2017 (5) TMI 475 - AT - Income Tax

Invalid reassessment due to change of opinion & lack of full disclosure. Appeal allowed, assessment reopening order set aside.

The Tribunal held that the reassessment proceedings were invalid due to both a change of opinion by the Assessing Officer and a lack of allegation of ... Reopening of assessment - change of opinion - reasons recorded / sufficiency of reasons for belief - proviso to section 147 - failure to disclose fully and truly all material facts - reassessment jurisdiction beyond four years - application of precedents on reopening (Allied Strips Ltd., AGR Investment Ltd., Usha International Ltd.)Reopening of assessment - change of opinion - reasons recorded / sufficiency of reasons for belief - Validity of reopening the completed assessment on the ground that fresh information from the Investigation Wing justified issuance of notice under section 148 as not being a mere change of opinion - HELD THAT: - The Tribunal examined the enquiry conducted during original assessment proceedings and found that detailed queries regarding share capital/share application money were raised and answered during the original assessment under section 143(3), and the Assessing Officer had accepted the returned income without making any addition. Applying the settled tests and authorities, the Tribunal held that where the Assessing Officer, after raising specific queries and receiving responses, frames assessment without making additions, issuance of a notice later on identical material amounts to a change of opinion. Reliance was placed on the ratio in Usha International Ltd. and the discussion in Allied Strips Ltd.; factual distinctions drawn in AGR Investment Ltd. were noted, but on the facts of the present case the original enquiries and acceptance of the assessee's explanations established that the reassessment was a change of opinion and therefore invalid. [Paras 24]Reopening was impermissible as it amounted to a change of opinion and thus the reassessment proceedings were invalid.Proviso to section 147 - failure to disclose fully and truly all material facts - reassessment jurisdiction beyond four years - Whether the proviso to section 147 was attracted because the reasons recorded alleged failure by the assessee to fully and truly disclose material facts, thereby justifying reassessment beyond four years - HELD THAT: - The Tribunal scrutinised the reasons recorded by the Assessing Officer and observed that they did not contain any allegation that the assessee had failed to disclose fully and truly all material particulars necessary for assessment. Citing the Delhi High Court decisions (including Haryana Acrylic and Allied Strips), the Tribunal reiterated that mere existence of information or a belief that income escaped is insufficient to overcome the statutory bar; an explicit or discernible allegation of failure to disclose material facts is a pre condition for invoking the proviso to section 147 for action beyond four years. As that pre-condition was absent in the reasons recorded, the bar under the proviso operated. [Paras 25, 26]Reassessment beyond four years was barred because the reasons recorded did not allege failure by the assessee to disclose material facts; consequently the reassessment could not be sustained.Final Conclusion: Following the principles laid down by the Delhi High Court and on the facts that detailed queries on share capital were raised and answered during the original assessment and that the reasons recorded did not allege any failure to disclose material facts, the Tribunal held the reassessment invalid - appeal allowed and reopening/set aside. Issues Involved:1. Validity of reopening assessment after four years.2. Allegation of change of opinion by the Assessing Officer (A.O).3. Requirement of full and true disclosure by the assessee.Issue-wise Detailed Analysis:1. Validity of Reopening Assessment After Four Years:The case was reopened by issuing a notice under section 148 of the Income-tax Act, 1961, based on information from the Investigation Wing that the assessee had taken accommodation entries from entry operators. The CIT(A) upheld the reassessment proceedings, stating that the notice under section 148 was issued within the six-year limit from the end of the A.Y. 2007-08. The reopening was based on new information about accommodation entries worth Rs. 10 lakhs, which was not available during the original assessment. The Tribunal noted that the A.O did not allege any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment in the reasons recorded for reopening.2. Allegation of Change of Opinion by the Assessing Officer (A.O):The assessee argued that the reopening was merely a change of opinion, which is not permissible by law. During the original assessment, the A.O had requested and received detailed information about the shareholders and share capital. The Tribunal referred to the decision in CIT Vs. Multiplex Treading and Industrial Co. Ltd and Allied Strips Ltd Vs. ACIT, where similar queries were raised during the original assessment, and it was held that reopening in such cases amounted to a change of opinion. The Tribunal observed that the A.O had formed an opinion during the original assessment by not making any additions after considering the detailed information provided by the assessee.3. Requirement of Full and True Disclosure by the Assessee:The Tribunal emphasized that for reopening an assessment beyond four years, there must be an allegation of failure to disclose fully and truly all material facts necessary for the assessment. In this case, the reasons recorded by the A.O did not contain any such allegation. The Tribunal cited the decision in Haryana Acrylic Manufacturing Company Vs. Commissioner Of Income-tax, which held that in the absence of such an allegation, any action under section 147 beyond the four-year period would be without jurisdiction.Conclusion:The Tribunal concluded that the reassessment proceedings were invalid on both counts: change of opinion and lack of allegation of failure to disclose fully and truly all material facts. The appeal of the assessee was allowed, and the order for reopening the assessment was set aside.