2022 (11) TMI 382 - AT - Income Tax

Reopening of assessment u/s 147 - Notice beyond the period of four years - HELD THAT - The reopening is only a change of opinion and no new tangible material came to the notice of the Assessing Officer to come to a different conclusion and thus, the change of opinion is not permissible in law as per the judgement of CIT v. Kelvinator of India Ltd. 2010 (1) TMI 11 - SUPREME COURT Moreover, when the assessment is reopened after four years from the end of the relevant assessment year under consideration, AO has to establish that there is a failure on the part of the assessee to disclose fully and truly all material facts to complete the assessment. In this case, AO has failed to establish that there is a failure on the part of the assessee and therefore, the reopening of the assessment is invalid and bad in law. In view of the above facts and circumstances and respectfully following the decision of the Coordinate Benches of the Tribunal in assessee s own case for the assessment year 2008-09, we sustain the appellate order passed by the ld. CIT(A) in quashing the assessment order passed under section 143(3) r.w.s. 147 - Thus, the grounds raised by the Revenue are dismissed.

Summary

Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961.
2. Whether the reassessment was based on a change of opinion without new tangible material.
3. Compliance with the proviso to section 147 regarding disclosure of material facts by the assessee.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The primary issue was whether the Assessing Officer (AO) validly reopened the assessment under section 147 of the Income Tax Act, 1961. The AO issued a notice under section 148 on 27.02.2017, claiming escapement of income. The reasons for reopening were provided to the assessee, who objected. The AO disposed of these objections by a speaking order dated 17.08.2017. The reassessment was completed under section 143(3) r.w.s. 147 on 07.11.2017, determining a total income of Rs. 20,84,11,151 after making additions/disallowances. The Commissioner of Income Tax (Appeals) [CIT(A)] quashed the reassessment, stating that the AO's action did not satisfy the proviso to section 147. The Tribunal upheld this decision, noting that the AO failed to establish any new material or failure on the part of the assessee to disclose fully and truly all material facts.

2. Change of Opinion Without New Tangible Material:
The Tribunal found that the AO's reopening of the assessment was based on the same material already available on record, which had been considered during the original assessment under section 143(3). The AO attempted to reclassify income from capital gains to business income without any new tangible material. This was deemed a change of opinion, which is not permissible in law. The Tribunal cited the Supreme Court's judgment in CIT v. Kelvinator of India Ltd. 320 ITR 561 (SC), which prohibits reassessment based on a mere change of opinion.

3. Compliance with Proviso to Section 147:
The Tribunal emphasized that for reopening an assessment beyond four years, the AO must prove the assessee's failure to disclose fully and truly all material facts necessary for assessment. The AO did not establish such a failure. The Tribunal referenced several case laws, including the Hon'ble Supreme Court's decision in ITO v. Lakhmani Mewal Das 103 ITR 437, which mandates a direct nexus between the material and the formation of belief for income escapement. The Tribunal concluded that the reopening was invalid as the AO did not meet the conditions stipulated in the proviso to section 147.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to quash the reassessment order. The Tribunal held that the reopening was based on a change of opinion without new tangible material and did not comply with the proviso to section 147, as the AO failed to prove any failure on the part of the assessee to disclose material facts.