2014 (2) TMI 886 - AT - Income Tax

Assessment Reopening Ruled Invalid: Tribunal dismisses Revenue's appeal, affirms CIT(A) decision.

Income-tax Officer Versus M/s Object Connect India Pvt. Ltd.

The Tribunal upheld the CIT(A)'s decision that the reopening of the assessment under Section 148 of the Income Tax Act was invalid as it was based on a ... Reopening of Assessment u/s 148 of the Act – Requirement to issue notice – Held that:-The decision in CIT Vs. Usha International Ltd.[ 2012 (9) TMI 767 - DELHI HIGH COURT] followed - The reasons recorded or the documents available must show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income - The final ascertainment takes place when the final or reassessment order is passed - It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment - The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction etc. - It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind - The CIT(A) has rightly quashed the reopening of assessment made by the Assessing Officer u/s 147 of the Act by observing that there was absolutely no fresh information provided or collected – thus, the order of the CIT(A) upheld – Decided against Revenue. Issues Involved:1. Whether the CIT(A) erred in observing that no new information had come to light for the Assessing Officer to issue a fresh notice under Section 148 of the Income Tax Act.2. Whether the CIT(A) erred in holding that the reopening of the assessment under Section 148 of the Income Tax Act, 1961, is bad in law.Issue-wise Detailed Analysis:Issue 1: No New Information for Issuance of Notice under Section 148The Revenue contended that the CIT(A) incorrectly observed that no new information had come to light for the Assessing Officer (AO) to issue a fresh notice under Section 148 of the Income Tax Act. The assessee company, engaged in the development and sale of computer software, had initially filed its return for AY 2002-03, admitting a loss. The AO issued a notice under Section 148 on 23/02/2006, and the assessment was completed on 29/03/2006. Subsequently, another notice under Section 148 was issued on 30/03/2009, questioning the set-off against interest receipts. The CIT(A) concluded that the reopening was merely a change of opinion, as no new information was collected.Issue 2: Reopening of Assessment under Section 148The CIT(A) held that the reopening of the assessment under Section 148 was bad in law, as it was based on a change of opinion without any fresh information. The CIT(A) referred to various case laws and determined that the reopening was ab initio void. The Revenue appealed against this decision.The Tribunal reviewed the arguments and the orders of the revenue authorities, referring extensively to the judgment of the Hon'ble Delhi High Court in CIT Vs. Usha International Ltd., which laid down conditions for reopening an assessment under Section 143(3). These conditions include the necessity for the AO to form a tentative or prima facie opinion based on material evidence, record the opinion in writing, and ensure that the opinion is not based on mere suspicion. The Tribunal emphasized that the principle of 'change of opinion' implies that the AO had formed an opinion during the original assessment, and the reassessment proceedings propose a different view without new factual information.The Tribunal also cited the coordinate bench's observations in the case of S. Ranjit Reddy and others, which stated that reopening an assessment based on subsequent assessment years requires new facts or additional information that was not available during the original assessment. Mere change of opinion does not justify reopening.Conclusion:The Tribunal upheld the CIT(A)'s decision, agreeing that the reopening of the assessment was invalid due to the absence of fresh information. The Tribunal dismissed the Revenue's appeals for both AY 2002-03 and AY 2003-04, concluding that the CIT(A) rightly quashed the reopening of the assessments.Judgment:Both appeals of the Revenue were dismissed. The judgment was pronounced in the open court on 02/01/2014.