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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: Shri Joginder Singh & Shri G Manjunatha
Date of hearing 28-02-2018 Date of pronouncement 09-03-2018 O R D E R
Per G Manjunatha, AM :
This appeal filed by the assessee is directed against order of the CIT(A)- 10, Mumbai dated 06-06-2016 and it pertains to AY 2006-07. The revenue has raised the following grounds of appeal:-
“1(i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in quashing the reopening of the assessment on the ground that the reopening is done on change of opinion as there is no mistake attributable to the assessee. (ii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the assessee had failed to establish with documentary evidence that the written back liabilities of prior period pertained to the period when the provisions of the tonnage tax scheme was in operation and, hence, income chargeable to tax has escaped assessment due to failure on the part of the assessee to disclose fully & truly all material facts necessary for its^ assessment. (iii) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that as the prior period liability written back of Rs. 2,21,41,9167- had been allowed as deduction in the earlier 2 ITA 5593/Mum/2016 assessment years, the entire amount was taxable in the assessment year 2006-2007 and the prior period expenses of Rs. 37,19,6807- was also not allowable as deduction in computing the total income of the assessee for the assessment year 2006-2007. (iv) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the prior period liability written back of Rs. 2,21,41,9167-and prior period expenses of Rs. 37,19,6807- are not related to the tonnage tax activities of the assessee company and, hence, not covered by the tonnage tax scheme.”
The brief facts of the case are that the assessee is a company engaged in the business of shipping, property development and financial operations. The assessee has filed its return of income for AY 2006-07 on 21-11-2006 declaring a total income of Rs.71,06,56,632. The assessment was completed u/s 143(3) on 31-12-2008, determining total income at Rs.79,02,18,941, after addition under prior period income of Rs.1,84,22,235. Subsequently, the case was reopened by issue of notice u/s 148 dated 26-03-2013, on the ground that income chargeable to tax had been escaped assessment within the meaning of section 147 in respect of addition made towards prior period income after setting off of prior period expenses of Rs.37,19,680, whereas prior period liabilities written back and prior period expenses are not allowable deductions and both the amounts needs to add to the income returned. In response to notice, the assessee vide letter dated 10-04-2013 stated that the return filed originally on 21-11-2016 may be treated as return filed pursuant to the notice issued u/s 148 of the Act, and also requested for supply of reasons for issuance of notice u/s 148 of the Act. The AO provided the reasons for the issue of notice vide letter dated 03-09-2013. In 3 ITA 5593/Mum/2016 response, the assessee vide letter dated 12-09-2013 filed its objection for reopening assessment. The assessee’s objections to reopening of the case was disposed of by the AO in a separate order. Thereafter, the AO completed the assessment u/s 143(3) r.w.s. 147 of the Act on 15-10- 2013 and determined the total income at Rs.73,67,08,210 by making addition of Rs.2,58,61,596 towards prior period liabilities, write back and prior period expenses.
Aggrieved by the assessment order, assessee preferred appeal before the CIT(A). Before the CIT(A), assessee has challenged reopening of assessment on the ground that the AO has reopened the assessment merely on change of opinion without there being any fresh tangible material which came to his knowledge subsequent to assessment which is evident from the fact that the issue of addition towards prior period income and write back of prior period liabilities and prior period expenses have been considered by the AO in the proceedings u/s 143(3), wherein after analyzing the issue, the AO had made addition towards prior period income of Rs.1,84,22,235. The assessee further submitted that the issues on which the reopening is done were already a subject matter of discussion at the time of passing of order u/s 143(3) and the issue has been travelled upto the Tribunal and the Tribunal, vide order date 14-09-2012 has deleted addition made by the AO towards prior period income. Therefore, the AO was incorrect
4 ITA 5593/Mum/2016 in reopening assessment on same set of facts without any fresh material in his possession. The CIT(A), after considering relevant submissions of the assessee observed that assessment cannot be reopened on an issue which has already been subject matter of discussion in the original assessment. It is also noticed that the Hon’ble ITAT has already given relief on the same issue of disallowance made in the assessment order passed u/s 143(3), vide their order dated 14-09-2012. When the order of the ITAT in assessee’s own case for the same assessment year favouring the assessee is readily available before issue of notice u/s 148, the issue of notice u/s 148 itself is not proper, therefore, the reopening is bad in law and accordingly quashed the assessment order passed by the AO u/s 143(3) r.w.s. 147 of the Act. Aggrieved by the order of CIT(A), the revenue is in appeal before us.
