2022 (4) TMI 1307 - AT - Income Tax

Tribunal dismisses Revenue's appeals for assessment years 2010-13, rules against reopening assessments

The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeals for the assessment years 2010-11, 2011-12, and 2012-13. It found the reopening ... Reopening of assessment u/s 147 - assessment has been reopened after expiry of four years from the end of the relevant assessment year - claim of deduction u/s.80IA (4)(iii) - HELD THAT:- A perusal of the reasons for reopening reveal that assessment has been reopened as the assessee allegedly made inaccurate claim of deduction u/s.80IA - The assessee has furnished a copy of original scrutiny assessment order dated 30/03/2013 passed u/s. 143(3) - While framing the assessment u/s. 143(3) of the Act, the AO had examined assessee’s claim of deduction u/s. 80IA (4)(iii). AO after examining the claim threadbare, restricted the deduction to ₹ 58,73,29,724/- as against ₹ 157,57,61,492/- claimed by the assessee in its return of income. In the reasons for reopening there is not even a single averment by the AO that the assessee has failed to disclose truly and fully all material facts necessary for the assessment. Similarly, in the entire reassessment order there is no finding/observation by the Assessing Officer that assessment has been reopened beyond the period of four years because of assessee’s failure to disclose fully and truly all material facts necessary for the assessment. Therefore, in our considered view the validity of reassessment proceedings are liable to fail on this account itself. Assessment has been reopened on the basis of audit objection - A perusal of the reasons for reopening reveal that the Assessing Officer while recording reasons has time and again referred to ‘Audit scrutiny’. In other words, what can be inferred from the manner in which reasons for reopening have been recorded is that the objections raised by the audit team triggered reopening of assessment. The requirement of the law is that it should be Assessing Officer’s own reasons and not borrowed reasons which should form basis of reopening the assessment. Therefore, in the absence of Assessing Officer’s own reason to believe that the income chargeable to tax has escaped assessment, the reassessment proceedings are bad in law. A perusal of reasons in the present case clearly indicate that it is not the belief of the Assessing Officer which has ignited the process of reopening but the observations in ‘Audit scrutiny’ that has formed basis of reopening. Thus,with reference to reopening on audit objection, we find merit in second contention of the assessee as well. Assessment has been reopened on the basis of ‘change of opinion’ - A perusal of reasons reveal that while recording reasons the audit objections were weighing heavy on the mind of Assessing Officer, therefore, time and again the Assessing Officer has used the expression ‘Audit scrutiny’, thus, it was not Assessing Officer’s own conviction or belief that income chargeable to tax has escaped assessment. Even if it is assumed that the reasons for reopening were recorded by the Assessing Officer out of his own belief even then the reopening is not sustainable as it is the result of ‘change of opinion’. While giving reply to the audit objection the Assessing Officer was convinced that the assessment made u/s. 143(3) of the Act was justified. The Assessing Officer in his reply to audit objections has defended the view taken in assessment order - AO changed his opinion and recorded reasons for reopening on re-appreciation of the documents already record. There is nothing on record to suggest that there was any new incrimination material that had come to the knowledge of the AO after scrutiny assessment. Thus, reopening of assessment is unsustainable on account of ‘change of opinion’. There are catena of judgments wherein it has been held that re-opening of assessment on the basis of ‘change of opinion’ is unsustainable. It amounts to review by the Assessing Officer which is not permissible under the Act. The requirement of section 147 of the Act is the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. Assessing Officer’s reason to believe is sine-qua-non for reopening assessment. It is not the reason to believe of PCIT or any other authority which matters when it comes to the provisions of section 147 of the Act. DR has placed reliance on various decisions to buttress his arguments. We have examined the same. We find that either those decisions are distinguishable on facts or the ratio laid down in the said judgments does not support the case of Revenue. We are in agreement with the findings of CIT(A) in holding reassessment proceedings u/s.147 of the Act as bad in law. Consequently, the impugned order is upheld and the appeal by the Revenue is dismissed. Issues Involved:1. Validity of reopening of assessment beyond a period of four years.2. Reopening of assessment based on audit objections.3. Reopening of assessment as a result of change of opinion.Detailed Analysis:1. Validity of Reopening of Assessment Beyond Four Years:The Revenue's appeals concern the reopening of assessments for the years 2010-11, 2011-12, and 2012-13. The primary issue is whether reopening beyond four years is valid. The first proviso to Section 147 of the Income Tax Act, 1961, stipulates that for reopening after four years, the Assessing Officer must show that income has escaped assessment due to the assessee's failure to disclose fully and truly all material facts. In this case, the reasons recorded for reopening did not indicate any such failure by the assessee. The Tribunal found that the reopening was invalid as the Assessing Officer did not meet the statutory requirements.2. Reopening Based on Audit Objections:The assessee argued that the reopening was based on audit objections, which is unsustainable. The Tribunal noted that the reasons for reopening repeatedly referred to 'Audit scrutiny,' indicating that the objections raised by the audit team triggered the reopening. The Tribunal held that the law requires the Assessing Officer's own reasons, not borrowed ones, for reopening an assessment. The Hon'ble Bombay High Court in PCIT vs. Yes Bank Ltd. and Indian & Eastern Newspaper Society vs. CIT held that reopening based on audit objections is invalid. The Tribunal found that the reopening in this case was based on borrowed reasons from the audit team, making it legally untenable.3. Reopening as a Result of Change of Opinion:The assessee contended that the reopening was a result of a change of opinion, which is impermissible. The Tribunal observed that the Assessing Officer had initially recommended dropping the audit objections but later recorded reasons for reopening, indicating a change of opinion. The Hon'ble Supreme Court in CIT vs. Kelvinator of India Ltd. held that reassessment based on a change of opinion is not permissible unless there is tangible material indicating escapement of income. The Tribunal concluded that the reopening in this case was due to a change of opinion without any new material, making it invalid.Conclusion:The Tribunal upheld the CIT(A)'s decision that the reassessment proceedings were bad in law for all three assessment years. The appeals by the Revenue for the assessment years 2010-11, 2011-12, and 2012-13 were dismissed. The Tribunal found that the reopening was invalid due to the lack of failure to disclose material facts by the assessee, reliance on audit objections, and change of opinion by the Assessing Officer.