Change of opinion not permissible for invoking proceedings u/s 147. ITAT quashed reassessment for payment of managerial remuneration in proprietorship firm
ABCAUS Case Law Citation:
ABCAUS 3099 (2019) (08) ITAT
Important case law relied upon by the parties:
CIT v. Kelvinator of India Ltd.: 320 ITR 561(SC)
The instant appeal was filed by the assessee against the order of the Commissioner of Income Tax(Appeals) in confirming the reopening of assessment u/s.147 of the Income Tax Act, 1961 (the Act).
The assessee derived income from the proprietorship firm and from other sources. The assessee filed the return of income and the assessment was completed u/s 143(3) of the Act.
Thereafter, the AO observed that there was escapement of assessment within a meaning of section 147 of the Act and notice u/s148 of the Act was issued 7 to furnish return of income.
Since the assessee did not file the return of income in response to notice u/s.148 of the Act, the Assessing officer treated the return filed u/s 139(1) of the Act as return under section 148 of the Act.
As per the reasons recorded for reopening of assessment, that despite being a proprietorship firm, the assessee had debited in his P&L account, managerial remuneration. The reasons further stated that since both the proprietor and the firm were inseparable and single entity, the managerial remuneration was to be disallowed. Hence, the satisfaction was recorded by the AO that he had reasons to believe that income to the extent of managerial remuneration claimed had escaped assessment within a meaning of section 147 of the Act.
Since there was no response from the side of the assessee, the Assessing officer completed the reassessment u/s 144/147 of the Act and passed the assessment order u/s 143(3) of the Act, inter alia, disallowing the said managerial remuneration.
Before the Tribunal, the assessee contended that the impugned reassessment order was nothing but a change of opinion and there was no fresh information available on record to justify the reopening of assessment.
The Tribunal observed that the accounts of the assessee were duly audited u/s 44AB of the Act and the fact of remuneration paid to two partners equally was also reflected in the audit report.
The Tribunal further noted that in the reasons recorded by the AO, it was stated that the aspect of remuneration was not considered during the course of original assessment proceedings u/s.143(3) of the Act.
Considering the peculiar situation under which the proceedings were started u/s 147/148 of the Act, the Tribunal opined that the law relating to change of opinion being not permissible for invoking proceedings u/s 147 of the Act is now well settled by Hon’ble Supreme Court.
The Tribunal opined that in the instant case, on the basis of change of opinion, the Assessing officer had resorted to section 147 of the Act in reopening of assessment and, therefore, it quashed the reassessment proceedings u/s 147 of the Act.
addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc icai announcement income tax penalty itat ITAT Delhi mca circular MCA notification penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes
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