The Ld.DR submitted that the Ld. CIT(A) erred in quashing the reopening of the assessment on the ground that the reopening is done on change of opinion as there is no failure on the part of the assessee to disclose fully and truly all material facts required for completion of assessment. The Ld. DR further submitted that the Ld.CIT(A) failed to appreciate the fact that the assessee had failed to establish with documentary evidences write back of liabilities of prior period pertaining to the period when the provisions of the tonnage tax scheme was in operation and hence, income chargeable to tax has been escaped
5 ITA 5593/Mum/2016 assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.
On the other hand, the Ld.AR strongly supported order of the CIT(A) and submitted that the very same issue on which the AO has formed a reasonable belief of escapement of income has been considered by the AO in the proceedings u/s 143(3) and made addition towards net prior period income being write back of prior period liabilities and prior period expenses. The Ld.AR further submitted that the assessment has been reopened after a period of 4 years and also the original assessment was concluded u/s 143(3). When an assessment is reopened after a period of 4 years, the AO has to allege that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this case, the AO has reopened the assessment without any allegation as to failure on the part of the assessee to disclose fully and truly all material facts on the same set of facts which is evident from the fact that the issue was subject matter of assessment u/s 143(3) and also the same has been travelled upto ITAT wherein the ITAT has deleted addition made by the AO. Therefore, reopening was bad in law and the Ld.CIT(A) has rightly quashed re-assessment and his order should be upheld.
We have heard both the parties, perused the material available on record and gone through the orders of authorities below. The Ld.CIT(A)
6 ITA 5593/Mum/2016 has quashed re-assessment order passed by the AO on the ground that the AO has reopened assessment merely on change of opinion without there being any fresh material which suggests escapement of income within the meaning of section 147(b) of the Income-tax Act, 1961. The relevant portion of the order of CIT(A) is extracted below:-
4.2. I have carefully considered the facts and circumstances of the case and submissions made by the Id.AR. As was seen from the facts of the case the assessment is reopened beyond four years from the end of the assessment year. The original assessment was concluded u/s 143(3) on 31/3/2008. In due course it was noticed that while concluding the original assessment the addition was made at a lower amount of Rs. 1, 84,22, 235 (221, 41, 916-37, 19, 680) instead of at higher amount of Rs. 2, 58, 61, 596(221, 41, 916+37, 19, 680) on the basis of write back of liability and prior period expenses. In my considered opinion the reopening is done on change of opinion as there is no mistake attributable to the appellant as the reopening is done beyond four years and the issue of disallowance of writeback of liability and prior period expenses were already a matter of discussion at the time of original assessment passed u/s 143(3). Assessment cannot be reopened on an issue which has already been a subject matter of discussion in the original assessment. It is also noticed that the Honorable IT AT has already gave .relief on the same issue of disallowance passed u/s 143(3) for the present assessment year vide their order dated 14/9/2012. This order is very much available to the AO at the time of the reopening of the assessment u/s 148 on 26/3/2013. When the order of the Honorable IT AT in appellant's own case for the same assessment year flowering the appellant is readily available before issue of notice under section 148, the issue of notice under section 148 itself is not proper. Therefore, the reopening is quashed and the assessment following it is dismissed. The ground is allowed.” The Ld.CIT(A) has quashed re-assessment on the ground that the AO has reopened the assessment on change of opinion which is evident from the fact that the issue on which the AO has formed reasonable belief of escapement of income has already been a subject matter of discussion in the original assessment and the said matter has been travelled upto the ITAT and the ITAT has deleted addition made by the 7 ITA 5593/Mum/2016 AO vide its order dated 14-09-2012. We find that the AO has considered the issue of prior period expenses and prior period income in the proceedings u/s 143(3) and after considering relevant facts has made addition towards net prior period income after setting off of prior period expenses. The AO has reopened assessment on the same set of facts on the ground that while completing assessment u/s 143(3), addition has been wrongly made in respect of prior period income of Rs.1,84,22,235 instead of higher amount of Rs.2,58,61,596 as prior period expenses cannot be netted off against write back of liability of prior period. The issue on which the reopening of assessment has been made has already been a subject matter of assessment u/s 143(3) and the AO has considered all relevant facts while completing assessment u/s 143(3).
Therefore, without there being any fresh material and also any allegation on the part of the assessee to disclose fully and truly all material facts necessary for assessment, reopening cannot be made after 4 years when the assessment has been concluded u/s 143(3) of the Act.
Therefore, we are of the considered view that the CIT(A) was right in quashing assessment order passed by the AO u/s 143(3) r.w.s. 147 of the Act. We do not find any error in the order of the CIT(A); hence, we are inclined to uphold the findings of the CIT(A) and dismiss appeal filed by the revenue.
In the result, appeal filed by the revenue is dismissed.
8 ITA 5593/Mum/2016 Order pronounced in the open court on 09th March, 2018.