that the Tribunal overlooked binding decisions in similar cases, such as Hoda Siel Products Ltd Vs. DCIT, which was upheld by the Supreme Court. The Tribunal, however, found that there was no failure on the part of the assessee to disclose material facts, and the reassessment was based on a change of opinion rather than new tangible evidence. The Tribunal relied on the Supreme Court's judgment in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd., which emphasized that reassessment based on a mere change of opinion is not permissible.

Conclusion:
The High Court agreed with the Tribunal's decision, emphasizing that the original assessment was conducted after thorough scrutiny and forming an opinion. The reassessment under Section 147 was deemed to be an attempt to review the original order under the pretext of reassessment, which is not permissible. The High Court cited the Supreme Court's judgment in Kelvinator of India Ltd., reinforcing that reassessment requires tangible material indicating income escapement, not merely a change of opinion. Consequently, the High Court dismissed the tax case appeal, finding no substantial questions of law or any infirmity in the Tribunal's order.