1.Commissioner of Income tax- 3 vs. SICOM LTD. [ Income tax Appeal no 137 of 2014 dt : 08/08/2016 (Bombay High Court)].

[Affirmed  SICOM LTD  vs.  Dy. Commissioner of Income Tax Range 3(3),. [ITA No. 3130/MUM/2011  ;  Bench : E ; dated 10/10/2012 ; A Y: 2003- 2004.  (Mum).  ITAT ]

Reopening – Within 4 years – Change of opinion –  reopening  not permissible :Sec 148                                                                          

The assessee company is engaged in the business of finance, leasing, banking and investment company (non-banking financial company). The return was filed declaring total loss of Rs. 84,29,79,390/- for AY 2003-04 . The assessment was completed for an income of Rs. 30,90,29,470/-  u/s 143(3) of the Act.  

Subsequently, the A.O. reopened the assessment by issuance of notice u/s 148 of the Act on 28-3-2008 after recording the reasons relating to write off of inter corporate  deposit (ICD), investment etc.

The assessee vide letter dtd. 18-7-2008 stated that there has been no failure on their part to disclose all the material facts in its return of income. However, the WA.O. observed that the assessee failed to furnish necessary details in respect of nature of assets written off. Therefore, it was a failure on the part of the assessee to disclose all the material facts in its return of income.

According to the A.O., the write off of investment wasa capital loss,  and the same couldnot be allowed as a revenue expenditure. Similarly, ICD and other assets written off constituted capital loss as these were the capital assets of the assessee, therefore, they were also not allowable as revenue expenditure and accordingly the A.O. added the same.

The assessee on the reopening of the assessment submitted that the assessee in response to the query raised by the A.O. in respect of write off done in the books of accounts of inter-corporate deposits, other assets and investment has filed detailed reply dtd. 10-11-2005 supported by the finding given by the Tribunal in assessee’s own case for the AY’s 1981-82, 1982-83  and 1983-84. It was  further submitted that the A.O. after considering the same has passed the assessment order u/s 143(3) of the Act. It was  further submitted that reopening of the assessment on the same sets of fact is  not permissible as it amounts to change of opinion.

The ITAT observed that in the course of original assessment proceeding the A.O. has considered and examined the particular aspect, the said aspect cannot be made a ground to reopen and initiate reassessment proceedings. The assessing authority cannot have a fresh look and reopen an assessment on the ground of change of opinion. The A.O. had considered and examined whether or not write off of the amount of inter-corporate deposits, other assets and investments was of revenue nature. The A.O. accepted the stand of the assessee and has made no addition in the original assessment proceedings. The reassessment proceeding cannot, therefore, be initiated on the ground that the said claim of the assessee cannot be allowed as permissible deduction under the provisions of the Act.  In the present case it is noticeable that the assessee had disclosed fully and truly all the material facts relevant for the assessment. There is no indication and it is not alleged that there was “tangible material” to come to the conclusion that there is escapement of income from assessment.  The reassessment proceeding  were quashed.

Being aggrieved by the order of ITAT, the Revenue filed  appeal before the Hon.  High Court. The High court  upheld the Tribunal order and dismissed the  Revenue appeal holding that Revenue has not been able to point out any fallacy in the reasoning of the Tribunal to come to the conclusion that the reopening notice is without jurisdiction