The Income Tax Appellate Tribunal (ITAT) while quashing the orders passed by tax authorities ruled that the reopening of assessment on account of “change of opinion” is not valid.
The assessee, M/s. Rajarathnam’s Jewels has been carrying on jewellery business in Bengaluru. It deals in gold, silver and diamond jewelleries and also undertakes job work from its customers. The assessee also runs a savings scheme titled as Akshaya Gold scheme.
The assessee was subjected to survey operation under section 133A of the Income-tax Act,1961. During the course of the survey, excess stock of gold titled by the AO as “un-reconciled gold” was noticed. It was claimed by the assessee that the gold and jewellery belonged to customers as well as family members weighing 17.319 kgs. were kept with it and the same was not included in its book stock.
The assessee submitted that the gold weighing 17.319 kgs were taken from family members and customers as metal loan for physical stock purposes only, i.e., the value of gold was not considered as liability of the assessee firm. Since it does not belong to the assessee firm, the same was not included in its stock.
The AO was of the view that the excess gold stock of 17.319 kgs. has to be brought to tax in the hands of the assessee. Accordingly, he re-opened the assessment of assessment years 2006-07 to 2012-13 by issuing notices under section 148 of the Act for the years. The assessee is challenging the validity of re-opening the assessment.
The coram of N.V. Vasudevan and B.R. Baskaran noted that the AO does not have any reason to doubt the genuineness of explanations given by the assessee with regard to the un-reconciled gold of 17.319 kgs of gold.
The ITAT said that the expression “un-reconciled” itself is a misnomer, since the revenue is aware of the receipt of gold from family members since 2001 itself, i.e., from the date of earlier survey operations.
“The AO has re-opened the assessment on mere change of opinion, because it is the assessing officer who took a different view at the time of reopening of the assessment, i.e., he has entertained an opinion that the family members should have transferred the gold to the assessee firm and then the assessee firm should have held the gold on its own account. There should not be any dispute that there is no material brought on record to support the above-said view of the AO. Under these circumstances, we have no other option but to hold that the assessing officer does not have any reason to believe that there was escapement of income in any of the years under consideration,” the ITAT said.
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