2014 (12) TMI 91 - AT - Income Tax

Invalid reassessment based on change of opinion quashed by Tribunal. Appeal allowed for statistical purposes.

M/s. JV. Gokal & Co. Versus Assistant Commissioner of Income Tax

M/s. JV. Gokal & Co. Versus Assistant Commissioner of Income Tax - TMI Issues Involved:1. Reopening of assessment under section 147/148.2. Applicability of section 40(a)(i) regarding payments to non-residents.3. Validity of reassessment based on 'change of opinion.'Detailed Analysis:1. Reopening of Assessment under Section 147/148:The primary issue is whether the Assessing Officer (AO) had valid grounds to reopen the assessment under section 147. The assessee argued that the original assessment was thoroughly scrutinized, and all relevant details were disclosed, including the payments to M/s. J.V. Overseas Trading Ltd. The AO initially accepted these details, and thus, reopening the assessment based on the same information constitutes a 'mere change of opinion,' which is not permissible under the law. The Tribunal agreed, citing the Supreme Court decision in Kelvinator of India Ltd., which mandates that reassessment must be based on 'tangible material' and not merely a different interpretation by a new AO.2. Applicability of Section 40(a)(i) Regarding Payments to Non-Residents:The AO contended that the payments made to M/s. J.V. Overseas Trading Ltd. for advertisement and commission should have been subjected to tax deduction at source (TDS) under section 195, and failure to do so attracts disallowance under section 40(a)(i). The assessee argued that the services were rendered outside India by a non-resident with no business operations in India, and thus, these payments do not constitute income accruing in India. The Tribunal noted that this issue was already considered during the original assessment, and the AO had accepted the assessee's position based on the Supreme Court's decision in Toshoku Ltd.3. Validity of Reassessment Based on 'Change of Opinion':The Tribunal emphasized that the concept of 'change of opinion' is crucial to prevent arbitrary reassessment. It reiterated that once an assessment is completed under section 143(3), it is presumed that the AO has applied his mind to all aspects of the case. Reopening the assessment on the same facts without any new material amounts to a review, which is beyond the AO's jurisdiction. The Tribunal relied on the Full Bench decision of the Delhi High Court in Praful Chunilal Patel, which was affirmed by the Supreme Court, to support this view.Conclusion:The Tribunal concluded that the reassessment proceedings initiated by the AO were invalid as they were based on a mere change of opinion without any new tangible material. Consequently, the notice issued under section 148 was quashed, and the appeal filed by the assessee was allowed for statistical purposes. The Tribunal did not consider the second ground of the appeal, as it became academic due to the invalidation of the reassessment proceedings.Order Pronouncement:The order was pronounced in the open court on 21st November 2014, allowing the appeal filed by the assessee.