PRL., COMMISSIONER OF INCOME TAX-5 V. M/S UNITED STATES PHARMACOPEIA INDIA PVT.LTD.,

ITTA/713/2017

AI Insights

The case involves an appeal by the Prl. Commissioner of Income Tax-5, Kondapur against M/s. United States Pharmacopeia India Pvt. Ltd., Hyderabad, concerning the reopening of an income tax assessment. The Income Tax Appellate Tribunal had previously ruled that the reopening was based on a mere change of opinion without any new tangible material, which is not allowed under Section 147 of the Income Tax Act, 1961. The Tribunal's decision was based on the Supreme Court's precedent in CIT vs. Kelvinator of India Ltd., which prohibits reopening assessments on mere changes of opinion. The High Court, after hearing the arguments, found no substantial question of law arising from the Tribunal's decision and thus dismissed the appeal.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 733159 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 21-11-2017
• Assessment Year: misc
• Other Referred Cases: CIT vs. Kelvinator of India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: B SARMA
• Keywords: Change of opinion; Income Tax; Reopening of assessment; Tangible material
• Section: 147

Judgement Text

"The Hon’ble Sri Justice C.V.Nagarjuna Reddy and The Hon’ble Sri Justice T.Amarnath Goud I.T.T.A. No.713 of 2017 Dt: 21-11-2017 Between: Prl.Commissioner of Income Tax-5, Kondapur ….Appellant and M/s.United States Pharmacopeia India Pvt. Ltd., Hyderabad ….Respondent Counsel for the Appellant: Mr.B.Narasimha Sarma Sr.Standing Counsel for IT Dept., The Court made the following: CVNR, J & TA, J ITTA.No.713 of 2017 Dt: 21-11-2017 2 Judgment: (per Hon’ble Sri Justice C.V.Nagarjuna Reddy) This Appeal arises out of Order, dated 05-05-2017, of the Income Tax Appellate Tribunal, Hyderabad Bench ‘A’ (SMC), Hyderabad (for short ‘the Tribunal’), whereby it has held that reopening of assessment by the Assessing Officer (for short ‘the AO’) was not based on any tangible material found after making the assessment order and such reopening was based on change of opinion, which was not permissible as per the judgment of the Supreme Court in CIT vs. Kelvinator of India Ltd.1 At the hearing, Mr.B.Narasimha Sharma, learned Senior Standing Counsel for the Income Tax Department, made a strong bid to convince this Court that the afore- mentioned finding of the Tribunal is incorrect. He is, however, unable to point out the fresh material found by the AO after passing of the assessment order warranting reopening of the assessment by invoking his powers under Section 147 of the Income Tax Act, 1961. 1 [2010] 187 Taxman 312 CVNR, J & TA, J ITTA.No.713 of 2017 Dt: 21-11-2017 3 While relying upon the judgment of the Supreme Court in CIT vs. Kelvinator of India Ltd. (1 supra), the Tribunal observed as under: “In conclusion, the Hon’ble Delhi High Court has held that an assessment cannot be reopened on a mere change of opinion; reason to believe that the income chargeable to tax has escaped assessment is one of the conditions precedent for invoking the jurisdiction of the AO for reopening assessment u/s 147. Considering the principles laid down by the Hon’ble Supreme Court, it cannot be stated that AO has not examined this issue, which is very obvious not only from the annual report but also from various expenditure claims made during the year. Thus, I am of the opinion that there is no ‘tangible material’ to come to a different opinion or to take a different opinion. The very basis of earlier opinion being reviewed by the AO in the reassessment proceedings will certainly come into the domain of the ‘review of the order’ by the successive officer. Review of the order cannot be done in the form of reopening of assessment without there being any tangible material to form a different opinion, when the assessment is reopened within the four years from the end of the assessment year. In this case, since the assessment being reopened is within the four years from the end of the assessment year, the principles laid down by the Hon’ble Supreme Court that there should be ‘tangible material’ to form a different opinion would certainly come into play, since the very same material, which was examined at the time of original assessment, is the basis for recording reasons by the AO before the reopening of assessment. I am of the view that the conditions of Section 147 have not CVNR, J & TA, J ITTA.No.713 of 2017 Dt: 21-11-2017 4 been satisfied in this case. Accordingly, reopening per se is bad in law.” The Tribunal has also rendered findings on merits in favour of the respondent- assessee while setting aside the order of the AO as confirmed by the Commissioner of Income Tax (Appeals). The question as to whether reopening of the assessment is based on fresh tangible material or not is a question of fact, which was found by the Tribunal in favour of the respondent. Therefore, no substantial question of law arises for consideration in this Court in the present Appeal. Accordingly, the Appeal is dismissed. ______________________ (C.V.Nagarjuna Reddy, J) ___________________ (T.Amarnath Goud, J) Date: 21-11-2017 lur CVNR, J & TA, J ITTA.No.713 of 2017 Dt: 21-11-2017 5 "