Case Law Details

Case Name : ACIT Vs Reliance Industrial Infrastructure Ltd. (ITAT Mumbai)
Appeal Number : I.T.A. No.5972/M/2012 & Cross objection No. 254/Mum/2013
Date of Judgement/Order : 23/09/2015
Related Assessment Year : 1999-2000
Courts : All ITAT (1731) ITAT Mumbai (490)

Brief of the Case

ITAT Mumbai held In the case of ACIT vs. Reliance Industrial Infrastructure Ltd. that on perusal of the reasons recorded by AO for initiating the re-assessment proceedings, it is clear that the said details were available while completing the assessment u/s 143(3). Further, the AO has reopened the assessment after expiry of four years from the end of the relevant assessment year. Hence it is imperative on the part of the assessing officer to show that the conditions specified in the first proviso to sec. 147 are complied with. However, the AO has failed to show that there was failure on the part of the assessee to disclose fully and truly all material facts. Hence, the reassessment proceeding under section 147 has not been validly initiated because the same has been initiated merely on a change of opinion without any fresh material coming into the possession of the AO.

Facts of the Case

The assessee filed its original return of income declaring a total income of Rs.40,56,090/- on 30-12-1999. The assessment was originally completed u/s 143(3) on 26.3.2002. Subsequently, the AO noticed that assessee has claimed Loss on sale of assets amounting to Rs. 2,65,78,977/- as deduction. The AO further noticed that the said claim pertained to the customs duty paid in respect of a Plant & Machinery, which had already been sold in the assessment year 1993-94. The AO took the view that the said claim is not allowable. Accordingly, he re-opened the assessment by issuing notice dated 29.3.2006 u/s 148 in order to disallow the above said claim.

Contention of the Assessee

The ld counsel of the assessee submitted that the AO has re-opened the assessment after expiry of four years from the end of the relevant assessment year and hence the first proviso to sec. 147 shall apply to the facts of the present case. He submitted that the AO has reopened the assessment without proving that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of original assessment proceeding. He further submitted that the assessing officer did make enquiries about the impugned claim during the course of original assessment proceedings and the assessee also gave a detailed reply. The assessing officer, after considering the explanations of the assessee in support of the impugned claim, accepted the same and hence he did not make any addition in the original assessment proceedings. Accordingly he submitted that there was no failure on the part of the assessee to disclose fully and truly all material facts and hence the first proviso to sec. 147 clearly applies to the facts of instant case. Accordingly he submitted that the AO has reopened the assessment on change of opinion only.

He relied on decision rendered by Hon’ble Delhi High Court in the case of Kelvinator India Ltd (320 ITR 561),wherein the Delhi High Court has held the assessment cannot be reopened on the basis of change of opinion. He also relied upon the decision rendered by the Hon’ble jurisdictional Bombay High Court in the case of CIT vs Gabriel India Ltd 203 ITR 1089 (Bom) and also in the case of Hindustan Lever Ltd vs ACIT 268 ITR 332(BOM). He also relied upon the judgment of the Bombay High Court in the case of Bhor Industries Ltd vs ACIT 267 ITR 161 (Bom). The ld AR for the Assessee further relied upon the Judgment of GKN Sinter Metals Ltd Vs. Ms Ramapriya Raghavan, ACIT {2015}55 Taxmann.com 438( Bombay) and submitted that the facts of present case are similar to the facts that prevailed in the above said case.

Held by the Revenue

The ld counsel of the revenue submitted that the assessee’s claim was allowed in the original proceeding on the belief that there was a contractual liability. Later it was found that there was no contractual liability and hence the assessing officer has reopened the assessment.

Held by CIT (A)

CIT (A) confirmed the validity of re-opening. It was held that new set of facts and tangible material have come on record after the completion of original assessment, and the AO after considering these new materials and facts on record, has form the view that income of the appellant had escaped assessment. Thus, in my considered view the reopening of assessment u/s.147 is completely justified. However, on merits, the CIT (A) allowed the expenditure incurred by the assessee on payment of customs duty.

Held by ITAT

ITAT held that re-assessment proceedings are liable to be quashed for the reason that the proceedings u/s 147 of the Act has been initiated merely on change of opinion. We have already seen that, while completing the original assessment, the AO has made enquiries with regard to the details of loss on sale of assets and further the details of the customs duty on the plant & machinery debited by the assessee in P & L account as the asset was not existing during the year. Thus we notice that the assessing officer has applied his mind on the impugned issue and has taken a view. On perusal of the reasons recorded by AO for initiating the re-assessment proceedings, we notice that the above said details were available while completing the assessment u/s 143(3). Hence we are of the view that the AO, on a mere change of opinion, has issued the notice for re-assessment. It is not permissible for the AO to resort to proceedings u/s 147 merely on change of opinion.

Further, we notice that the AO has reopened the assessment after expiry of four years from the end of the relevant assessment year. Hence it is imperative on the part of the assessing officer to show that the conditions specified in the first proviso to sec. 147 are complied with. However, the AO has failed to show that there was failure on the part of the assessee to disclose fully and truly all material facts. We are of the view that the reassessment proceeding under section 147 has not been validly initiated because the same has been initiated merely on a change of opinion without any fresh material coming into the possession of the AO.

Accordingly appeal of the revenue dismissed.

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