Tribunal quashes re-assessment for 2006-07 tax year based on change of opinion

The Tribunal quashed the re-assessment proceedings for the assessment year 2006-07, setting aside the assessment framed under section 143(3) r.w.s 147 of the Income Tax Act. As the re-opening was deemed void due to being based on a mere change of opinion by the Assessing Officer, the grounds of the assessee were allowed, and the appeal was allowed in favor of the assessee.

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Issues:
Challenging re-opening of assessment u/s 147/148 of the Income Tax Act for the assessment year 2006-07.

Analysis:
1. The appeal challenges the re-opening of assessment u/s 147/148 for the assessment year 2006-07. The law allows re-opening of an assessment only if specific conditions under Section 147 of the Act are met. The Assessing Officer must have a reason to believe that income has escaped assessment. In this case, the notice was issued within four years from the end of the relevant assessment year, giving jurisdiction to re-open if income has escaped assessment without the need for failure to disclose all material facts.

2. The original assessment for the year was framed under section 143(3) of the Act. For re-opening, it must be determined whether it is based on new tangible material post the original assessment or merely a change of opinion by the Assessing Officer. A mere change of opinion cannot warrant re-opening of an assessment, as established by legal precedents.

3. During the original assessment proceedings, detailed inquiries were made regarding share transactions, and the assessee provided necessary information. The document found during a survey was already before the AO during the original assessment. Therefore, the re-opening appears to be based on a change of opinion, which is impermissible under the law.

4. Legal references, including the decision in CIT Vs. Kelvinator India, emphasize that re-opening assessments based on a change of opinion is not valid post the amendment to the Act. The Assessing Officer must have tangible material to believe income has escaped assessment, and reasons must have a live link with the formation of belief.

5. Consequently, the Tribunal quashed the re-assessment proceedings for the assessment year 2006-07, setting aside the assessment framed under section 143(3) r.w.s 147 of the Act. As the re-opening was deemed void, the issue on merits was not adjudicated, and the grounds of the assessee were allowed. The appeal of the assessee was thus allowed, with the order pronounced on 16th October 2019.

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