Asst. CIT, Central Circle-18 vs Ashish Gupta

PER MANISH AGARWAL, AM:

The captioned appeal is filed by the Revenue and Cross Objection is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)-27, New Delhi [CIT(A) in short], dated 14.06.2023 in Appeal No. CIT(A), Delhi-10245/2019-20 arising out of the order passed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act, in short) dated 24.12.2029 for Assessment Year 2012-13.

Assessee in the cross objections has challenged the reopening u/s147 of the Act on the ground that no new/fresh material was brought on record though the case is reopened after the expiry of four years from the end of the relevant assessment year, more particularly when all the materials facts truly and necessarily required for completing the assessment were disclosed by the assessee in the original assessment proceedings u/s 143(3) of the Act and available in the assessment records. Since, the assessee has taken legal objections challenging the reopening of assessment, therefore, the same is taken first for consideration.

Before us, Ld. AR for the assessee submits that in the instant case, assessment order was originally passed u/s 143(3) on dated 29.03.2014 wherein after considering all the facts and submissions made by the assessee, additions of Rs. 44,120/- was made and, accordingly, the total income of the assessee was assessed at Rs.4,97,527/- as against the declared income of Rs.4,53,407/-. Thereafter, the AO has reopened the case of the assessee for the reason that the assessee has accepted loan from M/s Aerens Projects and Infrastructure Pvt. Ltd. in which assessee is having 18% shareholding and thus, the same is deemed dividend u/s 2(22)(e) of the Act. The AO after obtaining necessary approval from the PCIT-2, New Delhi, reopened the case of the assessee and issued notice u/s 148 of the Act on 30.03.2019. The Ld. AR submits that it could be seen from para 2 of the reassessment order wherein the AO observed that “…… on perusal of the balance sheet of assessee and details of loan and advance received as on 31.03.2012 it is noticed…..”. The ld. AR submits that the aforesaid observations of the AO makes it crystal clear that the satisfaction of escapement of income was recorded solely on the basis of materials already available on record in the shape of Balance Sheet and list of loans and advances which were filed by the assessee during the course of original assessment proceedings carried out on 143(3) of the Act and no new material/evidence/material is brought on record before recording the satisfaction of escapement of income.

On the other hand, Sr. DR for the revenue vehemently supported the orders of lower authorities and submits that assessee has holding shares of more 18% in the company and had received loans from the same company which fact remained to be disclosed during the original assessment proceedings. As per ld. Sr. DR when this fact was not disclosed by the assessee therefore, it constitutes fresh information and thus, reopening of the case u/s 147 on the basis of such information is in accordance with law and requested for confirmation of action of AO of reopening the assessment.

Heard both the parties and perused the materials available on record. In the instant case, assessment was originally completed u/s 143(3) vide order dated 29.03.2014 wherein the AO has examined the genuineness of the loan taken by the assessee from the company M/s Aerens Projects and Infrastructure Pvt. Ltd. after considering its financial statements such as Balance Sheet etc. It is further observed that the AO had proposed the addition for the loan taken from M/s Aerens Projects and Infrastructure Pvt. Ltd. vide show cause notice dt. 11.03.2014 and after considering the reply no addition was made for such loan. It is further observed that in reply to the show cause notice, assessee has filed all the relevant details of the loan taken from M/s Aerens Projects and Infrastructure Pvt. Ltd. It is further observed that during the course of assessment proceedings assessee has filed the copy of the its balance sheet, computation of income and schedule appended to Balance Sheet which include the list of unsecured loans & advances taken as well as given and all such information are available in the assessment folder.

It is further observed that the AO at para 2 of reassessment order made categorical observations that fact of receipt of loan by assessee from M/s Aerens Projects and Infrastructure Pvt. Ltd. is notice on perusal of the Balance Sheet and another documents available on record. Thus no new information or material was referred by the AO before recording the satisfaction of escapement of income and has referred the material and information disclosed by the assessee during the original assessment proceedings where the AO, after considering the materials and information filed by the assessee framed the opinion that loan taken from M/s Aerens Projects and Infrastructure Pvt. Ltd. is genuine loan and no adverse interference was taken. It is further observed that not only all the material facts related to such loan were which by the assessee, which were examined by the AO and the information available was duly examined before the completing the assessment. The case of the assessee is reopened after the expiry of four years from the end of the relevant assessment year and as per section 147 of the Act, it is the pre-condition that where AO in his possession has any new material/information than only the case could be reopened after the expiry of four years from the end of relevant assessment year.

The Hon’ble Jurisdictional High Court in the case of ACIT vs. AIIM Fincon (P.) Ltd. (supra), held that without having any new material, the reopening of assessment based of same material is mere change of opinion and therefore, the assessment could not be reopened.

The Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd. reported in (2010) 320 ITR 561(SC) held that the AO has power to reopen the assessment if there was reason to believe that income of the assessee has escaped assessment. The Hon’ble Court further held that reason to believed must be based on tangible material in possession of the AO after the completion of the original assessment proceedings.

The Hon’ble Delhi High Court in case of CIT vs. M/s Multiply Trading & Industrial Co. reported in 378 ITR 351 (Delhi) has held that “in order to reopen the assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been failure on the part of assessee to truly and fully disclosed all the materials facts must be concluded which certain level of certainty”.

In the instant case as observed above, the assessee has disclosed all the facts necessary for the assessment during the course of original assessment proceedings and it is not the case of the AO that the assessee has failed to disclosed truly and fully all materials facts to the satisfaction of the AO. Further the instant case has bee reopened on the basis of the material already available on record and on which opinion was already framed. Therefore, now again revisit the same document for reopening the assessment is mere change of opinion which is not permissible in the eyes on the part of law.

In view of above discussion and by respectfully following the judgment of Hon’ble Supreme Court in the case of Kelvinator of India Ltd. (supra) and of the Hon’ble Delhi High Court in the aforesaid cases, we are of the view that AO has wrongly reopened the assessment u/s 147 of the Act which is change of opinion and cannot form the basis of reopening the assessment. Accordingly, the notice issued u/s 148 is hereby held as bad in law and the consequent reassessment order passed is hereby quashed.

Since, we have already allowed the Cross Objections and quashed the reassessment order, the appeal of the Revenue become infructuous, thus dismissed.

In the result, the appeal of the Revenue is dismissed and Cross Objection filed by the assessee is allowed.