Bharat Electronics Ltd. Vs ACIT (ITAT Bangalore)
In the world of taxation, assessments and reassessments play a crucial role in determining the tax liability of individuals and entities. However, there are certain principles and procedures that must be followed to ensure the fairness and legality of these processes. The case of Bharat Electronics Ltd. Vs ACIT, heard by the Income Tax Appellate Tribunal (ITAT) in Bangalore, sheds light on the issue of reassessment based on a mere change of opinion without the presence of new evidence.
The crux of the matter lies in the proceedings initiated under Section 148 of the Income Tax Act. In this case, the appellant, Bharat Electronics Ltd., had filed an appeal against the order passed under Section 143(3) read with Section 147 of the Act. The Commissioner of Income Tax (Appeals) or CIT(A) had confirmed certain additions made by the Assessing Officer (AO).
One of the primary arguments raised by the assessee before the ITAT was the maintainability of the proceedings initiated under Section 148. The appellant contended that even though objections to the reopening were submitted to the AO, they were not addressed before the reassessment was carried out. According to the appellant, the AO should have disposed of these objections through a speaking order before proceeding with the reassessment. Failure to do so, in their view, rendered the entire proceeding illegal and liable to be quashed.
The Tribunal, in its analysis, noted that the AO had indeed mentioned the objections raised by the appellant in the assessment order itself. Therefore, the AO had taken note of these objections before proceeding with the reassessment. Consequently, the Tribunal did not find sufficient grounds to quash the reassessment solely on the basis of objections not being independently addressed.
Another critical argument put forth by the assessee was that the issues raised during the reopening of the assessment had already been dealt with in the original assessment. The appellant relied on various judgments, including one by the Hon’ble Supreme Court, which stated that reopening an assessment on the same set of facts, without the presence of new material, amounts to a change of opinion and is impermissible.
The Tribunal concurred with this argument and observed that there was no new material that had come to the knowledge of the Assessing Officer after the original assessment proceedings. Reopening an assessment based on a mere change of opinion, without the introduction of new evidence or material, was deemed void ab initio (invalid from the outset) and bad in law.
The Tribunal further referenced the decision of the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., emphasizing that the power to reopen assessments cannot be used as a means of reviewing or reassessing cases on the same set of facts. The Tribunal upheld that, in the absence of any fresh material, the reassessment initiated solely due to a change of opinion was not legally sustainable.
Conclusion:
The case of Bharat Electronics Ltd. Vs ACIT (ITAT Bangalore) serves as an important reminder of the legal principles governing reassessment proceedings in taxation. Reopening an assessment without the presence of new evidence and solely on the grounds of a change of opinion is not permissible under the law. Such reassessments are considered void ab initio and are liable to be quashed. This decision reaffirms the need for tax authorities to follow due process and ensure the presence of valid reasons and fresh material before initiating reassessment proceedings.
Author’s comments:
Though the decision of Tribunal is in favour of the assessee, the findings of the Tribunal with regard to requirement of speaking order is against the law laid down by the Supreme Court in GKN Driveshafts (India) Ltd vs ITO. It appears that the assessee also did not specifically point out the decision.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
The instant appeal filed by the assessee is directed against the order dated 29.03.2023 passed by the NFAC, Delhi arising out of the order dated 28.03.2016 passed by the Ld.DCIT, Large Tax Payers Unit, Circle – 1, Bangalore u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2009-10 whereby and where under the addition made in the reassessment proceeding u/s. 148 of the Act for the A.Y. 2009-10 has been confirmed.
2. At the very threshold of the matter, the Ld.Advocate appearing for the assessee advanced her argument on the very point of the maintainability of the proceeding initiated u/s. 148 of the Act. The crux of the submission of the Ld.Advocate appearing for the assessee is on two fold.
According to her, though upon receipt of the notice u/s. 148 of the Act dated 01.10.2014 alleging escapement of assessment in regard to a sum of Rs.48,47,73,370/- being the deduction towards the provision for customer disallowances and disallowance u/s. 35(2AB) to the extent of Rs.1,02,76,500/-, the appellant duly made objections dated 28.10.2014 before the Ld.AO on merit on two counts as raised by him, the Ld.AO proceeded with the reassessment proceeding without first disposing of the said application preferred by the assessee dated 28.10.2014. As the Assessing Officer is bound to dispose of the said objection by passing a speaking order but proceeded to pass the order of assessment, the entire proceeding is not in terms of the statutory provisions and the impugned order is, therefore, bad in law and liable to be quashed. Secondly, it was argued by the Ld.Advocate appearing for the assessee that the issues as raised by the Ld.AO while reopening assessment u/s. 148 of the Act were already been dealt with during the original assessment proceeding. Upon examining the documents furnished by the assessee in support of the claim made out the original assessment was framed and in the absence of any new material given to the knowledge of the assessing officer subsequent to the original assessment proceedings, reopening on the same set of facts was a clear case of change of opinion and the same is not, therefore, permissible. In this regard she has relied on very many following judgments including the judgment passed by the Hon’ble Supreme Court in case of CIT vs. Kelvinator of India Ltd. reported in (2010) 187 Taxman 312 (SC):
