VAMA INTERNATIONAL,MUMBAI vs. ACIT 22(3), MUMBAI

The Learned Commissioner (Appeals) erred in upholding the action of the learned Assessing Officer ('AO') in reopening the assessment u/s 147 of the Income Tax Act, 1961 ('Act').

The learned Commissioner (Appeals) erred in confirming the action of learned AO in initiating reassessment proceedings without appreciating the fact that no income of the appellant chargeable to tax had escaped assessment. There was no reason to believe that income chargeable to tax had escaped assessment.

The learned AO erred in reopening the assessment for the second time without having any fresh material based on which he had reasons to believe that income had escaped assessment.

The learned Commissioner (Appeals) and the leaned AO failed to appreciate the fact that an assessment cannot be reopened on the basis of change of opinion or reappraisal of existing documents.

The Learned Commissioner (Appeals) erred in upholding the action of the learned AO in reopening the assessment merely to make additions in relation to alleged non-genuine purchases @100% having already additions for the same @ 12.5% during the first reassessment proceeding which is nothing but change of opinion.

The learned Commissioner (Appeals) erred in confirming the addition made by the learned AO amounting to Rs.5,77,65,083 as alleged unproved /non-genuine purchases.

The learned Assessing officer erred in not considering Honorable Mumbai ITAT's order in appellants own case during the first reassessment proceeding wherein the Honorable ITAT had deleted the additions made for the same alleged purchases.

Briefly stated facts of the case are that the assessee filed return of income for the relevant assessment year declaring total income at Rs.45,58,688/-which was processed u/s.143(1) of the Act. No regular scrutiny assessment was done. However, the case was selected for scrutiny u/s 147 of the Act in consequence of the search and survey action was conducted in the case of Shri Bhanwarlal Jain and others on 03/10/2013 by DGIT(Inv.), Mumbai wherein itwas concluded that the assessee had taken bogus accommodation entries of purchases of Rs.5,77,55,683/- from certain parties. Based on the above said information, the assessment order u/s 147 r.w.s.143(3) of the Act was passed on 29.02.2016 assessing total income at Rs 1,17,79,3231/- after disallowing the bogus accommodation purchases at 12.5%. The assessee preferred the CIT(A) against the said assessment order who confirmed the addition. The assessee agitated the issue before the ITAT which vide its order dated 15.02.2018 has deleted the said addition stating that the assessee had furnished all necessary evidence to prove the genuineness of the said purchases. The case has been reopened again u/s 147 of the Act and issued notice u/s 148 of the Act on 12.03.2019 relying upon the decision of Hon'ble Supreme Court in the case of M/s N.K. Proteins Ltd Vs DCIT[84 ITR 195 (2017) SC] wherein the apex court confirmed the decision of Hon'ble High Court for addition of entire income on account of bogus purchase in the favour of revenue. In response to the notice u/s 148 of the Act, the assessee filed its return of income and submitted that when Hon'ble Mumbai ITAT has already held that the assessee proved the genuineness of the purchases, there remained no doubt about it.Further, the materials based on which belief was based for the second time that income had escaped tax is the same material based an which belief was formed the first time about escapement of income. Reassessment could not be initiated second on the same materials. However, the AO rejected the contentions and went ahead and passed reassessment order making 100% disallowance of the said purchases which was upheld by the CIT(A) as the assessee did not comply before him.

In the ground no.1 to 5, the assessee has challenged the validity of the action taken u/s 147/148 of the Act contending that the notice u/s 148 an the consequent assessment were liable to be quashed a no reassessment is permissible on the same set f reasons which had already got concluded by the ITAT which treated the impugned purchases as genuine.

