I-T - If material facts are available during assessment and no new tangible material comes after closure of assessment, then initiating re-assessment is change of opinion which is not permissible: ITAT
By TIOL News Service
MUMBAI, DECEMBER 01, 2018: THE ISSUE IS - Whether if material facts are available during assessment process and no new tangible material comes after closure of assessment, then initiating re assessment process is change of opinion which is not permissible. YES IS THE VERDICT.
Facts of the case
The assessee had filed return for relevant AY. The original assessment was framed u/s 143(3) of Act. Subsequently, on perusal of record, it was found by the AO that taxable income, in view of incorrect claim of deduction u/s 35DDA of the Act, had escaped assessment, consequently, proceedings u/s 147/148 of the Act were initiated after recording the reasons and therefore notice u/s 148 of the Act was issued after obtaining approval of Additional DIT(E), Range-II, Mumbai and the notice was duly served upon the assessee. The AO passed the re -assessment order. On appeal, CIT(A) upheld the action of AO. Aggrieved assessee filed appeal before Tribunal and submitted that reopening of assessment was invalid, without appreciating the fact that details were already made available to the AO and thus the order was passed merely on "Change of Opinion" on the same facts.
Tribunal held that,
++ in cases where an AO incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort may be made through section 263 of the Act. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. Here a distinction has to be drawn between erroneous application/interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is formed on facts. "Opinion" formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of "change of opinion". Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression "material facts" means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer's proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. A decision from Delhi High Court dated September 26, 2011 in Dalmia P. Ltd. v. CIT and another decision from jurisdictional High Court dated November 8, 2011, in Indian Hume Pipe Co. Ltd. v. Asst. CIT are two such cases, which throw light on the issue. If the judicial pronouncements are kept in juxtaposition with the facts of the present appeal, admittedly, the assessee furnished audited financial statement for the year ending 31/03/2008, computation of total income and other relevant material for making its claim. It is not the case that any new tangible material came to the notice of the AO at the later stage. Rather, it is a case, where the AO incorrectly applied the provision of the Act, therefore, on the same set of facts/claim, merely on the basis of "change of Opinion", the completed assessment under section 143(3) of the Act is not permissible. It is noteworthy that at the relevant time, the assessee was entitled to benefit of section 12A of the Act, therefore, from this angle also, the AO was not within the legal parameters to reopen the completed assessment. Thus, so far as, reopening is concerned, it was wrongly reopened, consequently, this ground of the assessee is allowed.
(See 2018-TIOL-2290-ITAT-MUM)
