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Facts
The assessee's original assessment for AY 2012-13 was completed under section 143(3) of the Income Tax Act. Subsequently, the Assessing Officer issued a notice under section 148 to reopen the assessment based on an audit observation. The audit noted that the assessee had disclosed other income and claimed substantial expenditure (Rs. 832.23 lakhs), which the audit deemed capital in nature or prior period expenditure, suggesting income had escaped assessment due to non-disclosure.
Held
The Tribunal held that the reopening of assessment was invalid as it constituted a mere change of opinion. It found that all material facts were already on record and considered during the original assessment under section 143(3). The Assessing Officer initiated reassessment without any fresh tangible material, making a bald allegation of failure to disclose facts. Consequently, the assumption of jurisdiction under section 148 was deemed bad in law, and the reassessment order was quashed.
Key Issues
1. Whether the reassessment proceedings initiated under section 148 were valid when the original assessment was completed under section 143(3). 2. Whether the reopening constituted a mere change of opinion without any new tangible material or failure to disclose material facts by the assessee.
Sections Cited
Section 143(3), Section 148, Section 147, Section 151, Section 40
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘A’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the ld. CIT(A) – 23,New Delhi dated 22.11.2022 pertaining to A.Y. 2012-13.
The grievances of the assessee read as under:
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad, both in the eyes of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in. rejecting the contention of the assessee that the initiation of the reassessment proceedings and the consequent reassessment order are bad, both on the facts and in law and liable to be quashed, as the statutory conditions and procedure prescribed under the statute have not been complied with.
3. (i) On the facts and circumstances of the case, learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the AO are bad in the eyes of law, as the reasons recorded for the issue of notice under section 148 are bad in the eyes of law and are contrary to the facts.
(ii) On the facts and circumstances of the case, learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the AO is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and have been recorded without application of mind on the part of the AO.
4. On the facts and circumstances of the case, the learned CIT(A). has erred, both on facts and in law, in confirming the action of the AO despite that the reassessment proceedings initiated by the learned AO and consequent reassessment proceedings is without jurisdiction in the absence valid approval of the prescribed authority under section 151 the Act.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the assessment order passed by the AO under section 147 read with the section 143(3) of the Act is illegal and without jurisdiction in the absence of any notice issued under section 143(2) of the Act and thus liable to be quashed.
6. (i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law in rejecting the contention of the assessee that the order passed by the AO is illegal and void- ab initio since reopening has been made on the basis of reasons without there being any whisper that the income has escaped due to the failure on part of the assessee to disclose fully and truly all material facts necessary for assessment, as the same has been reopened after a period of four years from the-end of relevant assessment year and the assessment has already been made under Section 143(3).
(ii) That the CIT(A) has erred in upholding the action of the AO despite the fact that the order passed by learned A.O. is illegal and void ab initio, as the assessee had already disclosed fully and truly all material facts necessary for the assessment under Section 143(3).
7. On the facts and circumstances of the case, the learned CIT(A) has erred in upholding validity of reassessment proceedings, despite the same having been initiated on the basis of mere change of opinion, without any new tangible material! information coming to the possession of the assessing officer subsequent to completion of assessment under section 143(3) of the Act.
8.(i) On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the disallowance of Rs. 8,27,18,0931- made by the AO on account of expenditure claimed by the assessee holding the same are capital in nature.
(ii) That the above said disallowance has been made rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee to justify that these are the revenue expenditure allowable in the year under consideration as per the Income Tax Act.
9. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the above addition by indulging in surmises only on the basis of presumption and assumptions.
10. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
Briefly stated the facts of the case are that in this case, original assessment was completed u/s 143(3) of the Income-tax Act, 1961 [the Act, for short] vide order dated 28.03.2015 wherein the returned income was accepted as such.
On 30.03.2019, the Assessing Officer issued notice u/s 148 of the Act assuming jurisdiction to reassess and reopen the completed assessment on 28.03.2015. The reasons for issue of notice u/s 148 of the Act read as under:
The bone of contention before us is that the assessee has fully and truly disclosed all necessary facts essential for its assessment. In its return of income, the assessee has returned a loss of Rs. 5,02,80,354/-.
In its return of income, at Item No. 41, the assessee has shown interest of Rs. 8,05,27,805/- and under the head “total amount disallowable u/s 40” has been mentioned as Rs. 2,83,01,296/- and aggregate income has been computed at Rs. 5,02,80,354/-. These facts were before the Assessing Officer when he was framing the original assessment order dated 28.03.2015.
The allegation by the Revenue authorities as per the audit note is:
“In this case, scrutiny was completed u/s 143(3) on 28.03.2015. During test check of records, it was noticed in the audit that in the profit and Loss Account, the assessee had disclosed other income at Rs. 49,05,000/-. The assessee had also claimed expenditure of Rs. 832.23 lakhs against the above income. Since no business activity has been carried out by the assessee company during the previous year 2011-12, therefore, above expenditure of Rs. 832.23 lakhs was not allowable to him under the provisions of the I.T. Act because all these expenses should be capitalized or may be kept under the head prior period expenditure. Thus, keeping in view the fact other income at Rs. 49,05,000/- is needed to be added to total income and charged to tax as income from other sources.”
In our considered opinion, all the allegations are based on the details available on record and which were available at the time of original assessment proceedings and no new material has been brought on record. Therefore, in our considered view, assumption of jurisdiction is without any basis as it is merely a change of opinion of same set of facts and, therefore, reopening of assessment has to be held as bad in law.
The ld. DR, in his written submissions has heavily relied upon the decision of the Hon'ble High Court of Delhi in the case of Consolidated Photo and Finvest – 281 ITR 394. But this decision of the Hon'ble Delhi High Court has been overturned by the Hon'ble Delhi High Court in the case of Jindal Photo Films Ltd 234 ITR 170.
The decision in the cases of Usha International 348 ITR 485 is also misplaced in as much as in that case, the Hon'ble Delhi High Court was seized with a situation where new facts, material or information came to the knowledge of the Assessing Officer which was not on record and available at the time of assessment order and, therefore, it was held that it is not a case of change of opinion.
In fact, the Hon'ble High Court went on to put the onus on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer proceeding on the basis of facts which are incorrect and wrong whereas in the case in hand, as mentioned elsewhere, the assessee has mentioned all facts and figures in its return of income, basis which assessment was completed originally on 28.03.2015 u/s 143(3) of the Act.
The other decisions relied upon by the ld. DR have been thoughtfully considered, but found to be on different facts.
In the reasons recorded for reopening assessment mentioned elsewhere it can be seen that the Assessing Officer has mentioned that there was failure/omission on the part of the assessee to disclose fully and truly all necessary facts essential for its assessment. But, we do not find any mention of any such fact which has been omitted or mentioned wrongly/falsely by the assessee.
As mentioned elsewhere, it has been mentioned that during the test check of assessment record, for the impugned A.Y, it came to the notice of the Assessing Officer that the assessee had claimed expenditure of Rs. 832.23 lakhs. This fact clearly reveals that the Assessing Officer had no fresh tangible material in his possession while reopening assessment u/s 147 of the Act.
In fact, while making bald allegation regarding failure of the assessee in disclosing fully and truly all material facts, the Assessing Officer had initiated proceedings by revisiting the material available on record at the time of completion of assessment proceedings.
Considering the facts of the case in totality, the assumption of jurisdiction by issuance of notice u/s 148 of the Act is bad in law and the impugned notice u/s 148 of the Act deserves to be quashed, thereby quashing the impugned assessment order.
Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 05.04.2024.