S. 143(1) assessment cannot be reopened u/s 147 in absence of “new material”

Delta Air Lines Inc vs. ITO (ITAT Mumbai)

The assessee filed a ROI in which it claimed exemption under Article 8 of the DTAA (“airline profits”) even in respect of interest earned on fixed deposits. The AO accepted the ROI u/s 143(1). Subsequently, he issued a notice u/s 148 seeking to make a reassessment and bring the interest to tax. The assessee claimed that as there was no new material that had come to the possession of the AO, the reassessment proceedings were not valid. The AO & CIT(A) relied on Rajesh Jhaveri Stock Brokers 291 ITR 500 (SC) and rejected the claim. On appeal by the assessee to the Tribunal, HELD allowing the appeal:

The assessee had made a clear disclosure in the ROI that it was claiming exemption under Article 11 for the interest income. This was accepted u/s 143(1). The assessment was sought to be reopened without there being any new material on record. In Telco Dadajee Dhackjee it was held by the Third Member that even in a case where only an intimation had been issued u/s 143(1)(a), it is essential that the AO should have before him tangible material justifying his reason to believe that income had escaped assessment. In the absence of such tangible material, the reassessment proceedings are invalid. Though in Praful Chunilal Patel 236 ITR 832 (Guj),, it was held that there is no necessity for the AO to have fresh facts coming to his notice subsequent to the original assessment to justify the reopening this view has not been subscribed to by the Full Bench in Kelvinator of India 256 ITR 1 (Del) which has been affirmed by the Supreme Court (320 ITR 561).