2012 (11) TMI 1150 - AT - Income Tax

Tribunal validates reassessment under sections 147 & 148, rejects change of opinion claim. Timing of income accrual clarified.

Mula Pravara Electric Co-op. Society Ltd. Versus Dy. CIT, Ahmednagar Circle, Ahmednagar

The Tribunal upheld the validity of the reassessment proceedings under sections 147 and 148 of the Act, finding that reasons were adequately provided to ... - Issues Involved:1. Validity of initiation of reassessment proceedings u/s 147 read with section 148 of the Act.2. Whether reassessment was based on a change of opinion.3. Applicability of Government Resolution dated 21-5-1999 and the timing of income accrual.4. Non-consideration of an alternative submission regarding the cessation of liability u/s 41(1) of the Act.Summary:1. Validity of initiation of reassessment proceedings u/s 147 read with section 148 of the Act:The assessee contended that the reopening of the assessment u/s 148 was invalid as the notice was issued without providing reasons recorded for issuance until the completion of the assessment order. The Tribunal found that the reasons were communicated to the assessee via a show-cause notice dated 8-12-2009, thus meeting the requirement of affording an opportunity to the assessee to raise objections. The Tribunal upheld the CIT(A)'s view that the defect, if any, in not supplying the reasons initially was cured when the reasons were provided before the CIT(A).2. Whether reassessment was based on a change of opinion:The Tribunal rejected the assessee's contention that the reassessment was based on a mere change of opinion. It was noted that there was no assessment u/s 143(3) initially, and the return was processed u/s 143(1)(a), which cannot be termed as an assessment. The Tribunal relied on the decision of the Hon'ble Supreme Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd., 291 ITR 500 (SC), concluding that the reassessment proceedings were valid.3. Applicability of Government Resolution dated 21-5-1999 and the timing of income accrual:The assessee argued that the income related to the waiver of arrears should be taxed in A.Y. 2000-01 based on the Government Resolution dated 21-5-1999. However, the Tribunal held that the income accrued on 23-5-2001, when the MSEB issued a letter specifying the benefit of waiver to the assessee. The Tribunal concurred with the CIT(A) that the remission of liability occurred in A.Y. 2002-03, as the specific act of waiver by MSEB was in May 2001.4. Non-consideration of an alternative submission regarding the cessation of liability u/s 41(1) of the Act:The assessee contended that the Tribunal failed to adjudicate an alternative submission that the loss on account of excess cost of electricity incurred in earlier years was not actually allowed, and therefore its waiver in A.Y. 2002-03 cannot be assessed as income u/s 41(1). The Tribunal acknowledged this omission and directed the Registry to re-post the appeal before a regular bench to consider and decide the alternative plea raised in Ground no. 4.Conclusion:The Tribunal partly allowed the Miscellaneous Application, directing a rehearing on the specific unadjudicated alternative plea while upholding the original decisions on other issues.