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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap & Shri S.S. Viswanethra Ravi
Date of concluding the hearing : January 19, 2016 Date of pronouncing the order : March 02, 2016
O R D E R Per Shri P.M. Jagtap :- This appeal is preferred by the Revenue against the order of the ld. Commissioner of Income Tax (Appeals)-XII, New Delhi dated 31.08.2012 for the assessment year 2006-07, whereby she quashed the assessment made by the Assessing Officer under section 143(3)/147 of the Act treating the same as invalid on the ground that the reopening of assessment itself was bad in law having based on a change of opinion.
2. The assessee in the present case is a Non-Banking Finance Company. The return of income for the year under consideration was originally filed by it on 27.11.2006 declaring total income of Rs.2,03,13,738/- under the normal provisions of the Act and book profit under section 115JB at Rs.38,95,04,834/-. Thereafter the revised return was filed by the assessee on 31.03.2008 declaring total income of ./2012 Assessment year: 2006-2007 Page 2 of 8 Rs.1,25,92,360/- under the normal provisions of the Act and book profit under section 115JB at Rs.38,95,04,838/-. In the assessment originally completed under section 143(3) vide an order dated 31.12.2008, the total income of the assessee under the normal provisions of the Act was determined by the Assessing Officer at Rs.16,17,08,631/- and book profit under section 115JB was computed at Rs.67,92,04,834/- after making various additions/disallowances. The said assessment was subsequently reopened by the Assessing Officer and after recording the reasons, a notice under section 148 was issued by him on 31.03.2011. In reply, a letter dated 15.04.2011 was filed by the assessee requesting that the revised return filed by it on 31.03.2008 may be treated as the return filed in response to notice under section 148. The assessee also obtained the copy of reasons recorded by the Assessing Officer and raised objections to the reopening of assessment made by the Assessing Officer on the basis of the said reasons. The Assessing Officer, however, did not find the said objections to be sustainable and overruling the same, he proceeded to complete the assessment under section 147/143(3) vide an order dated 30.12.2011 determining the total income of Rs.30,25,53,739/- after making three additions to the total income of the assessee aggregating to Rs.14,08,00,108/-.
Against the order passed by the Assessing Officer under section 147/143(3), an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the said assessment as well as disputing the additions made therein on merit. After considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) found merit in the preliminary issue raised by the assessee challenging the validity of reopening for the following reasons recorded in her impugned order:- “I have perused the facts stated in the assessment order as well as the written submission and supplementary submission filed by the appellant from time to time and also perused the details and/or documents filed before me. From the perusal of the same, it is clearly evident that all ./2012 Assessment year: 2006-2007 Page 3 of 8
the necessary facts were available before the Assessing Officer at the time of making the assessment. Further, from the perusal of the reason for reopening of assessment and the details and/or documents submitted by the appellant in the course of assessment proceedings, it is seen that no new tangible material had come to the knowledge of the Assessing Officer to form belief that the income has escaped assessment. In fact, between the date of order of assessment sought to be reopened and the date of forming of opinion by the Assessing Officer, nothing new has happened. There was neither any change of law nor any new material or information had come to the knowledge of the Assessing Officer. It was merely a fresh application of mind by the Assessing Officer to the same set of facts”.
For the reasons given above and relying on the various case laws discussed by her, the ld. CIT(Appals) held that the reopening of assessment by the Assessing Officer was bad in law as the same was based on a mere change of opinion. Accordingly, the assessment made by the Assessing Officer under section 147/143(3) in pursuance of such invalid reopening was quashed by the ld. CIT(Appeals). Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal.
