The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) quashed the reassessment of the assessee, ruling that an assessment under section 147 of the Income Tax Act,1961 cannot be reopened based on mere change of opinion.
Bhartiya Samruddhi Investments and Consulting Services Limited,the appellant-assessee,claimed ₹91,47,928 as ‘sundry advances/assets written off’ in the Profit and Loss account for assessment year 2012-13. The Assessing Officer (AO) determined this expenditure was capital in nature and should have been added back to the income.
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The AO noted the assessee did not provide details during assessment proceedings, resulting in an overassessment of loss. A notice under section 148 was issued on 31.03.2019, followed by a notice under section 142(1), stating the deduction was not allowable under section 37 of the Act and requested justification for the claim, warning that non-compliance would lead to the addition of the amount to total income.
In response to the notice, the assessee stated that a regular assessment under section 143(3) was completed on 12.01.2015, accepting a loss of ₹23,20,15,750. The assessee argued that the reopening of the assessment on 31.03.2019 was unjustified, as the claim of ₹91,47,928 for ‘sundry advances/assets written off’ had been discussed during the original assessment.
They noted that the AO did not provide evidence of undisclosed material or suppression and that the required approval for the notice under section 151 was missing. The assessee contended there was no new tangible evidence for reopening and cited case laws to support their position, ultimately requesting cancellation of the reassessment proceedings.
The AO rejected the submissions of the assessee, stating that the claimed expenditure was capital in nature and not allowable under section 37(1) of the Act. The AO noted that the assessee failed to provide satisfactory justification for the deduction of ₹91,47,928 for sundry advances/assets written off. As a result, the AO disallowed the amount and added it to the assessee’s income.
The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)] against the AO’s disallowance of ₹91,47,928 for ‘sundry advances/assets written off’ as capital in nature under section 37 of the Income Tax Act. The AO reopened the case under section 147 due to overassessment of loss. The appellant’s reply lacked satisfactory justification, prompting the AO to add the amount to income. The CIT(A) upheld the AO’s findings and dismissed the appeal, citing insufficient proof of the expenditure’s genuineness.
Dissatisfied with the order of the CIT(A) the assessee appealed before the tribunal.
The tribunal reviewed the records and found that the assessee filed its return for AY 2012-13 on 27/09/2012, reporting a loss of ₹23,20,15,750, which was accepted in the regular assessment completed on 12/01/2015. The case was reopened by the AO on 31/03/2019 due to a claim of ₹91,47,928 for ‘sundry advances/assets written off.’ The AO added this amount back to income, citing a lack of tangible evidence for the claim.
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The bench noted that there was no new material to justify the reopening, which was merely a change of opinion. Since the reassessment occurred more than four years after the relevant assessment year ended, it violated the proviso to section 147.
The appellate tribunal referenced a ruling from the Jurisdictional High Court, emphasizing that mere change of opinion does not confer the AO with jurisdiction to reopen assessments. Consequently, the tribunal quashed the reassessment, deeming it invalid, and did not address the merits of the case, as they were deemed academic.
The two member bench comprising Madhumita Roy(Judicial Member) and Shamim Yahya(Accountant Member) allowed the appeal filed by the assessee.
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