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Facts
The revenue filed an appeal against the order of the National Faceless Appeal Centre (NFAC) for AY 2015-16. The original assessment u/s 143(3) was completed on 09.03.2017. Subsequently, the case was reopened u/s 147 by issuing a notice u/s 148 dated 23.01.2019, on the grounds that excess deduction u/s 36(1)(viii) was allowed, leading to escapement of income.
Held
The Tribunal held that the issue regarding the allowance of deduction u/s 36(1)(viii) and 36(1)(viia) was discussed and deliberated during the original assessment proceedings. There was no concealment or escapement of information by the assessee. The AO was aware of the facts and had applied his mind. Therefore, the reopening under section 147 was based on a change of opinion, which is not permissible.
Key Issues
Whether the reopening of assessment u/s 147 of the Act was justified, or if it was based on a change of opinion without any new material.
Sections Cited
36(1)(viii), 36(1)(viia), 147, 148, 143(3), 250
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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI N. K. CHOUDHRY & SHRI GAGAN GOYAL
This appeal by revenue is directed against the order of National Faceless Appeal Centre (for short “NFAC”) dated 21.03.2023 u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2015-16. The revenue has raised the following grounds of appeal:-
Small Industries Development Bank of India 1. "The Ld. CIT (A) erred in holding that the reopening was made on the ground of change of opinion when no opinion was formed by the AO on the issue of re-computation of the deduction u/s 36(1) (viii) of the Act after reducing the deduction u/s. 36(1) (viia) of the Act from the proportionate profit from long term activity during the original assessment proceeding? 2. "The Ld. CIT (A) erred in not appreciating the ratio of the Delhi High Court in the case of M/s. Consolidated Photo & Finvest Ltd. Vs. ACIT (2006) 151 Taxman 41 (Delhi) wherein it is held that action under section 147 was permissible even if the Assessing Officer gathered his reasons to believe from the very same record as had been the subject matter of completed assessment proceeding? 3. the appellant craves leave to add, amend and/ or vary the grounds of Appeal before or during the course of hearing"
The brief facts of the case are that the assessee company is engaged in the business of functioning as a principal financial institution for the promotion, financing and development of the Micro, Small and Medium Enterprises and coordinates the functions of institutions engaged in similar activities. Return of income declaring income of Rs. 1506, 09, 36,510/- under the normal provisions of the Act and Rs. 1912, 58, 92,986/- as book profit under the provisions of section 115JB of the Act vide dated: 29.09.2015. During the assessment proceedings itself, the assessee filed a revised return of income on 14.02.2017 declaring total income at Rs. 1505, 38, 12,270/- and Rs. 1912, 58, 92,986/- respectively. Original assessment order u/s. 143(3) of the Act was passed on 09.03.2017.
Subsequently, the case of the assessee was reopened by issuing notice u/s. 148 of the Act vide dated: 23.01.2019. In response to this notice issued u/s. 148 of the Act, the assessee filed a return and asked for a supply of reasons. Reasons were supplied to the assessee vide page no. 77 to 79 of the paper book and the same are reproduced herein below for ready reference as under:-
Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India
The assessee objected to the reasons supplied, vide pages 80 to 84 of the paper book and the AO disposed of the objection of the assessee vide pages 85 to 87 of the paper book. Both papers are reproduced herein below:-
Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India Small Industries Development Bank of India
5. The AO was not satisfied with the reply of the assessee and finally reassessed the income of the assessee u/s. 143(3) of the Act r.w.s. 147 of the Act. The Assessee was aggrieved with the same order and preferred an appeal before the Ld. CIT (A), who in turn declared the assessment as bad in law and quashed the proceedings carried out in response to notice issued u/s. 148 of the Act. Now,
Small Industries Development Bank of India revenue is not satisfied with the order of Ld. CIT (A) and preferred this present appeal before us.
We carefully considered the order of AO passed u/s. 143(3) of the Act, Reasons taken for reopening of the case, objections of the assessee against reopening and AO’s disposal of the same, order of the AO passed u/s. 143(3) r.w.s. 147 of the Act and order of the Ld.CIT (A) passed u/s. 250 of the Act. The moot question before us is whether the issue raised by the revenue in reassessment proceedings was already discussed and dealt with during the original assessment proceedings or not. If the issue had already been dealt with by the revenue during the original assessment proceeding itself, reopening the matter would be tantamount to a change of opinion; otherwise, there is nothing wrong in these proceedings carried out by the department.
