2016 (11) TMI 1563 - AT - Income Tax

Reopening of assessment - validity of reasons to believe - change of opinion - Held that - If specific queries were raised during the course of original assessment proceedings to which specific replies were filed by the assessee supported by relevant documentary evidences issuing notice u/s 148 to re-open the assessment on the very same issues considered at the time of the original assessment proceedings amount to change of opinion. As relying on CIT vs. Kelvinator of India Ltd reported in 2010 (1) TMI 11 - SUPREME COURT OF INDIA Notice issued u/s 148 of the Act was without jurisdiction and deserves to be quashed. - decided in favour of assessee.

Summary

Issues:
1. Jurisdiction challenge against notice u/s 148 of the Income Tax Act.
2. Reopening of assessment based on specific queries and replies during original assessment proceedings.

Issue 1: Jurisdiction challenge against notice u/s 148:
The appeal and cross-objection were directed against the order of the CIT(A)-VIII, Ahmedabad for AY 2007-08. The Counsel for the assessee challenged the jurisdiction of the Assessing Officer in issuing notice u/s 148 of the Act, arguing that this challenge could be raised even if not done before lower authorities. The Tribunal admitted this additional plea, citing relevant judicial rulings. The reasons for reopening the assessment included issues related to income from leasing assets held under stock-in-trade and disallowance of interest expenditure. The Tribunal held that raising jurisdictional issues before the Tribunal, even if not raised earlier, is permissible, as supported by judicial precedents. The Tribunal admitted the additional issue raised by the Counsel, leading to the quashing of the notice u/s 148 and the assessment made thereunder.

Issue 2: Reopening of assessment based on specific queries and replies:
During the original assessment proceedings, specific queries were raised regarding exempt income, interest-bearing funds, and rental income treatment. The assessee provided detailed replies supported by ledger accounts and documentary evidence. The Tribunal observed that issuing a notice u/s 148 to reopen the assessment on the same issues considered during the original assessment amounts to a change of opinion, as per the decision of the Supreme Court in CIT vs. Kelvinator of India Ltd. The Tribunal emphasized the importance of a live link between reasons and belief for reopening assessments post-April 1989. Based on this analysis, the Tribunal concluded that the notice u/s 148 was without jurisdiction and quashed the assessment made under it. As a result, the Tribunal dismissed the appeal by the Revenue and the cross-objection by the assessee, without delving into the merits of the case.

In conclusion, the Appellate Tribunal at Ahmedabad, in the cited judgment, addressed the challenges related to the jurisdiction of the Assessing Officer in issuing notice u/s 148 of the Income Tax Act and the reopening of assessment based on specific queries and replies during the original assessment proceedings. The Tribunal admitted the additional plea challenging jurisdiction and quashed the notice u/s 148 and the subsequent assessment. The Tribunal highlighted the importance of a live link between reasons and belief for reopening assessments post-April 1989, as established by relevant legal precedents, ultimately leading to the dismissal of the appeal and cross-objection.