2015 (6) TMI 804 - AT - Income Tax

Tribunal overturns reassessment order citing lack of new facts

The Tribunal found the reassessment order invalid as it was based on a change of opinion without new material facts. The original assessment was restored, ... Reopening of assessment - unaccounted cash credit - Held that:- AO while framing the original assessment, specifically, asked the assessee to furnish the details of the unsecured loans and the assessee gave the details by disclosing the name of the persons from whom loans were received and also furnished their PAN nos. alongwith the requisite details in the form of affidavit from the Directors of the lending companies, balance sheet & profit & loss A/c of those companies as well as copies of acknowledgment of Income Tax Return etc. to demonstrate the creditworthiness, bonafide and genuineness of the transactions. The assessee also disclosed the names, addresses, PAN, Ward Nos. etc. of all the persons from whom loans exceeding ₹ 20,000/- were obtained and repaid during the year, in the Annexure ‘H’ attached to the Tax Audit Report which was furnished to the AO who after making the proper inquiry and being satisfied did not make any addition in the original assessment. Therefore, the notice issued u/s 148 of the Act subsequently on the basis of information received from the Investigation Wing of the Department was on account of change of opinion and as such the reopening u/s 147 of the Act was not valid, therefore, the subsequent reassessment framed on that basis was invalid. Accordingly, we set aside the impugned order passed by the ld. CIT(A) and the original assessment framed by the AO is restored. - Decided in favour of the assessee. Issues Involved:1. Validity of reassessment order under Section 143(3) read with Section 147 of the Income Tax Act, 1961.2. Legality of reopening the assessment under Section 147/148.3. Reopening of assessment beyond 4 years.4. Basis for reopening being hearsay and assumptions.5. Disallowance of Rs. 25,00,000/- under Section 68 for unexplained investment.Issue-wise Detailed Analysis:1. Validity of Reassessment Order:The assessee challenged the reassessment order dated 26th November 2010, arguing that it was bad in law. The original assessment was completed under Section 143(3) on 30.03.2006, and the reassessment was initiated based on information received from the Investigation Wing. The Tribunal found that the reassessment was initiated without independent inquiry by the AO and was based solely on the information from the Investigation Wing, which constituted a change of opinion. The Tribunal cited the case of CIT vs. Kelvinator of India Ltd. (256 ITR 1) to support the view that a mere change of opinion cannot justify reopening a completed assessment.2. Legality of Reopening the Assessment:The assessee argued that the AO did not record valid reasons to believe that income had escaped assessment and did not comply with the mandatory requirements of Section 147/148. The Tribunal noted that the AO had issued a notice under Section 148 based on information from the Investigation Wing, alleging that the assessee had received accommodation entries. The Tribunal held that the reassessment proceedings were invalid as they were initiated on the basis of a change of opinion and without independent inquiry.3. Reopening of Assessment Beyond 4 Years:The Tribunal observed that the notice under Section 148 was issued on 29.03.2010, beyond the four-year limit from the end of the relevant assessment year. The Tribunal emphasized that for reopening beyond four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The Tribunal found that the assessee had disclosed all relevant details during the original assessment proceedings, and there was no failure on its part. Therefore, the reopening was held to be invalid.4. Basis for Reopening Being Hearsay and Assumptions:The assessee contended that the reopening was based on hearsay, surmises, and assumptions, without any material to form an independent view about the alleged escapement of income. The Tribunal noted that the AO had relied solely on the information from the Investigation Wing without conducting an independent inquiry. The Tribunal held that the reopening was based on a change of opinion and not on new material facts, rendering the reassessment invalid.5. Disallowance of Rs. 25,00,000/- Under Section 68:The AO had made an addition of Rs. 25,00,000/- on account of unexplained investment under Section 68, alleging that the loans received by the assessee were accommodation entries. The assessee provided evidence, including affidavits, income tax returns, and balance sheets of the lending companies, to support the genuineness of the transactions. The Tribunal found that the assessee had disclosed all relevant details during the original assessment and had repaid the loans with interest in subsequent years. The Tribunal held that the disallowance was based on conjectures and surmises, and the reopening was invalid.Conclusion:The Tribunal concluded that the reopening of the assessment under Section 147/148 was invalid as it was based on a change of opinion and not on new material facts. The reassessment order was set aside, and the original assessment was restored. The appeal of the assessee was allowed.