2021 (6) TMI 817 - AT - Income Tax

Assessing Officer's Reopening Ruled Invalid

The Tribunal held that the Assessing Officer's reopening of assessment under section 147 of the Income-tax Act, 1961 was based on a mere change of opinion ... Reopening of assessment u/s 147 - AO has expressed the view that the “Provision for Standard assets” cannot be claimed u/s 36(1)(via) - HELD THAT:- AO having allowed the claim of the assessee in the original assessment proceedings, has reopened the assessment on mere change of opinion. Further, the view expressed the AO on the deduction available u/s 36(1)(via) is also, in our opinion, not a correct view The Hon’ble Delhi High Court in the case of Kelvinator of India Ltd. [2002 (4) TMI 37 - DELHI HIGH COURT] has held that the reopening of assessment upon mere change of opinion is not valid in law. Accordingly, we are of the view that there is merit in the contention of the assessee that reopening of assessment is not valid. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue and hold that the reopening is bad in law. Appeal filed by the assessee is allowed. Issues:Validity of reopening of assessment under section 147 of the Income-tax Act, 1961.Analysis:The assessee, a cooperative bank, challenged the validity of the reopening of assessment for the assessment year 2012-13 under section 147 of the Income-tax Act, 1961. The Assessing Officer (AO) reopened the assessment based on the belief that the assessee had claimed an excess deduction of Rs. 50,00,000 under section 36(1)(viia) by including provision for standard assets, which was not allowable. The AO had originally accepted the explanations and information provided by the assessee during the original assessment proceedings. The assessee contended that the provision for standard assets should be considered as part of the provision for bad and doubtful debts under section 36(1)(viia). The AO's view was that the provision for standard assets cannot be claimed under section 36(1)(viia), leading to an escapement of income. The dispute arose over the interpretation of the term 'provision for bad and doubtful debts' under section 36(1)(viia) and whether the provision for standard assets was allowable.The assessee argued that the AO's reopening of assessment was based on a mere change of opinion, citing the decision of the Delhi High Court in CIT Vs. Kelvinator India Ltd. The AO's view was challenged as not being in line with the accounting parlance definition of a provision for bad and doubtful debts. The Departmental Representative (DR) contended that the provision for standard assets was not allowable under section 36(1)(viia) as it was not related to bad and doubtful debts. The DR relied on case laws to support the position that the reopening was valid.The Tribunal analyzed the provisions of section 36(1)(viia) and the accounting interpretation of a provision for bad and doubtful debts. It noted that the AO had accepted the claim made by the assessee during the original assessment proceedings. The Tribunal held that the AO's reopening of assessment was based on a mere change of opinion and that the view taken by the AO on the deduction available under section 36(1)(viia) was incorrect. Relying on the decision in the case of Kelvinator of India Ltd., the Tribunal concluded that the reopening of assessment on mere change of opinion was not valid in law. Consequently, the Tribunal set aside the order of the CIT(A) and held the reopening to be bad in law, quashing the impugned orders passed by the tax authorities.As the assessment order was quashed on a legal issue, the Tribunal declined to adjudicate on the merit-based issues raised. Ultimately, the appeal filed by the assessee was allowed, and the order was pronounced in the open court on 22nd June 2021.