The ITO vs. Indian Packaging Products - (Income Tax Appellate Tribunal) (13 Dec 2023)

When primary facts necessary for assessment are truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment

MANU/IB/0600/2023

Direct Taxation

In present matter, the original assessment order was passed under Section 144 of the Income Tax Act, 1961 on 24th December, 2008 in which certain additions amounting to Rs. 8,81,120 were made by the Assessing Officer. The Assessing Officer was of the view that, as per the provisions of Section 184(5) of the Act, no remuneration and interest paid by the assessee to its partners was allowable while computing the income chargeable under the head of income from business. In appeal, Learned CIT(A) allowed relief to the assessee to the extent of Rs. 8,26,820. Thereafter, the Assessing Officer re-opened the case of the assessee under Section 147 of the Act.

It is a well settled law that, re-assessment proceedings cannot be initiated beyond a period of four years unless the Department is able to demonstrate that, such proceedings have been initiated on account of any failure on part of the assessee to truly and fully disclose all the material facts at the time of framing the assessment.

In the instant case, it is observed that re-assessment proceedings were initiated on the ground that remuneration and interest amounting to Rs. 1,83,200 and Rs.1,87,537 are not allowable to the assessee in view of the provisions of Section 184(5) of the Act. In the case of CIT vs. Bhanji Lavji, the Supreme Court held that, when primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment.

In the instant facts, re-assessment proceedings have been initiated beyond the period of four years from the end of the relevant assessment year. Further, it has also not the case of the Department that any fresh or new material had been unearthed which would lead to the conclusion that income had escaped assessment in the original assessment proceedings on account of failure on part of the assessee to fully and truly disclose all material facts during the course of original assessment proceedings.

The Assessing Officer is only seeking to make a disallowance on account of re-appreciation of law with respect to the same set of facts which were present before him during the course of original assessment proceedings. However, looking into the facts of the instant case, present is a case of mere change of opinion, which is not permissible in law. The appeal of the Department is dismissed.

Tags : TIME PERIOD REASSESSMENT LEGALITY