The ld. D.R. submitted that the assessment completed originally under section 143(3) was reopened by the Assessing Officer on altogether new issues, which had not been examined by the Assessing Officer during the course of assessment proceedings under section 143(3). He contended that it was thus not a case of reopening based merely on the change of opinion as held by the ld. CIT(Appeals) since there was no opinion expressed by the Assessing Officer on these issues during the course of original assessment proceedings under section 143(3). He also contended that the Assessing Officer can reopen the assessment if he has reason to believe that income of the assessee has escaped assessment and once there is a nexus between such reason and the belief about escapement of income, the reopening of assessment is permissible in accordance with the relevant provisions of law. He contended that the “tangible material”, ./2012 Assessment year: 2006-2007 Page 4 of 8 which forms the basis of reopening does not mean new tangible material and the Assessing Officer can rely upon the tangible material, which is already available.
The ld. Counsel for the assessee, on the other hand, invited our attention to the copy of reasons recorded by the Assessing Officer and pointed out that the assessment originally completed by the Assessing Officer under section 143(3) was reopened by the Assessing Officer on the basis of the same records as was available before him while completing the original assessment under section 143(3). He contended that no new fact or new material that had come to the possession of the Assessing Officer after completing the assessment originally under section 143(3), which forms the basis of reopening and thus the reopening of assessment by the Assessing Officer was clearly based on mere change of opinion as rightly held by the ld. CIT(Appeals). As regards the contention of the ld. D.R. that the reopening of assessment by the Assessing Officer was based on new issues, which had not been examined in the original assessment, the ld. Counsel for the assessee took us through the documentary evidence placed in his paper book at page no. 5, 10, 54, 108, 111, 113, 120-126 to show that all the issues raised in the reasons recorded by the Assessing Officer had already been examined during the course of original proceedings under section 143(3). He contended that the reopening of assessment by the Assessing Officer on the same issues, which had been examined during the original assessment, without there being any new material coming to his possession thus was based on a change of opinion, which is not permissible in law as held, inter alia, by the Hon’ble Supreme Court in the case of CIT –vs.- Kelvinator of India Limited reported in 320 ITR 561 and by the Hon’ble Calcutta High Court in the case of Debashis Moulik –vs.- ACIT reported in 370 ITR 660. He, therefore, strongly supported the impugned order of ld. CIT(Appeals) on this preliminary issue and urged that the same may be upheld. ./2012 Assessment year: 2006-2007 Page 5 of 8
We have considered the rival submissions and also perused the relevant material available on record. In order to appreciate the stand taken by both the sides on the preliminary issue raised in this case regarding the validity of reopening of assessment by the Assessing Officer, it is relevant to refer to the reasons recorded by the Assessing Officer for reopening the assessment, which are extracted below:- “Reasons for issue of notice U/S 148 for the AY 2006-07 Return declaring total income of Rs.2,03,13,738/- computed under the normal provisions of the Act was filed on 27.11.2006. Subsequently, assessment in this case was made U/S 143(3) on 31.12.2008 at an income of Rs.16,17,08,631 U/S 143(3)/ Rs.67,92,04,834 U/S 115JB.
"1. In this case, it has been noticed that the assessee company had claimed an expenditure of Rs.298 lakh on account of provision for non-performing assets under the head provisions as per the norms of Reserve Bank of India & Foreign Financial Institutions. This provision, being capital in nature, should have been disallowed and added back to the income of the assessee.
Further, tire assessment ill this case was completed at all income of Rs.1617.08 lakh under the normal provision and Rs.6792.04 lakh under section 115JB of the Act which was rectified to Rs.617.53 Lakh and Rs.6792.04 lakh respectively. In schedule 16, it was mentioned that the ill come in respect of operating Lease was recognized in instalments as accrued over the period of lease and initial direct costs incurred in negotiating and arranging Lease, Hire Purchase and Loans were debited as Upfront Fee in the Profit and Loss accounts. The assessee has treated the Upfront Fee in the following manners:-
i) The assessee claimed an expenditure of Rs.550.23 lakh on account of upfront fee. Tire assessee debited an amount of Rs.255.01 Iakh on account of upfront fee in the profit and loss account and in the statement of computation of taxable income the assessee has added back the amount debited in the profit and loss account and has claimed deduction for the full amount of Rs.550.23 lakh. ii) Rs.417.91 lakh on account of Upfront Fee under the head "Financial Charges" was also debited in profit and loss account.
