2024 (2) TMI 1600 - AT - Income Tax

Reopening assessment under section 147 unjustified when deductions under sections 36(1)(vii) and 36(1)(viia)(c) were fully considered under section 143(3)

ITAT MUMBAI held that reopening assessment u/s 147 was not justified as the issue regarding deductions u/s 36(1)(vii) and 36(1)(viia)(c) had been fully ... Reopening of assessment u/s 147 - change of opinion - deduction u/s. 36(1)(vii) and 36(1)(viia)(c) - whether the issue raised by the revenue in reassessment proceedings was already discussed and dealt with during the original assessment proceedings or not? - HELD THAT:- Original assessment order passed u/s. 143(3) and found that issue under consideration for the purposes of section 148 was discussed and deliberated in length. There was no concealment or escapement of information on the part of the assessee. AO was well versed and have full access to the information relevant for assessment. Rather, he himself calculated the figure of deduction and certain changes were incorporated in the order. Case of the revenue is not sustainable as there is no fault at the end of the assessee and the AO already applied his mind during the assessment proceedings. This action of AO u/s. 147 of the Act will tantamount to change of opinion which is not permissible on the given set of facts. Grounds raised by the revenue are dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether reassessment proceedings under sections 147/148 of the Income Tax Act were valid where the issue sought to be reopened (re-computation of deduction under section 36(1)(viii) after adjustments to deduction under section 36(1)(viia)) had been considered and reworked by the Assessing Officer during the original assessment under section 143(3). 2. Whether reopening based on the same material already available and considered in the original assessment amounts to a permissible reassessment or is impermissible as a mere change of opinion by the Assessing Officer. ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of reassessment where the issue was considered in original assessment Legal framework: Sections 147/148 empower reopening where the Assessing Officer has reasons to believe income has been escaped; section 143(3) governs completion of original assessment. Reopening is impermissible where the action amounts to mere change of opinion based on the same material that was available and considered in the original assessment. Precedent treatment: Earlier judicial authorities at different levels have held that reassessment cannot be sustained where the Assessing Officer had considered the same material and formed an opinion in the original proceedings; contrary earlier views that reopening from the same record is permissible have been critically examined by higher benches and found inconsistent with the change-of-opinion principle. The Tribunal noted that decisions relied upon by the revenue which permitted reopening on the same record are not good law in light of later authoritative pronouncements. Interpretation and reasoning: The Tribunal examined the original assessment record, including the section 142(1) notice requesting working of deductions and the assessment order paragraph explicitly stating that deduction figures were re-worked and allowed after taking disallowances/additions into account. The Assessing Officer had access to, and had recalculated, the relevant deductions during the 143(3) proceedings. There was no new material or concealment by the taxpayer; therefore the subsequent reopening proceeded from the same facts and computations already considered. The Tribunal held that where the Assessing Officer has already applied his mind and taken a considered view in the original assessment, reopening to adopt a different view constitutes a change of opinion and is impermissible. Ratio vs. Obiter: Ratio - where the original assessment record demonstrates that the Assessing Officer considered and reworked the disputed deductions, reopening on identical material is impermissible as a change of opinion. Obiter - observations rejecting particular earlier decisions relied upon by the revenue are explanatory of the ratio but ancillary to the primary holding. Conclusion: Reassessment was invalid because the issue had been dealt with in the original assessment; there was no concealment or new material and the reopening amounted to an impermissible change of opinion. The revenue's grounds on this issue were dismissed. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Change of opinion doctrine and treatment of contrary precedents Legal framework: The change-of-opinion doctrine precludes exercise of reopening powers where the Assessing Officer seeks to take a different view on the same facts and materials previously considered. Reopening requires reasons to believe founded on material not previously considered or newly discovered information indicating escapement of income. Precedent treatment: The Tribunal recognized an evolution in authority: earlier decisions suggesting reopening may be based on reasons formed from the same record have been superseded by later authoritative decisions establishing that mere reappraisal of the same material is not a valid basis for section 147 action. The Tribunal treated those earlier decisions as not reflecting the correct legal position and aligned with the principle that change of opinion cannot sustain reopening. Interpretation and reasoning: The Tribunal applied the doctrine to the facts, emphasizing that the Assessing Officer had specifically asked for the computation of the contested deductions during the original assessment, received detailed working, and expressly reworked and allowed the deductions in the 143(3) order. Since the AO had full knowledge and had already applied his mind to the computation, the subsequent issuance of a section 148 notice could not be justified on the same record. The Tribunal rejected the revenue's reliance on authorities permitting reopening from the same material as inconsistent with the settled legal position that reopening cannot be used to change an earlier opinion. Ratio vs. Obiter: Ratio - reopening is impermissible where the material relied upon in reassessment was available and considered in the original assessment, and the reopening represents a mere change of opinion. Obiter - discussion of the chronological hierarchy of conflicting precedents and their relative weight was explanatory and supportive of the ratio. Conclusion: The change-of-opinion doctrine barred reassessment on the facts; the Tribunal dismissed the revenue's argument invoking contrary precedent and upheld the view that reopening was invalid in absence of new material or concealment. Final Disposition The Tribunal concluded that the reassessment proceedings were bad in law as they amounted to a prohibited change of opinion; the revenue's appeal was dismissed and the reassessment quashed.