ITO (E), GHAZIABAD V. M/S. SAHYOG JAN KALYAN SAMITI, KANPUR

ITA 6245/DEL/2016

AI Insights

The case involves an appeal by the Income Tax Officer (Exemption), Ward Ghaziabad against M/s. Sahyog Jan Kalyan Samiti concerning the validity of re-assessment proceedings for the assessment year 2007-08. The primary contention was the deletion of an addition of INR 2,37,00,816 made by the Assessing Officer (AO), which was later annulled by the CIT(A). The CIT(A) found the re-assessment proceedings invalid as they were initiated without any new tangible material, relying instead on facts from previous years, which constituted a mere change of opinion. The Tribunal's decision affirmed the CIT(A)'s ruling, dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 396487 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Other Referred Cases: ICICI Bank Ltd. v. Dy. CIT, Usha International Ltd. v. ITO, Habibullah v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: ASHISH JAISWAL
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Reopening of assessment; Reason to believe; Benefit of exemption; Tangible material
• Section: 147; 148; 143(3); 11

Judgement Text

"ITA No.6245/Del/2016 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI YOGESH KUMAR US, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.6245/Del/2016 [Assessment Year : 2007-08] ITO (Exemption), Ward Ghaziabad vs M/s. Sahyog Jan Kalyan Samiti, 122/619, Shastri Nagar, Kanpur PAN-AABAS0743G APPELLANT RESPONDENT Revenue by Shri Manish Gupta, Sr.DR Assessee by Shri Ashish Jaiswal, Adv Date of Hearing 27.05.2025 Date of Pronouncement 30.05.2025 ORDER PER MANISH AGARWAL, AM : The present appeal has been filed by the Revenue against the order dated 05.04.2016 passed by Ld. Commissioner of Income Tax (A)-II, Kanpur [“Ld.CIT(A)”] in Appeal No.CIT(A)-II/118/ACIT(E)/15-16 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 05.03.2015 passed u/s 143(3) of the Act pertaining to assessment year 2007- 08. 2. In this appeal, the Revenue has challenged the action of the AO in deleting the addition of INR 2,37,00,816/- made as per the grounds of appeal. Further, the Revenue has taken general grounds of appeal 3. Before us, the Ld.AR for the assessee drew our attention to the fact that the appeal of the Revenue is not on the legality of the re-assessment proceedings. He further submits that from the perusal of the order of Ld.CIT(A), it is seen that Ld.CIT(A) while allowing the appeal of the assessee has annulled the assessment order by holding the re-assessment proceedings as invalid and thus, the same deserves to be dismissed. ITA No.6245/Del/2016 Page | 2 4. On the contrary, Ld. Sr. DR stated that in the grounds, Revenue has taken general grounds that the order of Ld.CIT(A) be cancelled and the order of AO be restored which is against the action of Ld.CIT(A) in accepting the appeal on the validity of the re-assessment proceedings therefore, he requested accordingly. 5. We have heard the rival contentions and perused the material available on record. After considering the submissions and perusing from the order of Ld.CIT(A), we find that in the instant case, Ld.CIT(A) has held the re- assessment proceedings as invalid by observing that the case of the assessee is re-opened after a period of four years without any tangible material and such observations of Ld.CIT(A) are not challenged by the Revenue in the appeal. The relevant observation of Ld.CIT(A) are as below:- “……..During the course of appeal before me, it is informed by the counsel of the appellant that this disallowance of rent paid to Smt. Nirmala Singh travelled up to the level of High Court for the AY 2005-06 which is purely a question of fact. But whether this fact holds good for this year or not cannot be decided on the basis of surmises and conjectures. The AO has not come into possession of any new information or evidence to find that no activity related to society was carried out from this premise during the financial year under consideration. It is argued that merely on the basis of facts pertaining to earlier years without any new material related to society work being done from this premises, it will not be proper to hold that during the year under appeal too, no activities were carried out from rented premises. Each and every year is independent. It was argued that hired portion of property is used to store the material purchased for the institute because institute is situated at Bhauti which is approx 15-20 KM away from the city. The material is purchased from the city and kept stored in this place which thereafter dispatched to institute at Bhauti. These are pure question of facts and there is no precedence on facts. Hence the observations in the order of High Court on a factual aspect of the assessment for a particular year cannot form a basis for reopening of the completed assessment of other years especially when all ITA No.6245/Del/2016 Page | 3 these details of expenses were duly disclosed in the books of accounts and were examined while passing the order u/s 143(3) of the act by earlier AO. During the original assessment proceedings AO issued letter