Mere Change of Opinion Based on Revenue Audit Objection Cannot Sustain Reassessment Without Fresh Tangible Material: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, quashed reassessment proceedings initiated solely on the basis of Revenue Audit objection after finding that the Assessing Officer (AO) had merely revisited material already available during scrutiny assessment without any fresh tangible material.

The assessee, A2Z Waste Management (Ranchi) Limited, had filed its return of income declaring nil income for AY 2013-14 and the assessment was originally completed under Section 143(3) of the Income Tax Act, 1961, accepting the returned income. Subsequently, reassessment proceedings were initiated on the ground that the assessee had wrongly claimed set off of brought forward business loss against interest income taxable under the head “Income from Other Sources”.

The reassessment proceedings were initiated pursuant to a Revenue Audit objection alleging incorrect set off of brought forward business losses against interest income.

Aggrieved by the reassessment order, the assessee preferred an appeal before the CIT(A), who partly allowed relief by permitting set off of brought forward business losses against interest income earned on FDRs kept as margin money for availing loans, while sustaining the balance disallowance. The assessee thereafter approached the Tribunal challenging the validity of reassessment proceedings as well as the remaining additions.

Before the Tribunal, the assessee submitted that all material facts had been fully and truly disclosed during the original scrutiny assessment and that reopening was initiated solely on the basis of material already available on record. The assessee further pointed out that the AO had completed the original assessment after examining books of account and supporting documents and had consciously allowed the set off claimed by the assessee.

The Revenue contended that the assessee had not participated before the Assessing Officer during reassessment proceedings and that the reassessment order had been passed ex parte.

The Tribunal comprising Anubhav Sharma (Judicial Member) and Manish Agarwal (Accountant Member) observed that the recorded reasons themselves showed that reopening was triggered solely on the basis of Revenue Audit objection without any fresh tangible material.

Relying on the decisions in CIT v. Kelvinator of India Ltd. and CIT v. Simbhaoli Sugar Mills Ltd., and other precedents, the Tribunal held that such reopening amounted to impermissible change of opinion and could not sustain reassessment proceedings.

Accordingly, the Tribunal quashed the notice issued under Section 148 and the consequent reassessment order.

The assessee’s appeal was allowed.

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