Tribunal invalidates assessment reopening for lack of new material, audit objections, and failure to address objections.

The Tribunal upheld the CIT(A)'s decision, ruling the reopening of the assessment invalid due to lack of new tangible material, reliance on audit objections, and failure to dispose of objections by a speaking order. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection on merit was rendered infructuous.

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Issues Involved:
1. Validity of reopening the assessment under section 147 of the Income Tax Act.
2. Jurisdiction of the CIT(A) to adjudicate the reopening issue in the second round of litigation.
3. Whether the reopening was based on tangible material or merely a change of opinion.
4. Impact of audit objections on the reopening of assessment.
5. Requirement to dispose of objections to reopening by way of a speaking order.

Detailed Analysis:

1. Validity of Reopening the Assessment:
The primary issue raised by the Revenue was whether the CIT(A) was justified in holding that the reopening of the assessment was invalid. The original assessment was completed under section 143(3) on 19.12.2008, accepting the total declared loss by the assessee. The case was reopened under section 147 on the grounds that the profit on the sale of assets was not offered for tax and financial expenses were claimed without actual payment. The CIT(A) held the reopening invalid, stating that there was no new tangible material available to the AO for initiating the reopening and that it was based on the same profit and loss account scrutinized during the original assessment. The CIT(A) relied on the Supreme Court's decision in CIT v. Kelvinator of India Ltd., which held that the AO has no power to review earlier assessments unless there is tangible material indicating income escapement.

2. Jurisdiction of the CIT(A) in Second Round of Litigation:
The Revenue argued that the CIT(A) had no jurisdiction to decide the reopening issue as it was not raised in the first round of litigation. However, the Tribunal found that the issue of reopening is a legal and jurisdictional matter and can be raised at any stage, including in the second round of litigation. The Tribunal cited the Bombay High Court's decision in Inventors Industrial Corporation Ltd. v. CIT and the Gujarat High Court's decision in P.V. Doshi v. CIT, which support the assessee's right to challenge the reopening even in the second round.

3. Reopening Based on Tangible Material or Change of Opinion:
The Tribunal noted that the reopening was based on the same profit and loss account already scrutinized during the original assessment, with no new tangible material presented by the AO. The Tribunal emphasized that reopening on the basis of already available information constitutes a change of opinion, which is not permissible. The Tribunal referred to the Delhi High Court's decision in CIT v. Orient Craft Limited, which held that reopening based on the same information scrutinized earlier amounts to a review, not a reassessment.

4. Impact of Audit Objections on Reopening:
The Tribunal observed that the reopening was influenced by audit objections, which do not constitute tangible material for reopening an assessment. The Tribunal cited the Delhi High Court's decision in Xerox Modicorp Ltd v. DCIT, which held that audit objections cannot be the basis for reopening an assessment. The Tribunal also referred to the Supreme Court's dismissal of the SLP in PCIT v. S. Chand & Co. Ltd., which upheld that reassessment based on audit objections is invalid.

5. Requirement to Dispose of Objections by Speaking Order:
The Tribunal highlighted that the AO failed to dispose of the assessee's objections to the reopening by way of a speaking order, which is mandatory. The Tribunal cited various decisions, including Hindustan Unilever Ltd. v. DCIT and Multiple Images v. ITO, where it was held that failure to dispose of objections renders the entire reassessment proceedings invalid.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, holding that the reopening of the assessment was invalid due to the lack of new tangible material, reliance on audit objections, and failure to dispose of objections by a speaking order. Consequently, the Revenue's appeal was dismissed, and the assessee's cross-objection on merit was rendered infructuous.

Order Pronounced:
The appeal of the Revenue was dismissed, and the cross-objection of the assessee was also dismissed. The order was pronounced in the open court on 06.10.2020.

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