no. F.No. Dy. CIT/KNP/2009-10 dated 20.08.2009 and vide question 2009. This proves that the reasons on which belief was created by the AO is nothing but merely a change of opinion on the basis of material available on record which cannot empower the Assessing Officer to issue the notice of reopening under section 148 beyond the period of four years. On perusal of the reasons recorded before reopening the assessment, it is seen that the AO relied purely on the petition filed by the assessee in its own case for the A.Y. 2005-06 where this issue of rent payment, dismissed by the Hon'ble High Court, Allahabad, was duly discussed. AO relying on these observations relevant for AY 2005-06 formed an opinion that the benefit of exemption claimed u/s 11 of the I.T. Act, 1961 is not allowable to the assessee as the assessee has made violation of provisions of Sec. 13 of the I.T. Act. Since the assessee had shown excess of income over expenditure of Rs. 1,66,04,893/- therefore AO formed reasons to believe that a sum of Rs. 1,66,52,893/- representing undisclosed transaction (s) has escaped taxation for assessment year 2007-08. After the change in the incumbent of the office these reasons were formulated that is nothing but amounts to change of opinion. It is noteworthy that the AO has nowhere observed that the assessee had not disclosed at the original assessment stage all the facts involved in the issues made basis for reopening the completed assessment. During the course of appeal before me, it is informed by the counsel of the appellant that this disallowance of rent paid to Smt. Nirmala Singh travelled up to the level of High Court for the AY 2005-06 which is purely a question of fact. But whether this fact holds good for this year or not cannot be decided on the basis of surmises and conjectures. The AO has not come into possession of any new information or evidence to find that no activity related to society was carried out from this premise during the financial year under consideration. It is argued that merely on the basis of ITA No.6245/Del/2016 Page | 4 facts pertaining to earlier years without any new material related to society work being done from this premises, it will not be proper to hold that during the year under appeal too, no activities were carried out from rented premises. Each and every year is independent. It was argued that hired portion of property is used to store the material purchased for the institute because institute is situated at Bhauti which is approx 15-20 KM away from the city. The material is purchased from the city and kept stored in this place which thereafter dispatched to institute at Bhauti. These are pure question of facts and there is no precedence on facts. Hence the observations in the order of High Court on a factual aspect of the assessment for a particular year cannot form a basis for reopening of the completed assessment of other years especially when all these details of expenses were duly disclosed in the books of accounts and were examined while passing the order us 143(3) of the act by earlier AO. During the original assessment proceedings AO issued letter no. F.No. Dy. CIT/KNP/2009-10 dated 20.08.2009 and vide question no. 23 asked assessee for the details of all expenses to persons covered u/s 13(3) of the Act in the specified format to which the assessee replied vide it's letter dt. 03-09-2009 submitted complete details of payments made to such persons including payment of rent to Smt. Nirmala Devi were given along with her PAN. It is also important to know that appellant vide this letter categorically informed the current status of all the old appeals/issues pending before higher appellate authorities in response to the specific query raised by the AO in question no. 27 in letter no. F.No. Dy. CIT/KNP/2009-10 dated 20.08.2009. So it's clear that the AO while passing the said order in the original assessment proceedings was made aware specifically about the payment of rent to Smt. Nirmala Devi and old appeals pending, by the assessee. Hence there is no fault of the appellant to disclose fully and truly all material facts necessary for his assessment for that assessment year. If the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and ITA No.6245/Del/2016 Page | 5 the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessed, then without any new material coming into possession of the AO, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. If the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessed should be made to suffer the consequences of that lapse. Before issuing any notice U/S 148 the assessing officer must have reason to believe that any income chargeable to tax has escaped assessment. Reason to believe cannot be a reason to suspect merely. There must be a direct nexus between the material coming to the notice of the assessing officer and the formation of the belief that there has been escapement of income of the assessee from assessment in a particular year. The material for formation of belief must be relevant and not vague. In the case under consideration there is no new material that came into the possession of AO to form the required