COMMISSIONER OF INCOME TAX Vs. MODIPON LTD.

JUDGEMENT

(1.) ASSESSMENT in this case was completed under Section 143(3) of the Income Tax Act (hereinafter referred to as "the Act") on 30.01.2004 at loss of Rs.1,03,63,693/ - as against the returned loss of Rs.1,75,90,254/ -. Thereafter, proceedings under Section 147 of the Act were initiated by issuing notice under Section 148 of the Act on 21.07.2005. Re -assessment proceedings were completed on 29.09.2006 at loss of Rs.39,13,425/ -. In re -assessment proceedings additions of Rs.31,87,271/ - and Rs.32,63,000/ - were made on account of disallowance of prior period expenses and capital expenditure respectively claimed as revenue expenses. The reopening was made on the basis of "tangible material" in the form of tax audit report filed by the Assessee and on the basis of information available in the Profit and Loss account.

(2.) BEFORE the CIT (A), the Assessee had challenged the validity of re -assessment proceedings. The CIT (A) vide para No. 2.3.3 of his order dated 25.09.2008 held that the reasons were recorded for reopening the assessment on 20.07.2005 within four years and therefore, the case is covered by the main Section 147 of the Act and not by the proviso in Section 147 of the Act. It was held by him that as per the amended provision of Section 147 of the Act, the only necessary pre -requisite is formation of belief by recording reasons for escapement of income. The CIT (A) held that the only requirement was that the AO should have some tangible material to come to the conclusion. The CIT (A) held that it cannot be said to be a "change of opinion" when the issue was never decided in the original assessment. The CIT (A), therefore, upheld the order of the AO.

(3.) IT is not in dispute that the re -assessment proceedings were initiated by the AO on the basis of tax audit report filed by the Assessee in Form No. 3CD and on the basis of information available in the Profit and Loss account. There was no reference to any new material by the AO which had come into his possession after the completion of original assessment under Section 143(3) of the Act. It is also a matter of record that before initiating re -assessment proceedings by issuing notice under Section 148 of the Act, the AO had initiated proceedings under Section 154 of the Act for the same reasons and proceedings initiated under Section 154 were dropped by him after the issuance of notice under Section 148 and were thus pending on the date of initiation of the re -assessment proceedings. In these circumstances, the Tribunal while setting aside the reassessment proceedings relied upon the Full Bench judgment of this Court in the case of Kelvinator of India Ltd. (supra) and quoted the following passage from the said judgment: