Second Reopening Invalid if Based on Change of Opinion: ITAT

The Income Tax Appellate Tribunal (ITAT), Mumbai, quashed a second reopening, which was based on a change of opinion. The tribunal said that the same was not legally valid.

The case of the assessee, Vaibhav Dwarkanath Warekar, was initially opened based on information from the Sales Tax Department which alleged that the assessee was the beneficiary of availing bogus bills. As a result, the Assessing Officer (AO) estimated profit at 0.5% of turnover, which was later reduced to 0.25% by CIT(A) and the same was upheld by the Tribunal.

The tax department reopened the case again, based on new information which alleged that the assessee had received accommodation entries. The same AO again applied a 0.5% profit rate, making an addition of about Rs 56,97,405.

The assessee argued that this second reopening was invalid. The assessee said that it was no failure on his part to disclose material necessary for assessment. He argued that reopening for the second time on the same issue is based on the difference of opinion.

The Tribunal observed that the same AO had already examined the issue in the first reassessment and estimated income. The tribunal said that reopening the case again on a similar issue was nothing but a “change of opinion“, which is not allowed under law. It also noted that the AO did not mention that there was a failure on the part of the assessee in not disclosing all the material.

The ITAT held that once the AO had made an addition based on estimation of sales turnover, he cannot revisit his own order for taxing the assessee on sales turnover.

The ITAT held the second reopening invalid and declared the reassessment order void.