belief. All the facts that have been used by the AO to form belief for reopening the completed assessment u/ 143(3) of the Act, were duly disclosed by the assessee in its original return of income and further during the original assessment proceedings u/s 143(3) in reply to specific query raised by AO and also they were part of the ongoing legal dispute between the assessee and the department in earlier years. Mere a reason is recorded will not constitute a valid reason and is not sufficient to issue notice u/s 148 of the Act. To constitute a valid reason to believe there must be some new material coming into light with the assessing officer, merely a change of opinion cannot constitute a reason to believe. If the assessee has disclosed basic and all the true facts during the course of assessment and the assessment is completed u/s 143(3) of the Act, later on notice u/s 148 cannot be issued unless the assessee had suppressed relevant facts which leads to concealment of income and later those facts come before the assessing officer, then the notice u/s 147/48 can be issued validly. ITA No.6245/Del/2016 Page | 6 Reopening of case under for assessment u/s 147 after expiry of 4 years cannot be justified unless the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose all true & material facts necessary for his assessment. Where subject matter is a matter which is fully disclosed and partly allowed previously by the AO and on subsequent appeal party allowed by the CIT(A) therefore reopening of assessment on ground of escapement of income/ tax is not valid - ICICI Bank Ltd. v. Dy. CIT (2012) 65 DTR 249 /246 CTR 292/ 204 Taxman 65 (Bom). It is clear from the above facts that the present case is purely one of change of opinion. The questionnaire and all particular issues relating to rent paid to Smt. Nirmala Singh, etc. was provided by the assessee during the original assessment proceedings. Under these circumstances, no new information coming in possession of the AO itself amounts to change in opinion as has been held in Usha International Ltd. (2012) 348 ITR 485 (Delhi) (FB). Reassessment proceedings will be invalid in case the assessment order itself records that the issue under consideration was raised and was decided subsequently. Reassessment proceedings in the said cases will be hit by principle of \"change of opinion\". Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. The Supreme Court has reaffirmed the principle in ITO v. Habibullah, [1962] 44 ITR 809 SC HELD: there should be some \"tangible material\" coming into the possession of the AO in such cases to enable him to resort to section 147. Despite being a case of full and true disclosure, tangible ITA No.6245/Del/2016 Page | 7 material coming to the possession of the AO after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlier, of the assessing authority; he can with justification change it, but that would not be a case of a \"mere change of opinion\" unguided by new facts or change in the legal position. It will be a case of the assessing authority having \"reason to believe\", notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him. It is not a case of an assessee who has failed to furnish full and true particulars at the time of assessment. Where the assessee has discharged his duty and the assessment completed under section 143(3) is to be reopened within the period of 4 years from the end of the assessment year, the assessing officer has to either show that the disclosure by the assessee was not full and true or he has come into possession of some \"tangible material\", to come to the conclusion that there is escapement of income. The tangible material must have a live link with the formation of the belief regarding escapement of income. When there is no failure on the part of the assessee to furnish full and true particulars and there is no tangible material on the basis of which the assessing officer can allege escapement of income, the only consequence would be that the assessing officer was exercising the power of review on the very same materials which he is presumed to have examined. The first proviso to section 147 can be resorted to only if the assessee has not discharged the duty. This is not allowed by the statute and higher courts. With these observations I have no other alternative but to annul the assessment for the AY 2007-08 reopened on the basis of the notice issued on 27.03.2014 u/s 148 of the Act. Accordingly all additions made vide the impugned order are annulled.” 6. Ground No.2 taken by the Revenue is general wherein no reference is made on the observations made and the decision taken by the Ld.CIT(A) with regard to the legality of the re-assessment order passed u/s 147 of the Act as is evident from the order of Ld.CIT(A) as reproduced above. In view of these facts, ITA No.6245/Del/2016 Page | 8 we find no force in the arguments of the Revenue and the appeal of the Revenue is hereby, dismissed being not borne out of the order of Ld.CIT(A). 7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 30.05.2025. Sd/- Sd/- (YOGESH KUMAR US) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "