2018 (8) TMI 2012 - AT - Income Tax

Tribunal Invalidates Reassessment Proceedings Based on 'Change of Opinion'; Original Assessment Stands Firm.

The Tribunal upheld the First Appellate Authority's decision, declaring the reassessment proceedings invalid due to the principle of 'change of opinion.' ... Validity of reopening of assessment u/s 147/148 after a period of four years - HELD THAT:- Since, there was no new tangible material available with the AO while resorting to section 147/148 of the Act, more specifically, while framing original assessment u/s 143(3) of the Act, there was full disclosure of material facts by the assessee and on the basis of those facts, assessment was completed u/s 143(3) of the Act. The Hon'ble jurisdictional High Court in a later decision dated 18/01/2016 in Nirmal Bang Securities Pvt. Ltd. vs ACIT [2016 (1) TMI 947 - BOMBAY HIGH COURT] on the issue of reopening u/s 147/148 held that the notice issued u/s 148 of the Act cannot be sustained as the same is without jurisdiction, therefore, we find no infirmity in the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal). Appeal of the Revenue is dismissed. Issues Involved:1. Validity of notice issued under section 148 of the Income Tax Act, 1961.2. Application of the principle of 'change of opinion' in reopening assessments.3. Conditions for reopening assessments under section 147 of the Income Tax Act, 1961.Detailed Analysis:1. Validity of Notice Issued Under Section 148:The Revenue challenged the order of the First Appellate Authority, which treated the notice issued under section 148 as invalid. The notice was deemed invalid because it was based on a mere change of opinion without proper discussion in the assessment order or detailed inquiries by the Assessing Officer. The Tribunal examined whether the original assessment was conducted with due diligence and whether the necessary details were called for and provided by the assessee. The Tribunal found that the original assessment involved detailed queries and examination of facts, indicating that the Assessing Officer had formed an opinion after due deliberation. Consequently, the reassessment proceedings were invalid as they were based on a change of opinion.2. Application of the Principle of 'Change of Opinion':The Tribunal discussed the principle of 'change of opinion' extensively. This principle postulates the formation of an opinion and then a change thereof. It means that if the Assessing Officer forms a belief based on facts and later changes this belief without new factual information, it constitutes a change of opinion. The Tribunal emphasized that reassessment proceedings are invalid if the original assessment order records that the issue was raised and decided. The Tribunal cited several judicial precedents to support this view, including the Supreme Court's decisions in CIT vs Kelvinator of India Ltd. and CIT vs Amitabh Bachhan. The Tribunal concluded that the reassessment in this case was invalid as it was based on a change of opinion.3. Conditions for Reopening Assessments Under Section 147:The Tribunal outlined the conditions required for reopening assessments under section 147. The Assessing Officer must form a tentative or prima facie opinion that there is underassessment or escapement of income, record this opinion in writing, and ensure that the opinion is not based on mere suspicion. The reasons recorded must show a nexus and be relevant to the opinion formed. Additionally, if the reassessment is initiated after four years, there must be a failure on the part of the assessee to disclose fully and truly all material facts. The Tribunal reiterated that mere production of books or documents does not amount to full disclosure. The Tribunal also discussed the permissive nature of section 114 of the Evidence Act, 1872, and its application in the context of reopening assessments.Conclusion:The Tribunal upheld the First Appellate Authority's decision, concluding that the reassessment proceedings were invalid due to the principle of 'change of opinion.' The Tribunal emphasized that the original assessment was conducted with due diligence, and the reassessment lacked new factual information. The appeal of the Revenue was dismissed. The Tribunal's decision was pronounced in the open court in the presence of representatives from both sides.