ITAT: Reassessment Beyond Four Years Quashed as AO Reopened Case on Mere Change of Opinion Without Fresh Material

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the Revenue’s appeal and upheld the order quashing reassessment proceedings initiated beyond four years, holding that reopening based merely on a change of opinion without any fresh tangible material is invalid. The Tribunal also affirmed the deletion of an addition of Rs 29.51 crore made under Section 68 towards share capital and share premium.

The dispute arose in the case of Kamdhenu Commosales Private Limited for AY 2010-11. The assessee had originally filed its return declaring an income of Rs 2,025. The assessment was first reopened under Sections 147/143(3), during which the Assessing Officer (AO) examined the share capital received by the company, issued notices under Section 133(6) to the subscriber companies, verified the documents furnished by them, and completed the reassessment without making any addition on this issue.

Several years later, the AO again reopened the assessment by issuing a fresh notice under Section 148, alleging that the assessee had received accommodation entries in the form of share capital and share premium. The reassessment culminated in an addition of ₹29.51 crore under Section 68 on the ground that the assessee failed to establish the identity, creditworthiness and genuineness of the investor companies.

The National Faceless Appeal Centre (NFAC), acting as CIT(A), quashed the reassessment proceedings. It held that the reopening was based entirely on information already available during the earlier reassessment and did not rely on any fresh tangible material. Since the reopening was initiated beyond four years from the end of the relevant assessment year, the AO was also required to establish that the assessee had failed to disclose fully and truly all material facts—a jurisdictional requirement that remained unsatisfied.

Affirming the CIT(A)’s findings, the Tribunal observed that the AO had already examined the share subscribers during the earlier reassessment proceedings by issuing notices under Section 133(6). The subscribers had furnished income tax returns, PAN details, audited financial statements, bank statements and other supporting documents, and no addition was made at that stage. The Tribunal held that the second reopening was nothing but a change of opinion, as there was no fresh tangible material before the AO to justify reopening the completed assessment.

The Tribunal further noted that the reasons recorded for reopening neither referred to the earlier enquiries nor explained how the assessee had failed to disclose material facts. It agreed with the CIT(A) that the reassessment proceedings suffered from lack of jurisdiction, particularly since they were initiated after the expiry of four years.

Even on merits, the Tribunal found no justification for the addition under Section 68. It observed that the assessee had furnished complete documentary evidence regarding the share subscribers, including PAN, income tax returns, audited financial statements, bank statements and confirmations. The subscriber companies had also responded to notices issued under Section 133(6). Despite this, the AO neither pointed out any specific discrepancy nor conducted any meaningful enquiry before making the addition.

Thus, the Tribunal upheld the CIT(A)’s order both on the issue of invalid reopening and on deletion of the Section 68 addition, resulting in dismissal of the Revenue’s appeal.

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