2013 (12) TMI 1360 - AT - Income Tax

Reassessment proceedings invalidated for being based on a change of opinion, notice under Section 148 quashed.

The Tribunal held that the reassessment proceedings were based on a change of opinion and not on any new material facts, rendering them invalid. ... Validity of reassessment proceedings - Held that:- The assessee has submitted and disclosed fully and truly all material facts necessary for assessment such as enclosed copies of the detail of commitment charges paid, copies of the rental receipts and rental payments - The Assessing Officer had no reason to believe that the income chargeable to tax has escaped assessment due to non-disclosure - The Commissioner of Income Tax(A) rightly held that the assumption of jurisdiction u/s 147 and 148 of the Act was based on change of opinion - Having second thoughts on the same material and omission on the part of Assessing Officer to draw the correct legal presumption during the assessment proceedings cannot be a basis of initiation of reassessment proceedings u/s 147 of the Act - The Commissioner of Income Tax(A) rightly held that reassessment proceedings do not survive the test of judicial scrutiny and the same are not sustainable - Decided against Revenue. Issues Involved:1. Validity of reassessment proceedings based on change of opinion.2. Deletion of addition made on account of commitment charges.3. Deletion of addition made on account of rent received and classified under 'Income from House Property.'Issue-wise Detailed Analysis:Ground No. 2: Validity of Reassessment Proceedings Based on Change of OpinionThe primary issue was whether the reassessment proceedings initiated by the Assessing Officer (AO) were valid or merely a change of opinion. The revenue argued that the reassessment was justified as the notice under Section 148 of the Income Tax Act, 1961, was issued in accordance with the statutory provisions. The AO recorded reasons and obtained necessary sanctions before issuing the notice. The revenue contended that the reassessment was based on the failure of the assessee to disclose fully and truly all material facts.The assessee countered that the reassessment notice was issued beyond the statutory period of six years and was based on the same material available during the original assessment. The assessee argued that all relevant details were furnished during the original assessment, and the reassessment was merely a review or change of opinion without any new tangible material. The assessee relied on the decision of the Hon'ble Jurisdictional High Court of Delhi in Orient Crafts Ltd. to support their claim.The Tribunal observed that the reasons recorded by the AO for initiating reassessment proceedings indicated that the issues of commitment charges and rent were already considered during the original assessment. The Tribunal noted that the assessee had provided all necessary details during the original assessment, and the AO had made a conscious decision based on those details. The Tribunal concluded that the reassessment was based on a change of opinion and not on any new material facts. Therefore, the reassessment proceedings were not valid, and the notice under Section 148 was quashed.Ground No. 3: Deletion of Addition on Account of Commitment ChargesThe revenue challenged the deletion of the addition made by the AO on account of commitment charges, which were treated as capital expenditure by the AO but claimed as revenue expenditure by the assessee. Since the reassessment proceedings were quashed, the Tribunal did not adjudicate this ground on its merits. The Tribunal held that the ground did not survive for adjudication due to the invalidity of the reassessment proceedings.Ground No. 4: Deletion of Addition on Account of Rent ReceivedThe revenue also challenged the deletion of the addition made by the AO on account of rent received, which was classified under 'Income from House Property.' Similar to Ground No. 3, the Tribunal did not adjudicate this ground on its merits due to the quashing of the reassessment proceedings. The Tribunal held that this ground also did not survive for adjudication.Conclusion:The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] that the reassessment proceedings were based on a change of opinion and were not valid. Consequently, the notice under Section 148 and the reassessment order were quashed. As a result, the other grounds related to the additions on account of commitment charges and rent received did not survive for adjudication. The appeal of the revenue was dismissed in its entirety.