Loading judgment…
Facts
The assessee, a dealer in vegetables and green leaves, filed a return of income including commission income. Initially, the assessment was completed based on Section 44AD. Subsequently, a notice under Section 148 was issued for reassessment due to alleged failure to disclose material facts, citing commission income of Rs. 23,82,650/-, of which only Rs. 2,38,265/- was offered. The reopening was based on the premise that Section 44AD was not applicable and the entire commission receipts should have been offered.
Held
The Tribunal held that the Assessing Officer reopened the assessment solely based on a change of opinion regarding the percentage of income to be taxed from commission business. The original assessment had considered commission income at 10% with a speaking order, while the reopened assessment accepted expenditure at 1/3rd of the commission income. This change in approach, without new material facts, constituted a change of opinion, which is not a valid ground for reopening under Section 147.
Key Issues
Whether the reopening of assessment under Section 147/148 of the Income Tax Act, 1961, based on a change of opinion by the Assessing Officer, is legally sustainable.
Sections Cited
44AD, 143(3), 148, 147, 151(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “CUTTACK” BENCH, CUTTACK
Before: SHRI GEORGE MATHAN & SHRI RAJESH KUMAR
The captioned appeal by the assessee is against the order of the Ld. Commissioner of Income Tax (Appeal), NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] vide order no. ITBA/NFAC/S/250/2024- 25/1069536140(1) dated 08.10.2024 passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2013-14.
Shri P. K. Mishra, Advocate represented on behalf of the assessee and Shri S. C. Mohanty, Sr. DR appeared on behalf of the revenue.
It was submitted by the Ld. AR that the assessee filed his return of income on 16.06.2014 declaring total income of Rs.9,61,590/-. Assessee is a dealer of vegetables and green leaves on commission basis. It was the submission that the assessee has also earned commission income to an extent of Rs.23,82,650/-. It was the submission that the assessee had filed his return of income originally by applying the provisions of section 44AD of the Act. The return filed by the assessee had been processed and the assessment had been completed u/s. 143(3) of the Act on 03.02.2016 estimating income of the assessee at 10%. It was the submission that subsequently notice u/s. 148 of the Act came to be issued on 31.03.2021 with the following reasons:
It was the submission that effectively the reopening has been done to bring to tax the estimated income of the assessee from the said commission business. It was the submission that in the original assessment order the total income of the assessee has been assessed at Rs.12,67,080/-. It was the submission that in para 3 of the reasons for reopening, the Assessing Officer has admitted that the income of the assessee had been assessed at 10% of Rs.23,82,650/- and that this was wrong and the entire commission received was liable to be brought to tax. It was the submission that subsequently in the course of the reopened assessment, the Assessing Officer admitted that only 70% of the commission income was liable to be assessed as the income of the assessee and consequently, further addition of Rs.13,50,168/- out of the commission business of Rs.23,83,650/-. It was thus, the submission that only for the purpose of change of rate of percentage of profit, the Assessing Officer has done the reopening which clearly was the change of opinion. It was the submission that reopening cannot be done on the basis of change of opinion.
In reply, the Ld. CIT, DR submitted that the assessee had applied the provisions of section 44AD of the Act. It was the submission that the reopening was done to assess the commission income under the right head. It was the submission that the Assessing Officer in the original assessment has not treated the commission business income of the assessee as liable to be taxed at 10%. It was the submission that the reopening is liable to be upheld. He relied on the decision of the Hon’ble Supreme Court in the case of ITO Vs. Techspan India 92 taxmann.com 361 (SC).
We have considered the rival submission and the material available on record and the case law relied on by the Ld. CIT, DR in the case of Techspan India (supra), which is in favour of the assessee in so far as in the original assessment order, the Assessing Officer has considered the total business of the assessee and has estimated the income at 10% by a speaking order. In the reopening, the Assessing Officer himself agrees in para 3 that in the original assessment order the Assessing Officer has accepted 10% as income from commission business of Rs.23,82,650/-. In the reasons recorded for reopening the Assessing Officer has admitted that the balance of Rs.21,44,385/- itself is liable to be taxed in its entirety. However, when the assessment was done, the Assessing Officer has accepted the fact that there are expenditure involved and, therefore, accepted the expenditure at 1/3rd of the commission income and thereby brought to tax the resultant income of Rs.13,50,168/-. Thus, it is clear that the Assessing Officer has reopened the assessment only for waiving the percentage of income which has been estimated in the original assessment order and in the reopened assessment order. This is not permissible as it is only a change of opinion. This being so, the reopening of the assessment as done by the Assessing Officer by issuing notice u/s. 148 is held to be bad in law and consequential reassessment is quashed.
In the result, the appeal of the assessee is allowed. Order dictated and pronounced in the open court.