Issue examined under original assessment proceeding: Whether re-opening in such case is justified
- The Assessee had filed its return of income by admitting total income of Rs. 23.82 crores. Subsequently, a revised return was filed on 18.04.2014 admitting total income of Rs. 21.82 crores. In the revised return, the Assessee claimed deduction of Rs. 2 crores paid towards interest on service tax. The revised return filed by the Assessee was taken up for scrutiny and assessment was completed under section 143(3) of the Act, dated 24.03.2016 by making addition of Rs. 42.13 lakhs towards disallowance of certain expenditure on the ground that Assessee could not submit proper bills and vouchers. The Assessing Officer had reopened the assessment by issuing notice under section 148, dated 28.03.2018 on the ground that an amount of Rs. 2 crores paid towards service tax related to A.Y. 2011-12 and was not admissible in the A.Y.2013-14, therefore total income was assessed at Rs. 24.24 crores.
- Reliance was placed on the decision of the Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., wherein it was concluded that, the concept of “change of opinion” on the part of the Assessing Officer to reopen the assessment does not stand obliterated by substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 & 1989 after the amendment the Assessing Officer has a reason to believe that income has escaped assessment but it does not mean that simply the Assessing Officer can reopen the case, one must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to re-open, provided there is “tangible material” to come to the conclusion that there is an escapement of income from assessment. Reasons must have a live link with the formation of the belief.
- In the present case, the Assessee had claimed interest on service tax paid as allowable deduction which related to the A.Y. 2011-13, for that purpose he filed revised return, and the same was examined by the Assessing Officer and completed the assessment under section 143(3). Therefore, the Assessing Officer had already formed an opinion that the deduction claimed by the Assessee was an allowable deduction and accordingly allowed. Subsequently, on the basis of very same revised return and on the very same claim the Assessing Officer came to a conclusion that the expenses claimed by the Assessee related to the earlier year i.e. A.Y. 2011-12 and not to the assessment year under consideration.
- Hence, it was inferred that it was a mere change of opinion and the same was not permissible under the provisions of the Act. Accordingly, the order was liable to be quashed.