In addition to the above communication between the assessee and the AO, we are reproducing herein below the submissions of the assessee before us as under: “2. In response to the first ground raised
by the DR, the AR pointed out to page 88 of the paperbook wherein it can be seen that from the notice issued u/s. 142(1) at the time of original assessment proceedings, the Ld. AO in point iii) of the notice asked the assessee to submit the working of deduction u/s. 36(1) (viia) of the Act and deduction u/s. 36(1) (viii) of the Act. After considering the same and the additions made thereunder, the Ld. AO in Para 38 of the original assessment order passed u/s. 143(3) dated 09.03.2017 mentioned that the total income of the assessee will undergo a change and hence re-worked the deduction u/s. 36(1) (vii) and 36(1) (viia) (c) of the Act after taking into consideration relevant disallowance/additions. The relevant portion is reproduced as under:
38. On account of the above disallowance/additions, the total income of the assessee will undergo a change and hence the deduction u/s. 36(1) (vii) as well as 36(1) (viia) (c) allowable to the assessee are re-worked and allowed accordingly.”
Small Industries Development Bank of India 3. Therefore, in view of the above, it is clear that the aforesaid issue was already dealt by the AO during the course of original assessment proceedings u/s 143(3) of the Act. There had been full and true disclosure of all material facts during the course of the assessment proceedings itself. Thus, reopening the said case on same facts is nothing but a mere change of opinion. It is now a well decided judicial pronouncement that no reopening is possible on the basis of change of opinion. Copies of following decisions were provided during the course of hearing: • Hon'ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC) • Court of Bombay in case of HDFC Bank Ltd Vs ACIT (WP 1787 of 2014). In addition to the above, reliance is also placed on the following cases laws: • HIGH COURT OF GUJARAT In The Case Of Saurabh Natvarlal Soparkar Vs Assistant Commissioner of Income-Tax, Circle 4(2) [2021] 131 Taxmann.Com 63 • *2021+ 131 Taxmann.Com 166 (Bombay) HIGH COURT OF BOMBAY In The Case Of Hindustan Unilever Ltd Vs Deputy Commissioner Of Income-Tax, Circle-1(1)(2), Mumbai • *2021+ 133 Taxmann.Com 270 (Orissa) HIGH COURT OF ORISSA In The Case Of Sri Jagannath Promoters & Builders Vs Deputy Commissioner Of Income-Tax 4. Thereafter, in rebuttal of ground 2, the AR submitted that the ruling of Full Bench of Hon'ble Delhi High Court in the case of CIT Vs USHA INTERNATIONAL LTD (348 ITR 485) in the Para 11 of the order has mentioned that the observations and ratio laid down by the Delhi High Court in the case of M/s. Consolidated Photo & Finvest Ltd. Vs. ACIT (2006) 151 Taxman 41(Delhi) does not reflect the correct legal position. The full bench of Delhi High Court has observed that the aforesaid judgment of M/s. Consolidated Photo & Finvest Ltd is in contrary to the full bench decision in case of Kelvinator Of India Ltd (supra) and others. Therefore, the reliance placed by DR on the ruling of M/s. Consolidated Photo & Finvest Ltd. vs. ACIT (supra) is not tenable.
Thereafter, the Ld. DR placed reliance on the decision of SC decision of ALA Firm vs. CIT (Civil No. 570 of 1976). In this regard, it is submitted that the SC was dealing with the assessment year is 1961-62. Subsequent to the said decision, there are a plethora of decision passed subsequently, wherein it is clearly emerging from the reasons so recorded by the Assessing officer which establishes the fact that there is no new material brought on record by the Assessing subsequent to completion of original proceedings u/s. 143(3) and the matter was duly examined during the original assessment proceedings and it is Small Industries Development Bank of India therefore clearly a case of change of opinion where on the same facts and material on record, the Assessing officer wishes to take a different view than the view taken earlier and a mere change of opinion cannot per se be a reason for reopening. In fact we would like to place reliance on following decision of tribunal which has rejected the department contention with regards to placing reliance on the decision of A.L.A Firm vs. CIT as under: •Latest decision of Hyderabad Tribunal announced on 17.10.2023 in the case of DCIT vs. M/s. DRS Logistics Private Limited (ITA 1718/Hyd./2018) (Copy attached) •M/s. Crescent Construction Co vs. ACIT - 22(3) (ITA No. 658/Mum/2014).”
We have thoroughly considered the submissions of both the sides’ alongwith original assessment order passed u/s. 143(3) of the Act and found that issue under consideration for the purposes of section 148 was discussed and deliberated in length. Further, there was no concealment or escapement of information on the part of the assessee. The AO was well versed and have full access to the information relevant for assessment. Rather, he himself calculated the figure of deduction and certain changes were incorporated in the order. In view of the above, case of the revenue is not sustainable as there is no fault at the end of the assessee and the AO already applied his mind during the assessment proceedings. This action of AO u/s. 147 of the Act will tantamount to change of opinion which is not permissible on the given set of facts. Grounds raised by the revenue are dismissed.
In the result, appeal of the Revenue is dismissed.