Relief to Ultratech: Assesment Proceeding cannot be Reopened u/s 147 of Income Tax Act by AO due to Mere 'Change in Opinion' [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that the Assessing Officer (AO) has not laid his hands on any new material post original assessment, reopening of assessment is nothing but change of opinion, thus the reopening under Section 147 of Income Tax Act, 1961 is not sustainable.

The assessee M/s. Ultra Tech Cement Ltd being a public limited company is into manufacturing and trading and sale of cement filed its return of income for the year under consideration declaring total income at Rs.2284,05,32,680/-, there after filed revised return at total income of Rs.2283,30,74,150/-.

On the basis of search and seizure operation carried out under Section 132 of the Income Tax at the premises of Aditya Birla Management & Corporation Pvt. Ltd. notice under Section 153C of the Income Tax Act was issued on the assessee for A.Y. 2008 – 09 to 2013-14 including the year under consideration.

The AO by recording reasons for reopening issued notice under Section 148 of the Income Tax Act and proceeded to frame the assessment by making different additions/ disallowance of deductions framed the assessment under Section 143(3) read with Section 147 of the Income Tax Act.

Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals), which partly allowed the appeal. Further aggrieved the assessee filed an appeal before the Tribunal.

The Authorised Representatives of the assessee (AR) contended that assessment was reopened  after a period of 4 years i.e. from the end of assessment year 2012 – 13 and as such proviso to Section 147 of the Income Tax Act. The AO should have reason to believe that any income chargeable to tax has escaped assessment in the case of assessee for the year under consideration, and that such income has escaped assessment due to failure of the assessee to file a return or disclose fully or truly all material facts necessary for assessment.

Departmental Representative(DR) submitted that the AO at the time of assessment under Section 143(3) of the Income Tax Act and as such there was no application of mind with respect of these documents by the AO at the time of completion of the original assessment.

The Bench comprising of Kuldip Singh, Judicial Member and S Rifaur Rahman, Accountant Member observed thatAO as well as CIT (A) had failed to build up the case of the assessee that such material facts necessary for completion of the assessment were not truly and fully disclosed by the assessee and as such reopening in this case is not sustainable in the eyes of law being void ab-initio.

The Tribunal stated that when the AO while recording the reasons has gathered all the facts from the assessment record itself it is difficult to believe the contention of the  D.R. that the complete material was not brought before the AO and he has not applied his mind. So when the AO has not laid his hands on any new material post original assessment reopening is nothing but change of opinion.

It is settled principle of law that “change of opinion” is not permissible under the garb of reopening under Section 147 /148 of the Income Act.  The Supreme Court of India in case of CIT vs Kelvinator of India Ltd held that there is a difference between power to review and power to re-assess under Section 147 of the Act and that AO had no power to review and that if the concept of “change of opinion” was removed then in the garb of reopening of assessment review would take place.

Hence reopening made by the AO by initiating proceedings under Section 147/148 of the Income Tax Act has not withstood the judicial scrutiny and the assessment framed was held not sustainable, so appeal filed by the assessee was allowed.

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