ITO Vs Ambattur Constructions Pvt. Ltd. (ITAT Chennai)
Original assessment completed u/s 143(3) accepting returned income of ₹7.82 lakhs. Later reopened u/s 147 r.w.s. 144B based on audit objection. AO added ₹6.52 crores received by assessee on retirement from a firm u/s 28(ii) (business income). Reopening was originally intended for an addition u/s 68 (unexplained cash credits), but no such addition was made.
CIT(A) quashed the reassessment holding that that reopening was based merely on audit objection & not on any new tangible material, terming the reopening as change of opinion which is not permissible in law. On merits, CIT(A) held that Section 28(ii) does not apply & that ₹6.52 crores received on retirement from the firm was capital receipt, not taxable.
Tribunal noted that reopening exercise has been undertaken by AO on the basis of same material that was available before AO during the course of regular assessment proceedings. The reopening has been done at the behest of audit objection. AO disagreed with the audit objection but still reopened the case of Assessee. Clearly the satisfaction is nothing but a borrowed satisfaction which is impermissible in law to reopen the case of Assessee. It is settled position of law that the formation of belief of escapement of income to reopen the case of the assessee is necessarily to be that of AO & nobody else. Only & only if AO is satisfied that certain income escaped assessment, the case could be reopened. After perusal of reasons recorded by AO to reopen the case of the assessee, it could very well be seen that formation of belief of escapement of income is on same set of material & financial documents which were already available before AO during the course of original assessment proceedings. The reasons do not indicate any event as to the receipt of any fresh tangible material coming to the possession of AO subsequent to culmination of original assessment proceedings. The formation of belief is on the same set of material as available during assessment proceedings u/s 143(3). This being the case, reopening would be nothing but mere change of opinion on existing material which is impermissible as per the decision of Hon’ble Apex Court in Kelvinator of India Ltd. (187 Taxman 312). It was held therein that the review of order is impermissible.
