CIT Vs. CENTRAL WAREHOUSING CORPORATION

JUDGEMENT

(1.) The revenue is aggrieved by the order of the Income Tax Appellate Tribunal (hereinafter referred to as "ITAT") dated 15.7.2011 in ITA 1874/Del/2011. The ITAT affirmed the order of the CIT(Appeals), but had set aside the assessee's second reassessment, pursuant to notice under Section 147 of the Income Tax Act, for assessment year 2002-03. It is urged that the findings are erroneous that the reopening of the proceedings was warranted in the circumstances of the case. The assessee, a statutory Central Government corporation, filed its return declaring loss of Rs. 2,65,77,24,891/-. The return was processed under Section 143(1). It was later selected for scrutiny, and notice was served upon the assessee on 17.10.2003 under Section 143(2). During the course of the scrutiny assessment, the assessing officer (AO) framed a detailed questionnaire concerning 18 issues, and asked the assessee to furnish replies and relevant details. The assessee furnished the requisite details in a detailed reply and also annexed the necessary documents. The A.O. therefore completed the assessment on 22.2.2005. In this initial assessment, the A.O. disallowed certain amounts including the exemption claimed under Section 10(29) of the Act, as well as certain categories of income and purchase. (While the matter stood thus, on 17.3.2006, the A.O. issued a reassessment notice, this time alleging that exemption claimed under Section 10(29) was inadmissible. He sought to add back a sum of Rs. 15,90,10,698/-. This was premised also, inter alia, on the footing that Section 37 could not have been sought recourse to, by the assessee in the circumstances. This reassessment notice (hereinafter called the "first reassessment notice") was set aside by the Appellate Commissioner on 25.10.2007. The matter attained finality.

(2.) Yet again, on 20.12.2007, the A.O. issued a second reassessment notice under Section 147 this time not only including the amounts sought to be added earlier, but also other amounts such as prior period expenses, deferred expenditure claimed for purchase of dunnage, its treatment in the books, and the debiting of unabsorbed expenditure in the profit and loss accounts. This reassessment proceeding and order was challenged by the assessee. The CIT(Appeals), by order dated 11.2.2011, was of the opinion that the second reassessment notice in fact was an impermissible "change of opinion". He also considered the merits of the additions and recorded that they were untenable. The revenue's appeal to the ITAT was rejected by the impugned order.

(3.) It is argued that an examination of the assessee's reply to the questionnaire clearly reveals that while it had originally not claimed these allowances, it did so in the revised return filed by it. This has led to the enquiry by the assessing officer who ultimately chose not to pursue the matter in the light of the assessee's reply dated 10.2.2005. The A.O. categorised this as "reason to believe", under Section 147 of the Act, and sought to justify the reopening in the circumstances of the case. Counsel for the assessee urged that upon the opening of original reassessment pursuant to the first reassessment notice dated 17.3.2006, it was open to the assessing officer to look into the entire record and bring to tax such amounts as found necessary. Not having do so, the A.O. could not have fallen back on the record, in the absence of "tangible material" or fresh reason, which alone could have provided him the rationale to issue a reassessment notice.