2021 (7) TMI 364 - AT - Income Tax

Reopening of assessment u/s 147 - Whether any fresh material or any information which gives the impression that the income of the assessee has escaped assessment? - HELD THAT - Departmental representative fails to dispute that the AO had issued 148 notice dt. 30.3.2017 i.e. well beyond the specified period of four years from the end of the relevant assessment year of filing of the return without even indicating as to whether the assessee had not disclosed the corresponding shortfall pertaining to its turnover; fully and truly , as per 147 section first proviso. This factual backdrop the CIT(A) has rightly termed the impugned reassessment as a mere change of opinion as per hon'ble apex court land mark decision in CIT Vs. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT . Bombay High Court decision in Hindustan Lever Ltd. Vs. ACIT 2004 (2) TMI 41 - BOMBAY HIGH COURT that the reasons recorded by the Assessing Officer must state that there was failure on the part of the assessee to disclose fully and truly all material facts. Reasons are required to be read as they were recorded by the AO. And that the AO himself must also speak through his reasons and should not keep and also seek through his reasons and should not be an assessee guessing for the same. CIT(A) has rightly accepted the assessee's legal arguments challenging validity of the impugned reassessment. - Decided against revenue.

Summary

Issues:
Validity of reopening of assessment under section 147 based on short accountal of closing stock.

Analysis:
The Revenue's appeal and the assessee's cross objection arose from the CIT(A), Kurnool's order regarding the reopening of assessment under section 147 of the Income Tax Act, 1961. The appellant company filed its return of income for the assessment year 2010-11, which was assessed under section 143(3) resulting in certain additions. Subsequently, the Assessing Officer initiated proceedings under section 147 to address the short accountal of closing stock. The assessment was completed under section 144 rws 147, leading to an addition in income. The appellant challenged this addition, arguing that the reopening was not valid as no fresh information was brought forth. The appellant relied on various decisions to support their contention, emphasizing that the AO had not come across any new facts or fresh information to justify the reassessment.

The lower appellate authority considered the facts and legal precedents cited by the appellant and concluded that the AO had reopened the assessment based on the same material submitted during the original assessment under section 143(3). The CIT(A) held that there was no fresh information indicating income escapement, and the reassessment was merely a change of opinion. Citing relevant case laws, including the decision in Phool Chand Bajranglal Vs ITO, it was established that for a valid reassessment, the AO must have fresh information or new facts leading to a reasonable belief of income escapement. In this case, since no new information was found, the initiation of proceedings under section 147 was deemed invalid, and the assessment was annulled accordingly.

The appellate tribunal agreed with the CIT(A)'s analysis, noting that the Assessing Officer had reopened the assessment solely based on the short recording of closing stock, which had already been disclosed during the original assessment. The tribunal highlighted that the notice issued for reopening was beyond the specified period and failed to establish any failure on the part of the assessee to disclose material facts fully and truly. Referring to legal precedents, including the decision in CIT Vs. Kelvinator of India Ltd., the tribunal upheld the CIT(A)'s decision, confirming the invalidity of the reassessment as a mere change of opinion. Consequently, the Revenue's appeal was dismissed, and the assessee's cross objection was deemed infructuous.

In conclusion, the tribunal upheld the CIT(A)'s order, emphasizing the importance of fresh information or new facts for a valid reassessment under section 147. The decision reaffirmed the principle that the reasons for reassessment must indicate a failure on the part of the assessee to disclose all material facts fully and truly, and the reassessment cannot be based on a mere change of opinion.