2021 (2) TMI 354 - AT - Income Tax

Reopening of assessment u/s 147 - Validity of reasons to believe - whether the assessee is entitled to deduction u/s 80-IB(10) on the expenses which have been disallowed due to non compliance of certain provisions of the Income Tax Act, 1961 was never examined by the Assessing Officer in the course of the original assessment proceedings - HELD THAT - On a perusal of the records, we find that the A.O in the course of the original assessment proceedings had queried as regards the aforesaid issues, and only after being satisfied with the reply filed by the assessee had accepted the same. As can be gathered from a letter dated 28/12/2011 the assessee on being queried by the A.O had duly demonstrated that the additions/ disallowances made in its computation of income duly formed part of its eligible profits‟ for the purpose of quantification of its deduction u/s 80IB(10). On a similar footing, we find that the assessee vide its letter dated 26/12/2011 had after giving the bifurcated details of its other incomes had therein explained that as to on what basis the said amounts were eligible for deduction u/s 80IB(10). It can safely or in fact inescapably be gathered that the A.O while framing the original assessment had queried on the issues in question, and only after considering the reply of the assessee, had opined, that the assesee‟s claim for deduction u/s 80IB(10) was in order. Accordingly, we are of a strong conviction that the A.O backed by a mere change of opinion on the same set of facts as were there before his predecessor while framing the original assessment u/s 143(3), dated 27.12.2011, had therein in his attempt to recast the assessee‟s entitlement for deduction u/s 80IB(10) reopened its concluded assessment, which as noticed by us hereinabove in absence of any fresh tangible material is not permitted under law. See M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT as held a mere change of opinion cannot per se be a reason to reopen the case Now when the assessee‟s claim for deduction u/s 80-IB(10) was after exhaustive deliberations and specific queries as regards the issues in question accepted by the A.O, then, backed by a mere change of opinion on the basis of the very same material he could not have reopened the concluded assessment. Accordingly, finding no infirmity in the view taken by the CIT(A) who in our considered view had by way of a well reasoned order quashed the reassessment order passed by the A.O u/s 143(3) r.w.s. 147 for want of jurisdiction, we uphold the same. - Decided against revenue.

Issues Involved:
1. Validity of reopening the assessment based on a "change of opinion."
2. Jurisdiction of notice issued under Section 148 of the Income Tax Act.
3. Entitlement of the assessee to deduction under Section 80-IB(10) for certain disallowed expenses.
4. Requirement of tangible material for reopening the assessment.

Detailed Analysis:

1. Validity of Reopening the Assessment Based on a "Change of Opinion":
The primary issue was whether the reopening of the assessment was valid, given that it was based on a "change of opinion." The original assessment under Section 143(3) was completed on 27/12/2011, accepting the assessee's claim for deduction under Section 80-IB(10). The Assessing Officer (A.O.) later reopened the case under Section 147, citing that the assessee's claim for deduction on "Other incomes" and disallowed expenses was not maintainable. However, the CIT(A) quashed the reassessment, observing that the reopening was based on the same facts available during the original assessment and constituted a mere "change of opinion," which is not permissible under law. This view was supported by the Supreme Court judgment in CIT Vs. Kelvinator of India Ltd., which held that a "change of opinion" cannot justify reopening an assessment.

2. Jurisdiction of Notice Issued Under Section 148:
The notice issued under Section 148 dated 18.02.2014 was challenged on the grounds of jurisdiction. The CIT(A) held that the notice was without jurisdiction since the reasons recorded for reopening the assessment were based on the same material considered during the original assessment. The CIT(A) cited several judicial precedents, including the Supreme Court and Bombay High Court rulings, which state that reopening an assessment without new tangible material amounts to a change of opinion and is not permissible.

3. Entitlement of the Assessee to Deduction Under Section 80-IB(10) for Certain Disallowed Expenses:
The A.O. had restricted the assessee's entitlement to deduction under Section 80-IB(10), arguing that the disallowed expenses (u/s 40(a), 40(a)(ia), employees contribution to PF, 43B, and donations) did not qualify for deduction. The assessee contended that these disallowed expenses were part of its business income and had been accepted during the original assessment. The CIT(A) found that the A.O. had already considered these issues during the original assessment, and there was no new material to justify reopening the case.

4. Requirement of Tangible Material for Reopening the Assessment:
The CIT(A) and the Tribunal emphasized the necessity of "tangible material" for reopening an assessment. The reassessment was quashed because the A.O. did not present any new tangible material but merely revisited the same facts and issues already considered in the original assessment. This principle was reinforced by the Supreme Court in CIT Vs. Kelvinator of India Ltd., which mandates the presence of tangible material for reopening an assessment to prevent arbitrary use of power by the A.O.

Conclusion:
The Tribunal upheld the CIT(A)'s decision to quash the reassessment order, agreeing that the reopening was based on a mere "change of opinion" without any new tangible material. The appeal filed by the revenue was dismissed, affirming that the A.O. lacked jurisdiction to reopen the assessment under Section 147 based on the same facts previously considered.

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