TaxTMI 
TaxTMI 
2022 (4) TMI 803
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....Usha International Limited (2012) 348 ITR 485. iii. The learned CIT(A) had erred in not considering the decision of the Supreme Court in the case of KalyanjiMavji& Company Vs. Commissioner of Income Tax 102 ITR 287(SC)(1976) wherein it is held that there is no change of opinion if the assessment is reopened on new facts which came to notice subsequently, even though they are already on record. 4. Brief facts of the case are that the Assessee, Smt. Ramanathan Vasantha Priya is the proprietrix of Sri Ganesan Stores and Sri Ganesan Stores and Readymade located at No.35, N.S.B. Road, Trichy who filed her return of income for the Assessment Year 2013-14 on 01.10.2013 reporting a total income of Rs. 8,22,760/-. The case was selected for complete scrutiny for the reason "large amount of sundry creditors". Assessment u/s.143(3) of the Act was completed on 02.02.2016 by making estimated addition at the rate of 6% of Rs. 14,24,822/- for non-production of proper vouchers under the head "packing, tea & coffee expenses" amounting to Rs. 1,14,322/- and assessing the total income at Rs. 9,87,092/-. 5. Assessment was reopened u/s.147 of the Act by issuing notice u/s 148 of the Act, dated 23.....
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....its appearing in the books only on account of purchases made were Rs. 48.25 lakhs for Ganesan Stores & Ready mades and Rs. 47.64 lakhs for Ganesan Stores and that in any case the opening balances of credits cannot be added by the AO as has been done in this case. 7. Ld. CIT(A) found merits in the submission made by the assessee that the trade creditors have already been verified by the AO in the original assessment and are forming part of purchases in the P&L account and have been used to determine book profit. By placing reliance on the judicial precedents and keeping in view the fact that the original assessment was made specifically to verify the creditors, Ld. CIT(A) held in favor of the assessee by stating that AO cannot turn around and reopen the case for the same issue on which inquiry has been made earlier and in absence of any new information which clearly amounts to a change of opinion. In view of the submissions made by the assessee and in view of the decisions reported in the case of a) ITO v. Tech Span India Private Limited 302 CTR 74 (SC) b) CIT, Salem v. P. Nithilan 403 ITR 154 (Madras) c) PCIT-VI, Chennai v. Santech Solutions P. Ltd. 97 taxmann.com 179 (Ma....
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....ng fourteen sheets which are placed on record. From page 2 to 4 of these papers, Ld. Counsel referred to the two submissions at dated 20.07.2015 and 29.01.2016 made in the course of original assessment proceedings u/s 143(3) pointing out the details furnished. Ld. Counsel further pointed from the order u/s 143(3) dated 02.02.20216placed at page 5 to demonstrate that Ld. AO had examined the issue under consideration. Relevant extracts from page 2 of the assessment order u/s 143(3) are reproduced as under - "The representative appeared from time to time with all the details called for. During the course of hearing, for claim of creditors, the assessee's representative has stated that the purchase of material/goods from the sellers was always only on credit basis, thus, the assessee has shown huge amount of sundry creditors in the balance sheet. The books of accounts with vouchers produced have been examined." 11. Ld. Counsel invited the attention of the Bench to the 'reasons to believe' recorded by the Ld. AO for initiating the reassessment proceedings which is reproduced as under - "On examination of the financial statements annexed to the Income tax return along with submissi....
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....e perusal of 'reasons to believe' recorded (reproduced supra), we note that these have been recorded by the Ld. AO on the basis of assessment records available with him. In the facts and circumstances of the case before us, to deal with the jurisdictional issue, we are required to examine whether there was any fresh tangible material in the possession of the AO at the time of recording of the 'reasons to believe'. 12.1 In the present case, it is noticed by us that the case of the assessee is that there was no fresh tangible material in the possession of Ld. AO at the time of recording of impugned reasons which starts with "On examination of the financial statements annexed to the Income tax return along with submissions filed by the assessee for the AY 2013-14, the following issues emerge-..." [emphasis supplied by us]. 12.2 A perusal of the 'reasons to believe' recorded by the Ld. AO in this case reveals that at the time of recording of these 'reasons', the Ld. AO had examined the original assessment records only and no fresh material had come in his possession. In response to our specific query and based on case records produced before us, Ld.Sr. DR coul....
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.... in the possession of AO at the time of recording of impugned reasons is a sine qua none, before AO can record reasons for reopening of the case. In the judgment of Hon'ble Supreme Court in the case of CIT v. Kelvinator India Ltd. [2010] 320 ITR 561 it is laid down that for reopening of the assessment, the AO should have in his possession 'tangible material'. The term 'tangible material' has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment. Relevant extracts from the said judgment of Hon'ble Supreme Court (supra) are as under - 4. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz.,....
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....ion from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." 5. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 12.5 Hon'ble Jurisdictional High Court of Madras in the case of Bapalal& Co. Exports v. Jt. CIT [2007] 289 ITR 37held that in the absence of any new material, the AO is not empowered to reopen an assessment irrespective of the fact whether it was made under sections 143(1) or 143(3) of the Act. 12.6 In the case of Orient Craft Ltd. [2013] 354 ITR 536(Delhi), it was observed by Hon'ble Delhi High court that in the said case, reasons for reassessment disclosed that AO reached belief that there was escapement of income "on going through the return of income" filed by assessee after he accepted return u/s. 143(1) witho....
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....U) Chennai (supra), having gone through it carefully, it is noted that the said decision relates to writ petition by the assessee on the order disposing the objections filed by the assessee on the initiation of proceedings u/s 148 of the Act on the reasons to believe recorded for reopening of the assessment. Present case before this Tribunal is an appeal against the assessment order passed by Ld. AO u/s 147 of the Act. Disposal of objections submitted by the assessee on the reasons furnished cannot be compared with the final assessment / reassessment orders passed after complete adjudication of disputed facts and the material available on record. Thus, a clear distinction can be drawn in this regard and the reliance placed on the decision by the Ld. Sr. DR goes in vain. Further, the decision relied upon by the Ld. Sr. DR is under a writ jurisdiction by a single judge bench dated 18.08.2021. As counter to the said decision, Ld. Counsel of the assessee placed reliance on the decision of a Division Bench of the same Hon'ble Jurisdictional High Court in the case of DRS Industries Private Limited v. DCIT (Central Circle - 1) Coimbatore vide W.A. No. 1494 of 2021, dated 09.08.2021 which ....