ITO Vs Bishambhar Dayal Agrawal (ITAT Raipur)
Income Tax Appellate Tribunal (ITAT), Raipur Bench, recently addressed procedural and substantive issues concerning the reopening of assessments under Section 147 of the Income Tax Act, 1961, in the case of ITO Vs Bishambhar Dayal Agrawal. A key preliminary issue involved the assessee’s right to challenge the jurisdiction assumed by the Assessing Officer (AO) for reopening the assessment, even without filing a cross-appeal or cross-objection, and despite not raising the issue before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued this point orally under Rule 27 of the ITAT Rules, 1963.
The Tribunal considered whether such an objection was maintainable. Relying on the Delhi High Court’s judgment in Sanjay Sawhney Vs. Pr. CIT (2020), the ITAT affirmed that Rule 27 does not mandate a written application, thus permitting oral submissions. Furthermore, citing the Bombay High Court’s decision in Peter Vaz Vs. CIT (2021), the Tribunal held that a respondent (the assessee in this instance) is entitled under Rule 27 to support the favourable order of the lower authority (CIT(A)) by raising new legal grounds, including jurisdictional challenges, without needing a cross-objection, even if the specific ground was not raised previously. The ITAT concluded that the assessee was well within his rights to orally raise the objection regarding the validity of the jurisdiction assumed by the AO under Section 147.
Reassessment Invalidated Due to “Change of Opinion”
Having admitted the assessee’s preliminary objection, the ITAT examined the core issue: the validity of the reassessment proceedings initiated under Section 147. The original assessment for Assessment Year 2010-11 was completed under Section 143(3) on March 7, 2013. The AO later reopened the assessment based on “reasons to believe” that certain deductions for performance guarantees and deposits, previously treated under contract expenses, should have been shown as assets (deposits) and were potentially funded from undisclosed sources, invoking Section 69 for undisclosed investment.
The ITAT observed that the records indicated the AO, during the original assessment proceedings, had already examined the assessee’s claim for contract payment expenses, which included the amounts later disputed (performance guarantee/deposits). The reopening was initiated not based on any new information or tangible material that came to light after the original assessment concluded, but rather through a re-appreciation of the same facts and materials already available on record. The successor AO essentially formed a different view on the same set of facts considered by the original AO.
Reliance on Supreme Court and High Court Precedents
The Tribunal heavily relied on the landmark Supreme Court judgment in CIT Vs. Kelvinator of India (2010). This ruling established that while the post-1989 amendment broadened the scope of Section 147, it does not grant arbitrary power to reopen assessments based merely on a “change of opinion.” Reassessment requires “tangible material” indicating income escapement, distinguishing it from a review, which the AO is not empowered to conduct. The concept of “change of opinion” acts as an in-built check against abuse of power.
The ITAT also cited several Bombay High Court rulings (Asteroids Trading & Investment P. Ltd. Vs. DCIT (2009), Asian Paints Ltd. Vs. DCIT (2008), ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT (2010), Aventis Pharma Ltd. Vs. Asst. CIT (2010)) reinforcing that reopening an assessment based on a fresh application of mind to the same facts, without new material, constitutes an impermissible change of opinion. Even for reopenings within four years, as supported by NYK Lime (India) Ltd. Vs. DCIT (2012) and Purity Tech Textile Pvt. Ltd. Vs. ACIT (2010), fresh tangible material is necessary. Consequently, the ITAT concluded the reopening lacked valid jurisdiction, quashed the reassessment order, and dismissed the Revenue’s appeal without delving into the merits of the addition made under Section 69.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
