Tribunal quashes invalid reassessment order by Income Tax Commissioner, citing lack of disclosure & change of opinion.

The Tribunal upheld the decision of the Commissioner of Income Tax (Appeals) to quash the reassessment order, deeming it invalid due to the absence of failure by the assessee to disclose material facts and because it was based on a change of opinion. The appeal by the Revenue was dismissed.

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Issues Involved:
1. Validity of reassessment proceedings under section 147 of the Income-tax Act, 1961.
2. Alleged failure on the part of the assessee to disclose material facts.
3. Reassessment based on a change of opinion.

Detailed Analysis:

I. Validity of Reassessment Proceedings under Section 147:

The primary issue in this appeal is whether the reopening of the assessment under section 147 was valid. The original assessment was completed under section 143(3) on 10-01-2005, and the reassessment notice under section 148 was issued on 26-05-2008, beyond the four-year period from the end of the relevant assessment year. The Commissioner of Income Tax (Appeals) [CIT(A)] quashed the reassessment, holding it invalid on two grounds: there was no failure on the part of the assessee to disclose material facts, and the reopening was based on a change of opinion.

II. Alleged Failure on the Part of the Assessee to Disclose Material Facts:

The Assessing Officer (AO) must comply with the first proviso to section 147 when reopening an assessment after four years from the end of the relevant assessment year. This proviso requires that the AO must demonstrate that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts necessary for the assessment. The AO's reasons for reopening did not include any such allegation against the assessee. The AO also failed to address this issue in the interim order disposing of the assessee's objections. The Tribunal emphasized that the AO must record a finding in the reasons that there was a failure on the part of the assessee to disclose material facts. This failure to comply with the mandatory jurisdictional condition precedent renders the reopening invalid.

III. Reassessment Based on a Change of Opinion:

The Tribunal further held that the reassessment was based on a change of opinion, which is not permissible under section 147. The original assessment had already considered the claim for deduction under section 80-IA for the Mithapur power plant, and the AO had allowed the deduction after examining the relevant material. Reopening the case merely to reappraise the same material amounts to a review, which is not allowed. The Tribunal cited the Supreme Court's decision in CIT vs Kelvinator India Ltd, which held that the AO has the power to reassess but not to review, and that there must be tangible material to justify the belief that income has escaped assessment.

The Tribunal also referenced several judgments, including those of the Bombay High Court, which consistently held that reopening based on a mere change of opinion is invalid. The Tribunal concluded that the AO's reasons for reopening lacked the necessary link between the material considered and the formation of the belief that income had escaped assessment.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to quash the reassessment order, finding that the reopening was invalid due to the absence of any failure on the part of the assessee to disclose material facts and because it was based on a change of opinion. The appeal filed by the Revenue was dismissed.

Order Pronounced:

The order was pronounced in the court on the 23rd day of December, 2016.

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