2022 (4) TMI 717 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - eligibility of reasons to believe - tangible material in the hands of the AO to initiate reopening - HELD THAT - For invoking second limb of first proviso to section 147(1) of the Act, the AO is duty bound to record an allegation against the assessee in the reasons recorded for initiation of reassessment proceedings that any income chargeable to tax has escaped assessment for such assessment years by the reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. From the reasons recorded by the AO it is very much clear that no such allegation has been noted by the AO against the assessee in the reasons recorded and we are unable to see any indication of the AO to invoke second limb of first proviso of section 147 of the Act to initiate action against the assessee for reassessment for A.Y.2007-2008 beyond the period of four years, therefore, we are compelled to hold that the initiation of reassessment proceedings u/s.147 of the Act, issuance of notice u/s.147 of the Act, impugned reassessment order as well as first appellate order are hit by second limb of first proviso to section 147 of the Act, therefore, on this count entire action of the AO including impugned reassessment order and first appellate order deserves to be quashed. So far as second part of the arguments of the assessee, we are of the considered view that from the reasons recorded by the AO we clearly note that the AO has only perused the relevant records as well as Notes forming part of Accounts by initiating action against the assessee for reassessment proceedings for A.Y.2007-2008 and there was no new tangible material in the hands of the AO, which was not before him during original scrutiny assessment proceedings, therefore, it is a clear case of change of opinion, which is again hit by the recent decision in the case of Marico Ltd. 2020 (6) TMI 436 - SC ORDER . The initiation of reassessment proceedings u/s.147 of the Act, notice u/s.148 of the Act, impugned reassessment and first appellate order also deserves to be quashed on this count and we hold so. - Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act for the assessment year 2007-2008.
2. Compliance with the first proviso to Section 147 regarding the time limit for initiating reassessment proceedings.
3. Existence of new tangible material to justify the initiation of reassessment proceedings.
4. Allegation of change of opinion by the Assessing Officer.

Detailed Analysis:

Issue 1: The appeal was filed by the assessee against the order of the CIT(A)-3, Chennai, for the assessment year 2007-2008 challenging the reassessment proceedings initiated by the Assessing Officer.

Issue 2: The first proviso to Section 147 of the Act states that no action shall be taken after four years from the end of the relevant assessment year unless income has escaped assessment due to the failure of the assessee to disclose material facts. In this case, the AO initiated reassessment proceedings on 25.03.2014, beyond the four-year limit, without alleging any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The initiation of reassessment proceedings was held to be in violation of the first proviso to Section 147, leading to the quashing of the reassessment order.

Issue 3: The AO was found to have initiated reassessment proceedings without any new tangible material that was not before him during the original assessment. This lack of fresh material led to the conclusion that the reassessment was based on a change of opinion, which is impermissible under the law. The absence of new material and the reliance on the same information from the original assessment resulted in the quashing of the reassessment order.

Issue 4: The initiation of reassessment proceedings, notice under Section 148, and the subsequent orders were deemed invalid due to a lack of compliance with the statutory provisions and the presence of a change of opinion without new tangible material. The legal grounds were considered, and the appeal was partly allowed based on these findings.

In conclusion, the reassessment proceedings for the assessment year 2007-2008 were found to be invalid due to non-compliance with the statutory provisions regarding the time limit and the absence of new tangible material, resulting in a change of opinion without proper justification. The reassessment order and subsequent proceedings were quashed on legal grounds, leading to the partial allowance of the appeal by the assessee.