Reopening by successor AO by revisiting the same materials is invalid

The fact of the matter is that during the course of the original assessments under Section 143 (3), the AO did serve upon the Assessee a detailed questionnaire. The AO examined the nature of the transactions involving the Assessee and the payments received therefor. The reopening was not based on any fresh material. By revisiting the same materials the successor AO now concluded that the payments received by the Assessee pursuant to the O&M Agreements should be treated as FTS. In the circumstances, the view taken by a successor AO on the same material was indeed nothing but a mere change of opinion. It is a well-settled legal proposition, as explained in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) that once an Assessee has discharged the burden of not only producing the account books and other documents, but also the specific material relevant to the assessment, “it is for the Income-tax Officer to draw the proper inferences of fact and law therefrom and the Assessee cannot further be called upon to do so for him.” In Indian Oil Corporation v. ITO [1986] 159 ITR 956. the Court pertinently observed “it is for the taxing authority to draw inference. It is not necessary for the Assessee to draw inference.” These observations apply on all fours to the case on hand. Here the Assessee had discharged its burden of disclosing fully and truly all the material facts before the AO during the original assessments. There was no basis for the successor AO to conclude that “no opinion with regard to taxation” of the payments received for the services rendered had been formed by the AO. It is plain that the pre-condition for invoking Section 147 did not exist. The assumption of jurisdiction under Section 148 of the Act was not valid.

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