Before us, the ld.AR has vehemently argued in favour of the grounds of appeal stating that the reassessment notice u/s 148 of the Act was issued after four years from the end of the relevant assessment year violating the provisions as the assessee had fully and truly disclosed all material facts and there was no basis of reopening of the assessment also on the ground that same material facts of involving alleged bogus purchases stood concluded in its favour by the ITAT which was could not revied under the guise of certain decision of the hon'ble Supreme Court. He placed reliance non a plethora od decisions of various courts of law including hon'ble Supreme Court and jurisdictional High Court in this regard i.e. Usha Exports 312 CTR 237(Bom), Radhwani Salt Works 400 ITR 249(Guj), ICICI BANK 246 CTR 292(Bom)etc. The ld.DR placed reliance on the orders of authorities below.

We have carefully gone through the records. The chain of events as narrated in earlier paras regarding the proceedings from time to time have not been disputed by either sides. It is very much evident that the reopening has been done after expiry of four years from the end of the relevant assessment year. Moreover, the materials on which reopening has been initiated and concluded are the same which had already been subject matter of earlier scrutiny assessment proceedings and the addition made treating the said purchases as bogus had already been decided by the ITAT in favour of the assessee. Therefore, from all possible angles, action of the AO in reopening the assessment is devoid of any merit and not backed by the provisions of law.

1 In this regard, reliance could be placed on the decision of the Hon'ble Bombay High Court in the case of ICICI Securities Ltd. -vs.- ACIT (W.P. No 1919 of 2006) Bom).In the said case reassessment was made since the assessee had treated loss on trading in shares as business loss and not as speculative loss. After examining the facts of the case, it was held as under:- "In the facts of the present case, there is nothing new which has come to the notice of the revenue. The accounts have been furnished by the petitioner when called upon. Thereafter the assessment was completed under section 143(3) of the Income Tax Act, Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analyses. In our view, this is not something which is permissible under the provision to section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make a proper return. In the present case, no such case is made out on the record." The decision of the jurisdictional High Court has since been affirmed by the Apex Court in ACIT vs. ICICI Securities Primary Dealership Ltd. (2012) 348 ITR 299 (SC). Reliance in this regard is also placed on the decision in the case of Bhavesh Developers (2010) 229 CTR 160 (Bom) wherein the AO reopened the assessment after expiry of four years on the contention that deduction u/s 80IB was not to be allowed on other income which mainly comprises of society deposit, stilt parking and sundry credit balance. The Hon'ble High Court in arriving at the decision held that reasons which had been disclosed to the appellant showed that the findings was based on the details filed by the appellant and the P&L A/c. There was no failure on the part of the appellant to fully and truly disclose all necessary facts for the purpose of assessment and hence reopening of assessment after four years is not valid in the present case. Further, in the case of Supreme Treves Pvt. Ltd. (2009) 23 DTR 215(Bom), the AO reopened the assessment after expiry of four years on the contention that the goodwill is not an intangible asset eligible for depreciation and the assessee has not disclosed the nature of goodwill on which depreciation has been provided in assessment. The Hon'ble High Court has held that, if according to Revenue, no depreciation was allowable on the goodwill, then, it would be wholly irrelevant to consider the nature of the goodwill, further the return of income filed by assessee, particularly the notes and schedule attached to the balance sheet clearly showed that all facts relating to claim of depreciation on goodwill had been fully disclosed by the assessee. As there was no failure on the part of the assessee to disclose ell facts, the reopening of assessment after the expiry of four years could not be sustained.

