Facts of the Case

The assessee, a Government of West Bengal undertaking and nodal agency for development of the IT and IT-enabled services sector in the State, filed its return of income for Assessment Year 2012-13 on 28.09.2012 declaring total income of ₹6,17,45,925. The case was selected for scrutiny and assessment was completed under Section 143(3) on 28.03.2015. Subsequently, reassessment proceedings were initiated under Sections 147 and 148 on the ground that the assessee had allegedly claimed excess standard deduction under Section 24(1) at 30 percent not only on rent receipts but also on electricity charges, service charges and permission fees. The reassessment resulted in an addition of ₹1,67,29,175. The reopening was upheld by the CIT(A), leading to the appeal before the Tribunal. Similar facts were involved for Assessment Year 2013-14.

Issues Involved

Whether reassessment proceedings initiated under Sections 147 and 148 based solely on material already available during original assessment constitute a mere change of opinion, whether absence of new tangible material invalidates reopening, and whether the reassessment framed pursuant thereto is sustainable in law.

Petitioner’s Arguments

The assessee contended that all primary facts relating to rent, electricity recovery, service charges and permission fees were fully disclosed during the original assessment proceedings and examined by the Assessing Officer while framing assessment under Section 143(3). It was argued that the reopening was initiated solely on reappreciation of the same material without any new tangible material, amounting to an impermissible review of the completed assessment. Reliance was placed on binding judicial precedents of the Supreme Court, particularly CIT vs. Kelvinator of India Ltd. and Mangalam Publications vs. CIT.

Respondent’s Arguments

The Revenue supported the reopening and contended that excess standard deduction under Section 24 had been wrongly allowed in the original assessment, resulting in escapement of income, and therefore reassessment proceedings were validly initiated.

Court Order / Findings

The ITAT Kolkata held that the reasons recorded for reopening clearly demonstrated that the Assessing Officer had relied entirely on material already available on record during the original assessment proceedings. The Tribunal observed that there was no new tangible material forming the basis of belief that income had escaped assessment. It was held that reopening on the same set of facts constituted a mere change of opinion and amounted to review, which is impermissible under the Income-tax Act. The Tribunal relied upon the Supreme Court decisions in CIT vs. Kelvinator of India Ltd. and Mangalam Publications vs. CIT and held that the reassessment proceedings as well as the consequential assessments were invalid in law.

Important Clarification

The Tribunal clarified that the concept of “change of opinion” acts as an inbuilt safeguard against arbitrary reopening of completed assessments. Reassessment proceedings can be initiated only when there exists new tangible material having a live nexus with the belief of escapement of income. Reappreciation of the same facts already examined during original assessment does not confer jurisdiction to reopen.

Final Outcome

Both appeals filed by the assessee for Assessment Years 2012-13 and 2013-14 were allowed. The reassessment proceedings initiated under Sections 147 and 148 of the Income-tax Act and the consequent assessment orders were quashed as being without jurisdiction and invalid in law.

Source Link- https://itat.gov.in/public/files/upload/1768199315-3bghYK-1-TO.pdf

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