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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R
PER Waseem Ahmed, Accountant Member:-
This appeal is preferred by the Revenue against the order of Commissioner of Income Tax (Appeals)-XXX, Kolkata dated 18.11.2013 for the assessment year 2008- 09 and same is being disposed of along with the Cross Objection (CO) has been filed by the assessee. Shri S.M. Surana Ld. Advocate and Shri Sunil Surana, Ld. Authorized Representative appeared on behalf of assessee and Shri S.M. Das, Ld. Departmental Representative represented on behalf of Revenue. The grounds raised by the Revenue per its appeal are as under:-
& CO 48/Kol/2014 A.Y. 2008-09 ACIT Cir-43,Kol. Vs. Sh. Ajay Kr. Thakkar Page 2 “ i) That on the acts and in the circumstances of the case Ld. CIT(A) has erred in deleting the addition without finding out any mistake in calculation of opening stock as made by the AO in his assessment order. ii) That on the facts and in the circumstances of the case the Ld. CIT(A)’s contention, that the addition is made “not supported by any details / evidence” is not tenable as the A.O determined the opening stock from the value of stock of investment activities and trading activities as disclosed by the assessee in his revised return. iii) That the petitioner craves leave to alter/modify or adduce further grounds of appeal, if necessary at the time of hearing of appeal.”
The ground raised by assessee per its CO are as under:-
1. For that the Ld. CIT(A) should have held that the AO cannot revalue the opening stock of the current year which can always be the closing stock of the earlier year and even if the method of valuation of closing stock is changed the same cannot be applied to the opening stock and should have directed to take the closing stock of the last year as the opening stock of the current year.
2. For that the Ld. CIT(A)’s order was in accordance with law in so far as the reopening of the assessment u/s. 147 was concerned which was wrongly reopened by the AO.
3. For that the assessee craves leave to add, alter or amend any ground before or at the time of hearing.”
We first decided to adjudicate the legal issue raised in ground No. 2 in the CO filed by the assessee wherein the validity of reassessment proceedings u/s 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) was challenged.
At the outset the ld AR for the assessee before us submitted that the issue of opening stock has been duly considered by the Assessing Officer in the original assessment proceedings u/s 143(3) of the Act which is evident from the order of AO. This is a settled law that when any issue is examined in detail during scrutiny proceedings u/s 143(3) by the Assessing Officer, it amounts to forming an opinion on the subject matter, despite the fact that no addition has been made on this account by the AO. Subsequent reopening on the same material which was already available on record and also examined by the AO would tantamount to change of opinion which is not permissible and thus order passed u/ s 147 is void and liable to be quashed. & CO 48/Kol/2014 A.Y. 2008-09 ACIT Cir-43,Kol. Vs. Sh. Ajay Kr. Thakkar Page 3 On the other hand the ld DR vehemently supported the order of authorities below. 4. We have heard the rival submissions and carefully perused the records. We find that in this case original assessment was made u/s 143(3) of the Act. During the original assessment proceedings u/s 143(3) of the Act, we find that the issue of the opening stock was duly examined by the AO. The relevant extract of the AO order dated 06-08-2010 is reproduced as under :
“Opening Stock Opening investment of Rs.4,90,80,417/- as per original Personal balance sheet valued at cost or market price Whichever is lower at Rs.4,52,49,724/-. The valuation Has been worked out on the basis of Stock Exchange Operation Rs. 4,52,49,724/- Rs.12,69,23,378/- Less : Purchase Cost of shares sold: (6,75,60,449 + 1,55,86,931) i.e. Rs. 8,31,47,380/- Add: Shares as on 31.3.08 (cost) Rs. 8,34,74,727/- Rs.16,66,22,107/- Less; Shares as on 01.04.07(cost)Rs. 4,90,80,417/- Rs. 11,75,41,690/- Rs. 93,81,688/- Less: Expenses/loss debited to personal P/L A/c Rs. 28,06,716/- Rs. 65,75,972/- From the above, we note that the AO has duly considered the issue of the opening stock. Hence it cannot be said that the AO was not aware of the value of the opening stock declared by the assessee. AO has also considered and chosen not to make any addition on account of valuation of the opening stock. Thus, the AO after conscious application of mind has chosen not to make any addition. Hence, it is clear that the AO has applied his mind regarding the valuation of opening stock shown by the assessee.
4.1 Now in this background, we note that while reopening of the assessment on the ground of understatement of opening stock is nothing but change of opinion. Thus, we note that no new fact has come to the notice of AO for reopening the issue of opening stock. The issue of opening stock was duly dealt by the AO at the time of original assessment u/s 143(3) of the Act. AO consciously made a decision not to make any disallowance in this regard. Hence, on the same issue when the reopening is done and & CO 48/Kol/2014 A.Y. 2008-09 ACIT Cir-43,Kol. Vs. Sh. Ajay Kr. Thakkar Page 4 the AO changes his opinion and comes to the decision that the assessee should have been shown more amount of income, it is clearly a change of opinion. It is a fresh application of mind on the same set of facts. This, in our considered opinion, is not permissible as held by the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. reported in 320 ITR 561 (SC). The relevant extract of the judgment is extracted below:-
“Therefore, post - 1st April 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer.” Thus, the decisions referred to the above supports the case of the assessee. Once the AO has considered the details of the opening stock and chosen not to make any disallowance, reopening and addition on this account is merely a change of opinion and is not permissible. Moreover, if it is considered that when the details were available and AO chose not to make any disallowances, then remedy lies with the Commissioner of Income Tax u/s 263 of the Act. This cannot be made a subject- matter of reopening u/s 147 of the Act and fresh application of mind by another Assessing Officer. In these circumstances, we hold that reopening in this case is bad in law. Since, we have quashed the order of assessment dated for the year under consideration as being invalid and unsustainable in law, we therefore, do not propose to go into the merits of the issues raised in assessee’s CO. In the result, CO of the assessee is allowed on legal ground of the assessee then remaining grounds of the assessee’s CO on merits becomes academic and infructuous.
Coming to Revenue’s appeal No.433/Kol/2014.