This expenditure gave an enduring benefit to the assessee and income thereof also spread over the period of lease. The amount of upfront fee was required to be capitalized and added back to the income of the assessee.
3 In this case, there was a totalling mistake in the computation of income from "Business and Profession" under normal provisions of the Act which was taken at Rs.617.53 lakh instead of Rs.1617.53 lakh. The mistake resulted in excess tax credit to be allowed in the subsequent assessment ./2012 Assessment year: 2006-2007 Page 6 of 8 years by Rs.1000 lakh. In view of this, I have reason to believe that an amount of Rs.1000 lakh has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.
4 The assessee has availed deduction U/S 36(l)(viii) an amount of Rs.160.06 lakh {40% of (Total Interest income from Long term Finance / Total Income X Profit as per company act)} instead of Rs.18.20 lakh {As per annexure-A, 40% of (Total Interest income from Long term Finance / Total Income X Profit and gain of business}. In view of this, I have reason to believe that an amount of Rs.141.86 lakh has escaped assessment within the meaning of section 147 of the IT Act, 1961.
5 In this case, however the sales tax was not passed through the profit and loss account but all amount of Rs.112.95 lakh has been deducted from computation on actual payment. In view of this, I have reason to believe that an amount of Rs.112.95 lakh has escaped assessment within the meaning of section 147 of the IT Act, 1961."
The escapement of income has been on account of failure on the part of the assessee to truly and fully disclose all the material facts necessary for assessment. In view of the above, I have reasons to believe that an amount of Rs.2462.21 lakhs has escaped assessment within the meaning of section 147 of the IT Act, 1961."
It is manifest from the reasons recorded by the Assessing Officer for reopening the assessment that the assessment originally completed under section 143(3) was reopened by the Assessing Officer on the basis of the same records as was available before him while completing the original assessment under section 143(3) and there was no new material that had come to his possession on the basis of which assessment was reopened. At the time of hearing before us, the ld. D.R. has not disputed this position. He, however, has contended that the reopening of assessment by the Assessing Officer was based on altogether new issues, which had not been examined by the Assessing Officer during the course of original proceedings under section 143(3). However, as demonstrated by the ld counsel for the assessee at the time of hearing before us on the basis of relevant material placed on record in his paper book, all these issues were duly examined by the Assessing Officer during the course of assessment proceedings and only after having satisfied with the submissions made by the assessee, the claim of the assessee was accepted by him in the assessment completed under section 143(3). The ld. D.R. ./2012 Assessment year: 2006-2007 Page 7 of 8 has also contended that the tangible material which forms the basis of reopening need not be new and the Assessing Officer can rely even on the tangible material which is already available on record. In our opinion, this contention raised by the ld. D.R. runs contrary to the decision of the Hon’ble Calcutta High Court in the case of Debashis Moulik –vs.- ACIT reported in 370 ITR 660 whereas the assessment originally completed under section 143(3) was sought to be reopened by the Assessing Officer on the basis of new facts discovered from the existing records and it was held by the Hon’ble Calcutta High Court that the reassessment was reopened by the Assessing Officer merely on the basis of change of opinion, which was not permissible in law.
As already noted by us, there was no new material that had come to the possession of the Assessing Officer and since the assessment originally completed under section 143(3) was reopened by him on the basis of same material, which was available at the time of completion of original assessment under section 143(3), we are of the view that the reopening of assessment made by the Assessing Officer merely on the basis of change of opinion was bad in law as rightly held by the ld. CIT(Appeals). In that view of the matter, we uphold the impugned order of the ld. CIT(Appeals) cancelling the assessment made by the Assessing Officer under section 147/143(3) and dismiss this appeal filed by the Revenue.
In the result, the appeal of the Revenue is dismissed.