2012 (12) TMI 118 - AT - Income Tax

Tribunal affirms annulment of reassessment due to change of opinion & lack of disclosure. Appeals dismissed.

The Tribunal upheld the CIT(A)'s decision to annul the reassessment proceedings, emphasizing that the reassessment was based on a change of opinion and ... Reopening of assessment - change of opinion - applicability of proviso to section 147 of the Income tax Act (limitation on reassessment where material facts were fully and truly disclosed)Reopening of assessment - change of opinion - Validity of reassessment proceedings where the Assessing Officer had raised queries during original assessment and the assessee had responded but the assessment order did not expressly discuss those issues - HELD THAT: - The Tribunal held that where the assessee places the relevant material before the Assessing Officer during original assessment proceedings and furnishes explanations to specific queries raised by the AO, the mere absence of an express discussion in the original assessment order does not permit a presumption that the AO failed to apply his mind. Relying on the principles in the jurisdictional High Court decisions affirmed by the Supreme Court (as discussed in the judgment), a subsequent different view taken by the AO or his successor on the same material amounts to a mere change of opinion which does not justify reopening under the reassessment provisions. The Revenue's reliance on authorities where no queries were raised or where material remained undisclosed was distinguished on facts. Consequently, reassessment initiated on the same material already before the AO was held to be vitiated as being founded on a change of opinion. [Paras 36, 37, 38, 40]Reassessment quashed as being founded on a mere change of opinion; reassessment invalid.Applicability of proviso to section 147 of the Income tax Act (limitation on reassessment where material facts were fully and truly disclosed) - Whether initiation of reassessment for Assessment Year 2003 04 was time barred under the proviso to section 147 because there was no failure by the assessee to disclose fully and truly all material facts - HELD THAT: - For ITA No. 488 (AY 2003 04) the Tribunal agreed with the CIT(A)'s conclusion that the proviso to section 147 applied. The AO did not demonstrate that any new information had come to light or that there was a failure by the assessee to disclose fully and truly all material facts necessary for assessment. The material relied upon in the reasons for reopening was the same as that placed before the AO during original assessment and answered by the assessee; accordingly, the initiation of reassessment was held to be time barred under the proviso to section 147. [Paras 8, 39]Reassessment in ITA No. 488 (AY 2003 04) held time barred under the proviso to section 147; reassessment invalid.Final Conclusion: The departmental appeals are dismissed: reassessments founded on a mere change of opinion are quashed, and the reassessment for AY 2003 04 is additionally held time barred under the proviso to section 147. Issues Involved:1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.2. Applicability of the proviso to Section 147.3. Alleged 'change of opinion' by the Assessing Officer (AO).4. Treatment of service line deposits.5. Depreciation on energy meters.Issue-wise Detailed Analysis:1. Validity of Reassessment Proceedings under Section 147:The primary issue raised by the revenue was whether the reassessment proceedings under Section 147 were valid. The revenue argued that the CIT(A) erred in annulling the reassessment orders, ignoring that if a transaction is found to be bogus based on subsequent information, it cannot be said that the original disclosure was 'true' and 'full.' The revenue relied on several Supreme Court and High Court decisions to support this argument.2. Applicability of the Proviso to Section 147:For ITA No. 488/Del/2011, the CIT(A) struck down the reassessment proceedings based on the proviso to Section 147, which states that reassessment cannot be initiated after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts. The CIT(A) found no such failure on the part of the assessee, as all material facts were disclosed during the original assessment.3. Alleged 'Change of Opinion' by the AO:The CIT(A) held that the reassessment proceedings were invalid as they were based on a 'change of opinion.' The original assessment had already scrutinized the issues regarding service line deposits and depreciation on energy meters. The AO had raised queries during the original assessment, and the assessee had provided detailed explanations, which were accepted by the AO. Therefore, reopening the assessment on the same issues was merely a change of opinion, which is not permissible.4. Treatment of Service Line Deposits:The AO had added a sum of Rs. 6,82,00,000/- to the income of the assessee, treating it as a revenue receipt. The assessee had received service line deposits from customers, part of which was transferred to the profit and loss account as revenue, while the balance was shown as a liability. The AO contended that the entire amount should be treated as revenue receipt. However, the CIT(A) found that this issue was already scrutinized during the original assessment, and the reassessment was based on the same material, thus constituting a change of opinion.5. Depreciation on Energy Meters:In ITA No. 489/Del/2011, apart from the issue of service line deposits, the reassessment also involved the depreciation on energy meters. The AO had disallowed the higher depreciation claimed by the assessee, treating it as an incorrect rate. The CIT(A) found that this issue was also raised and addressed during the original assessment, and reassessment on this ground was similarly a change of opinion.Conclusion:The Tribunal upheld the CIT(A)'s decision to annul the reassessment proceedings, emphasizing that the reassessment was based on a change of opinion and that there was no failure on the part of the assessee to disclose fully and truly all material facts. The appeals filed by the revenue were dismissed, affirming that the initiation of reassessment proceedings was invalid both on the grounds of change of opinion and the applicability of the proviso to Section 147.