2017 (8) TMI 718 - AT - Income Tax

Invalid reassessment under Section 147: Tribunal quashes order based on change of opinion.

The Tribunal held that the reopening of the assessment under Section 147 of the Income Tax Act was invalid as it was based on a mere change of opinion ... Validity of reopening of assessment u/s. 147 - assets transferred to UPS SCS (India) P. Ltd. - Held that:- A.O. having examined the issue in the original assessment proceeding and formed an opinion that the amount received by the assessee on account of transfer of human resource and customer relationship, is not taxable, the reopening of the assessment on the issue by revisiting the very same material which were considered at the time of original assessment, amounts to review of the earlier order on a mere change of opinion, which is impermissible. In this context, we rely upon the decision of the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. (2010 (1) TMI 11 - SUPREME COURT OF INDIA), wherein held that reopening of assessment cannot be made on the basis of mere change of opinion. The Hon’ble Supreme Court observed, once an opinion was formed by the A.O. while completing the original assessment, it cannot be reviewed by taking recourse of section 147 of the Act. The issue relating to the amount received by the assessee’s transfer of various assets including human resources and customer relationship was not only examined by the A.O. during the original assessment proceeding, but the A.O. also formed an opinion while accepting the assessee’s claim of non taxability of the said amount. Therefore, the A.O. having formed an opinion during the original assessment proceeding, it cannot be a subject matter of review in the garb of reassessment proceeding u/s. 147 of the Act. Therefore, we hold that the initiation of proceeding u/s. 147 of the Act in the present case is invalid. Accordingly, we quash the impugned assessment order passed u/s. 143(3) r/w s. 147 of the Act - Decided in favour of assessee. Issues Involved:1. Validity of reopening of assessment under Section 147 of the Income Tax Act.2. Taxability of the amount received towards transfer of customer database and human resources.Issue-wise Detailed Analysis:1. Validity of Reopening of Assessment under Section 147 of the Income Tax Act:The primary issue raised by the assessee was the validity of the reopening of the assessment under Section 147 of the Income Tax Act. The assessee contended that the reopening was based on a mere change of opinion, as the Assessing Officer (A.O.) had already examined the issue during the original assessment proceedings and concluded that the amount received was not taxable.The facts reveal that the assessee, engaged in the business of freight forwarding logistic services, transferred its assets to another company and declared an income of Rs. 80,59,171 for the relevant assessment year. The original assessment was completed under Section 143(3) of the Act. Subsequently, the A.O. found that the assessee received Rs. 1.94 crores for the transfer of customer database and human resources, which was treated as a capital receipt by the assessee and not offered for tax. The A.O. believed this amount should be taxable as revenue receipt and issued a notice under Section 148 to reopen the assessment.The assessee objected, arguing that the issue had already been examined during the original assessment, and reopening it without any new tangible material amounted to a change of opinion. The Tribunal noted that during the original assessment, the A.O. had indeed examined the details related to the transfer of assets, including customer database and human resources, and had accepted the assessee's claim that the amount received was a capital receipt.The Tribunal relied on the Supreme Court's decision in CIT vs. Kelvinator of India Ltd., which held that reopening of assessment cannot be based on a mere change of opinion. The Tribunal also referred to other relevant case laws, including Idea Cellular Ltd. v. Dy. CIT and GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, ACIT, to support the principle that reassessment on the same material considered during the original assessment is impermissible.The Tribunal concluded that the A.O. had formed an opinion during the original assessment and reopening the assessment on the same material amounted to a review, which is not allowed under Section 147. Therefore, the initiation of proceedings under Section 147 was deemed invalid, and the impugned assessment order was quashed.2. Taxability of the Amount Received towards Transfer of Customer Database and Human Resources:Given the Tribunal's decision on the first issue, the other grounds raised on the merits of the taxability of the amount received became redundant. The Tribunal did not adjudicate these grounds separately, as the invalidation of the reopening of the assessment rendered the other issues moot.Conclusion:The assessee's appeal was allowed, and the order passed by the Commissioner of Income Tax (Appeals) was set aside. The Tribunal held that the reopening of the assessment under Section 147 was invalid due to the absence of new tangible material and the reliance on a mere change of opinion. Consequently, the assessment order passed under Section 143(3) read with Section 147 was quashed.