Whether the contention of the assessee once accepted by AO can again be challenged by issuing order u/s 148?

Ratnagiri Gas & Power Pvt Ltd vs. DCIT - (ITAT DELHI) - 29 Aug 2017

Question of law discussed : Whether the contention of the assessee once accepted by AO can again be challenged by issuing order u/s 148?


Some important facts/ discussion of the case for easy reference:

1-During the year under consideration, assessee company had earned an income of Rs.3,13,23,000/-. Out of the total amount of Rs.3,13,23,000/-, an amount of Rs.2,72,27,000/- was transferred by the assessee company to the IEDC (Incidental Expenditure during Construction) account, and the balance amount of Rs.40,96,000/- was transferred to the Profit and Loss Account and the same was duly accepted by the AO however it was re-assessed in the order 148 and asked to tax the same under "income from other sources" and would be taxed basis on normal rates instead of being included in 115JB tax rate which assessee has used..However the contention of the assessee was duly accepted by the AO before issuing the order 148,

2-Hon‟ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. v. CIT [2011] 336 ITR wherein the Court has held as under:

“Section 147 has this effect that the Assessing Officer has to assessee or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings However, if after issuing a notice under Section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under Section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee."

3- Delhi High Court in the case of CIT v. Adhunik Niryat Ispat Ltd. in ITA No. 2090 of 2010 dated 28.07.2011 Since the grounds for reopening the reassessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. - Decided in favor of assessee.

4- Therefore, since the income which the AO had alleged in the reasons recorded to have escaped assessment, has not been added to the income of the assessee for the year under consideration, the action of the AO in raising an additional demand on other issue is bad in law and contrary to the above judicial pronouncements,

5- CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561- Learned court (SC) held that " One needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re¬assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re¬opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer.Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.........."


For reading full text of the judgement please refer link - https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/September_2017/917Taxpundit58.pdf