2021 (1) TMI 957 - AT - Income Tax

Tribunal rules reassessment invalid based on change of opinion without new material

The Tribunal upheld the CIT(A)'s decision, ruling that the reassessment proceedings were invalid as they were based on a mere change of opinion without ... Validity of reopening of assessment u/s 147 - whether new information or facts for issuance of notice of re-assessment should be seen? - whether the reopening of the assessment amounts to “review” or “change of opinion” should be seen at a next stage? - HELD THAT:- In the instant case in the light of the decision of the Hon’ble Delhi High Court in the case of Madhukar Khosla [2014 (8) TMI 568 - DELHI HIGH COURT] it is evident that the Assessing Officer has merely perused the records available with him and formed reason to believe that income had Assessment. There is no mention of any ‘trigger’ as how the Assessing Officer came to know this under assessment. If without any information or any new fact came into his possession, he simply revisit or peruse the completed assessment, it definitely amounts to review of the assessment by the Assessing Officer, which is not permitted in law. Even in the instant case, no addition has been made on this issue either in the earlier or subsequent regular assessments. As the reassessment in the instant case fails at this stage of examining “reasons to believe”, we are not required to examine the stage of “change of opinion”. In the instant case before us, the information regarding dues from Iraqi Government was available at the time of regular assessment u/s 143(3) in the form of notes to account of annual report, which is evident from the reasons recorded. - Decided in favour of assessee. Issues Involved:1. Validity of the reopening of assessment by issuing notice under Section 148 of the Income-tax Act, 1961.2. Whether the reassessment proceedings were based on a mere change of opinion without any new tangible material.Issue-wise Detailed Analysis:1. Validity of the reopening of assessment by issuing notice under Section 148 of the Income-tax Act, 1961:The Revenue appealed against the order of the Learned Commissioner of Income-tax (Appeals) [CIT(A)], which quashed the reassessment proceedings. The CIT(A) held that the reopening was void ab initio as there was no tangible material before the Assessing Officer (AO) to form a belief that income had escaped assessment. The CIT(A) noted that the material on which the reassessment was based was already available during the original assessment and was part of the Notes to Accounts. The CIT(A) emphasized that the AO’s action was based on a mere change of opinion, which is not permissible under the law. The CIT(A) relied on several judicial precedents, including the Hon’ble Gujarat High Court and the Hon’ble Delhi High Court, to support the conclusion that the AO does not have the power to review an assessment based on the same set of facts already considered.2. Whether the reassessment proceedings were based on a mere change of opinion without any new tangible material:The Tribunal upheld the CIT(A)’s decision, agreeing that the reassessment was based on a mere change of opinion. It was noted that the AO had not brought any new tangible material to justify the reopening of the assessment. The Tribunal referred to the Hon’ble Supreme Court’s decision in CIT Vs. Kelvinator of India Ltd., which held that the AO has the power to reassess provided there is tangible material to conclude that income has escaped assessment. The Tribunal also cited various other judgments, including those from the Hon’ble Delhi High Court and the Hon’ble Bombay High Court, which consistently held that reassessment based on a mere change of opinion is not permissible.The Tribunal observed that the information regarding the dues from the Iraqi Government was already available during the original assessment. The AO’s reasons for reopening the assessment did not mention any new information or facts but were based on a perusal of the existing records. This indicated that the AO was reviewing the completed assessment, which is not allowed under the law.The Tribunal concluded that the reassessment proceedings were invalid as they were based on a mere change of opinion without any new tangible material. The Tribunal dismissed the Revenue’s appeal and upheld the CIT(A)’s order quashing the reassessment proceedings.Conclusion:The Tribunal dismissed the Revenue’s appeal, affirming the CIT(A)’s decision that the reopening of the assessment was void ab initio. The Tribunal held that the reassessment was based on a mere change of opinion without any new tangible material, which is not permissible under the law. The Tribunal relied on various judicial precedents to support its conclusion.