2019 (10) TMI 1121 - AT - Income Tax

Invalid reassessment order dismissed, lacking new material & based on change of opinion.

DCIT-14 (2) (1) Mumbai Versus M/s Idea Cellular Ltd. (Successor to M/s. Spice Communications Ltd.)

DCIT-14 (2) (1) Mumbai Versus M/s Idea Cellular Ltd. (Successor to M/s. Spice Communications Ltd.) - TMI Issues Involved:1. Validity of reopening the assessment.2. Assessment made on a non-existent entity.3. Reopening based on a change of opinion.4. Absence of new tangible material for reopening.5. Application of Section 170(2) of the Income Tax Act.Detailed Analysis:1. Validity of Reopening the Assessment:The revenue challenged the order of the Commissioner of Income-Tax (Appeals) [CIT(A)], which held that the reopening of the assessment was invalid. The CIT(A) found that the Assessing Officer (AO) had reopened the assessment based on a mere change of opinion without any new tangible material. The AO had initially completed the assessment under Section 143(3) and later reopened it under Section 147, alleging that the lease expenses claimed by the assessee were not allowable under Section 37(1) of the Income Tax Act. The Tribunal upheld the CIT(A)'s decision, emphasizing that reopening an assessment based on a change of opinion is not permissible.2. Assessment Made on a Non-Existent Entity:The assessee argued that the reassessment order was passed in the name of a non-existent entity, as the company had merged with another entity, Idea Cellular Ltd. The Tribunal noted that the AO was informed about the merger through a letter dated 7th June 2011, and yet, the reassessment order was issued in the name of the non-existent entity. Citing various judicial precedents, including the decisions of the Delhi High Court in Spice Entertainment Ltd and the Bombay High Court in Jitendra Chandralal Navlani, the Tribunal held that an assessment order passed on a non-existent entity is void and without jurisdiction.3. Reopening Based on a Change of Opinion:The Tribunal reiterated that reopening an assessment based on a change of opinion is not valid. The AO had initially accepted the lease expenses as revenue expenditure in the original assessment. The Tribunal highlighted that the AO had not brought any new tangible material on record to justify the reopening of the assessment. The reliance on previously available information and documents indicated that the reassessment was merely an attempt to review the earlier decision, which is not permissible under the law.4. Absence of New Tangible Material for Reopening:The Tribunal emphasized that for a valid reopening of an assessment, there must be new tangible material that was not available during the original assessment. The AO had reopened the assessment based on the same set of facts and documents that were already scrutinized in the original assessment. The Tribunal cited the Supreme Court's decision in CIT vs. Kelvinator of India Ltd, which held that the existence of new tangible material is a prerequisite for reopening an assessment under Section 147.5. Application of Section 170(2) of the Income Tax Act:The CIT(A) had also held that the AO did not follow the provisions of Section 170(2) of the Income Tax Act, which deals with the assessment of a successor entity in case of amalgamation. The Tribunal agreed with the CIT(A) that the AO failed to assess the successor entity, Idea Cellular Ltd, and instead issued the reassessment order in the name of the non-existent entity. This procedural lapse further invalidated the reassessment order.Conclusion:The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s order that the reassessment was invalid. The reassessment order was set aside on the grounds that it was passed on a non-existent entity, was based on a mere change of opinion, and lacked new tangible material. Consequently, the Tribunal did not find it necessary to discuss the other grounds of appeal, as the primary issue of the invalid reassessment order was sufficient to dispose of the case.Order Pronounced:The appeal of the revenue was dismissed, and the order was pronounced in the open court on 18/09/2019.