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Facts
The assessee, engaged in manufacturing and export of silver jewellery, filed its return of income. The assessment was reopened under section 147 based on an audit objection, to re-compute MAT liability and deny adjustment of brought forward business losses.
Held
The Tribunal held that the reassessment proceedings were initiated based on the same material available during the original assessment, constituting a change of opinion without fresh tangible material. This was impermissible as per the Kelvinator of India Ltd. case.
Key Issues
Whether the reopening of assessment under section 147 was validly initiated without fresh tangible material, and if not, whether it amounts to a change of opinion.
Sections Cited
143(3), 147, 148, 115JB
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Income Tax Appellate Tribunal, “DB” BENCH, AGRA
Before: HON’BLE SHRI SATBEER SINGH GODARA, JM & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
Aforesaid appeal by assessee for Assessment Year (AY) 2012-13 arises out of an order of learned Commissioner of Income Tax (Appeals)- 2, Agra [CIT(A)] dated 31-01-2019 in the matter of an assessment framed by Ld. Assessing Officer (AO) u/s 143(3) r.w.s. 147 on 22-12-2017. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under.
The assessee is stated to be engaged in manufacturing and export of silver jewellery. The assessee filed its return of income on 28-09-2012 which was scrutinized u/s 143(3) on 28-05-2014 after making adhoc disallowance of expense for Rs.1 Lacs. However, the assessment was reopened, apparently, at the behest of audit objection and notice u/s 148 was issued on 30-03-2017. The case was reopened to re-compute the MAT liability of the assessee and to deny adjustment of brought forward business losses on the ground that the accumulated profits were in credit. The assessee offered same return of income as filed on 28-09-2012 and objected to the reopening. The assessee, inter-alia, contended that the initiation of reassessment proceeding was on the same set of facts which were already available before Ld. AO at the time of scrutiny assessment proceedings. The same was rejected by Ld. AO on the ground that no opinion was formed or expressed on this issue and further reopening could be done on audit objection.
On merits, it was noted by Ld. AO that the assessee computed its income u/s 115JB for Rs.118.68 Lacs. From this, the assessee reduced brought forward business loss of Rs.116.64 Lacs for AY 2011-12. This loss was brought forward as per Income Tax Act. The Ld. AO held an opinion that since the assessee had accumulated credit balance in its Profit & Loss Account as on 01-04-2011 for Rs.627.11 Lacs, it could not make such an adjustment. Accordingly, this adjustment was denied to the assessee. The Ld. CIT(A) confirmed the action of Ld. AO and also rejected the legal grounds as raised by the assessee against which the assessee is in further appeal before us.
From the facts, it clearly emerges that the re-assessment proceedings have been triggered on the basis of same material and financial documents which was available to Ld. AO during the course of regular assessment proceedings. The reasons do not indicate any event as to the receipt of any fresh tangible material coming to the possession of Ld. AO subsequent to culmination of original assessment proceedings.
Apparently, the re-assessment proceedings have been initiated on audit objection without there being any fresh or tangible material on record. This being the case, reopening would be nothing but mere change of opinion on existing material which is impermissible as per the decision of Hon’ble Apex Court in Kelvinator of India Ltd. (187 Taxman 312). In this decision, it was held by Hon’ble Supreme Court that the review of order is impermissible. The Hon’ble Court, inter-alia, held that Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. There can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power. In this case, the Ld. AO reached the belief of escapement of income on going through the return of income filed by the assessee after the return was accepted u/s 143(1). The Hon’ble Court held that it was nothing but a review of the earlier proceedings and an abuse of power by AO. The less strict interpretation of the words "reason to believe" vis-à-vis an intimation issued u/s 143(1) cannot be permitted. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the AO subsequent to the issue of the intimation which reflects an arbitrary exercise of the power conferred under section 147. The ratio of cited decision would squarely apply to the facts of present case. Considering the ratio of this decision, we would hold that the impugned order is liable to be quashed on legal grounds since Ld. AO did not have valid jurisdiction to reopen the case of the assessee. Delving into the merits has been rendered academic in nature.
The appeal stand allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963.