2 Reliance in this regard is also placed on the decision in the case of Idea Cellular Ltd (2008) 301 ITR 407 (Bom) wherein the AO reopened the assessment after expiry of four years on the contention that amalgamation reserve credited directly to Reserves and Surplus Account has escaped assessment. The Hon'ble Bombay High Court has held that, since the petitioner had mentioned the accounting entry for amalgamation reserve in the return itself and also answered queries raised by AO during assessment on the issue, there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment of the relevant assessment year. The pre-quisite condition contained in the proviso to sec. 147 has to be met before initiating reassessment proceedings after the expiry of the period of 4 years from the end of the relevant (Del)(FB) wherein it has been held that initiation of re-assessment proceedings on the basis of information in the Tax Audit Report is not acceptable since the same was submitted by the appellant along with the return of income. It was one thing to say that the AO had received information from an audit report which was not before him, but it was another thing to say that such information can be derived by the material which had been supplied by the appellant himself. While arriving at the said decision the Hon'ble Delhi High Court referred to the CBDT Circular No. 549 dated 31.10.1989 which, while explaining the scope and effect of section 147, made it very clear that a mere change of opinion cannot form the basis of reopening a completed assessment and also held that the circular issued by the board was legally binding on the revenue. The Hon'ble Delhi High Court further added that in the event the Income Tax officer exercises its jurisdiction u/s 147 upon a mere 561 (SC) wherein the Hon'ble Apex Court has held that, after 01-04- 1989, the A.O. has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. The Apex court further held that, one needs to give a schematic interpretation to the words 'reason to believe' failing which, section 147 would give arbitrary power to the A.O. to reopen assessment on the basis of mere change of opinion which cannot be per se reason to reopen. The full bench of the Hon'ble Delhi High Court in assessment year. The Hon'ble High Court while deciding the case held as under: "The duty of an assessee is limited to fully and truly disclose all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the AO was in conformity with the requirements of all applicable laws and known accounting principles, and materials details had been exhibited before the AO, it is for the AO to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the AO in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income if any on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the AO in exercise of his power under s.147, therefore, cannot be sustained." 6.4 Reliance is also placed on the decision of Hon'ble Bombay High Court in the case of Godrej Agrovet Ltd (2007) 290 ITR 252(Bom) wherein the AO has reopened the assessment on the ground that he has failed to consider the effect of section 80IB(13) r.w.s. 80IA(9) in regular assessment. In the said case, on similar facts it has been held that there were no reasons on the basis of which prima facie it could be said that income had escaped assessment. Although it was alleged that there was failure on the part of the assessee to disclose fully and truly all material facts, in fact the reopening was based on the facts which were already on record. Therefore, it could not be said that the assessee had failed to disclose fully and truly all material facts and the notice was liable to be quashed. Hence, in view of the decision of Jurisdictional High Court, initiation of reassessment proceedings on this issue is not tenable.

We find that the issue relating to the alleged bogus purchases was already taken into consideration by the AO, while framing the original assessment order u/s 143(3) and such issue has attained finality after the ITAT order(supra). Further in view of the aforesaid factual and legal position and in absence of any failure of the nature referred to in proviso to section 147, the order passed u/s.143(3) r.w.s 147 needs to be summarily cancelled. It is apparent that all the material facts were available before the AO at the time of passing of the assessment order and no new information came to the possession of the AO. In fact, the AO has also applied his mind on the same set of facts while assessing interest income under the head business income. Hence, reopening of assessment after four years is invalid as all the material facts were available on record, there was no failure to disclose fully and truly all material facts, no new material/information came to the possession of the AO. It is merely fresh application of mind to the same set of facts and the reassessment is based on mere change of opinion. The proceedings u/s 147 of the Act are not proceedings to review the assessment already framed but is only an power to reassess the escaped income. Therefore, once more than four years have expired since the end of the relevant assessment year and first proviso to Section 147 is applicable and the reassessment proceedings can be validly initiated only if there is an failure on the part of the assessee to truly and fully declare and disclose material facts which we hold that there was no failure on the part of the assessee to declare and disclose fully and truly material facts in the return of income filed. The above grounds of appeal of the assessee succeed and the orders of the authorities below are set aside. We are order accordingly.

Since we have adjudicated the legal ground raised by the assessee by holding that reopening of concluded assessment u/s.147 of the Act by Revenue was bad in law being unsustainable in the eyes of law by quashing the said reopening u/s.147 of the Act vide detailed reasoning given in this order. Thus, now no occasion will arise for us to adjudicate the issues in this appeal on merits as are raised in ground number 6 and 7 as were raised by the assessee as the same have become infructuous and academic.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 17/12/2025. NARENDER KUMAR CHOUDHRY (न्यायिक सदस्य /JUDICIAL MEMBER) Place: मुंबई/Mumbai दिनांक / Date 17.12.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/