2018 (9) TMI 1871 - AT - Income Tax

Tribunal quashes re-assessment for change of opinion without disclosure, emphasizes procedural adherence and valid reasons.

Shah Silk Corporation Versus The Deputy Commissioner of Income Tax, Circle-3, Surat.

The Tribunal allowed the appeal, quashing the re-assessment proceedings as it was deemed a change of opinion without failure to disclose material facts by ... Reopening of assessment u/s 147 - assessment time bared - non disposing the objections of assessee - HELD THAT:- The perusal of the reasons recorded for re-opening shows that the AO has not mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Even the assessment order also makes no mention of such failure on the part of the assessment. It is also noticed that assessee has filed objection vide letter dated 21.01.2013, but these objection has not been disposed by AO at all except making mention thereon in the assessment order. The AO was required to dispose off objection, laid down by Hon'ble Supreme Court in the case of G.K.N.Drive Shafts Ltd. [2002 (11) TMI 7 - SUPREME COURT] and Garden Finance Ltd. [2003 (10) TMI 17 - GUJARAT HIGH COURT] AO is bound to dispose off objection filed by the assessee. In absence of any averment that the assessments are sought to be re-opened by reason of failure on the part of assessee to disclose fully and truly all material facts necessary for assessment for the relevant assessment year, the very initiation of proceedings u/s.147 by issuance of notice u/s.148 after expiry of four years from the end of relevant assessment year is bad and cannot be sustained. We are of the considered opinion that the re-opening amounts to change of opinion and there was no failure on the part of assessee to disclose all necessary for making assessment, hence, the same is bad in law, and therefore quashed. Accordingly, this legal ground of the assessee is allowed. Issues involved:1. Reopening of assessment2. Disallowance of partners' remuneration3. Interest u/s.234A, 234B, and 234CReopening of assessment:The appeal challenged the reopening of assessment for the Assessment Year 2006-07, claiming it was time-barred and lacked necessary conditions. The appellant argued that the notice issued under section 148 was beyond the four-year limit from the end of the relevant assessment year. The appellant contended that the reasons for reopening did not indicate any failure on their part to disclose material facts. The appellant cited a decision by the Hon'ble Gujarat High Court to support their argument. The appellant also highlighted that the assessment order did not mention any such failure. The appellant further argued that the re-opening was based on a mere change of opinion rather than new information. The CIT(A) directed the AO to recalculate the remuneration payable to partners, merging the assessment order in the appellate order. The Tribunal found that the re-opening amounted to a change of opinion, as there was no failure on the part of the assessee to disclose necessary information, thus quashing the re-assessment proceedings.Disallowance of partners' remuneration:The appeal contested the disallowance of partners' remuneration amounting to Rs. 6,63,371. The Tribunal did not adjudicate on this issue as the re-assessment proceedings were quashed, rendering the disallowance grounds inconsequential.Interest u/s.234A, 234B, and 234C:The appeal sought deletion of interest under sections 234A, 234B, and 234C. However, this issue was not explicitly addressed in the detailed analysis provided in the judgment.In conclusion, the Tribunal allowed the appeal on the legal ground of quashing the re-assessment proceedings due to the absence of failure on the part of the assessee to disclose all necessary information for assessment. As a result, the other grounds related to the disallowance of partners' remuneration were not addressed. The judgment emphasized the importance of compliance with procedural requirements and the necessity of establishing valid reasons for reopening assessments within the statutory time limits.