Reassessment under Section 147 is invalid if it is based on a mere change of opinion, particularly when the assessee has fully disclosed all material facts during the original assessment and the AO's belief is based on incorrect factual assumptions.

आदेश /O R D E R

PER GEORGE GEORGE K, VICE PRESIDENT:

This appeal at the instance of the assessee is directed against the CIT(A)/NFAC’s order dated 10.06.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2012-13.

2. Brief facts of the case are as follows: The assessee is a private limited company engaged in the business of providing design and drawing services for engineering industry. For the assessment year 2012-13, the return of income was filed on 29.11.2012 declaring total income of Rs.18,09,99,774/-. The return of income was selected for scrutiny and assessment was completed u/s.143(3) of the Act vide order dated 16.03.2016 assessing total income at Rs.18,12,11,047/-. Thereafter the assessment was reopened and notice u/s.148 of the Act was issued on 28.02.2019. The reason for issuance of notice for reopening the assessment was that assessee had claimed as revenue expenditure a sum of Rs.6,29,67,347/- towards software expenses. The AO noted that the expenditure claimed as revenue expenditure pertains to software and license fee paid and the assessee company had deducted TDS only in respect of payment of Rs.50,50,223/-. Hence, the AO was of view that balance amount of Rs.5,79,19,094/- is to be treated as capital expenditure. In response to the notice issued u/s.148 of the Act, the assessee filed reply stating that software license is valid for only one year and the amount claimed as expenditure under the software expenses is not capital in nature. However the explanation offered by the assessee company was not accepted by the AO and software expenses to the tune of Rs.5,79,19,094/- was treated as capital expenditure. The AO added the same to the total income of the assessee after allowing 25% depreciation.

3. Aggrieved by the order of the AO passed u/s.147 r.w.s. 143(3) r.w.s. 92CA(3) of the Act, the assessee filed an appeal before the First Appellate Authority. Before the First Appellate Authority, the assessee raised grounds on merits as well as on legal issue. One of the legal ground taken by the assessee before the First Appellate Authority was that reopening of assessment is bad in law since in the original assessment, the assessee had furnished all the relevant details and reassessment completed by the present AO is only on mere change of opinion. The CIT(A) however rejected the arguments of the assessee and dismissed the grounds of assessee both on merits as well on legal issues.

4. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal, raising the following grounds:-

1. That on the facts and circumstances of the case and in law, the Assessing Officer ("AO") has erred in completing the assessment of the Appellant under section 143(3) read with section 147 of the Act vide order dated December 18, 2019 at an income of INR 23,43,39,095 under the normal provisions of the Act as against the returned income of INR 18,09,99,770.

2. That on the facts and circumstances of the case and in law, the order passed by the AO under section 143(3) read with section 147 of the Act is illegal, bad in law, without jurisdiction and thus, liable to be quashed. Further, the CIT(A) has erred in upholding the said order.

3. That on the facts and circumstances of the case and in law, the re-assessment order passed by the AO is invalid and thus, liable to be quashed as the same was initiated merely on the basis of change of opinion as all the material information was already available with the AO while passing the original assessment order. Further, the CIT(A) has erred in upholding the said order.

4. That on the facts and circumstances of the case and in law, the proceedings initiated by the AO under section 147/ 148 of the Act for