2013 (1) TMI 295 - HC - Income Tax

Validity of notice u/s 148 Re-opening of assessment u/s 147 - Escaped assessment - Change of opinion - Jurisdictional requirement to issue notice u/s 148 - Sufficiency of reasons recorded - Claim deduction u/s 54EC against earnest money received for sale of land - Capital Gain - Investment made in the NABARD bonds - Circular No.359, dated May 10, 1983 - Assessee sold property at Pune to a builder - Received a sum as earnest money before the sale/execution of the conveyance Said sum invested by the petitioner in the NABARD bonds and the National Housing bonds prior to sale/execution of the conveyance and claim deduction u/s 54EC Held that - As concluding from the fact of the case that the assessee was asked by a letter dated August 5, 2008, by the revenue to submit details of investment made u/s 54EC. Fresh application of mind by the Officer on the same set of facts amounts to a change of opinion and does not warrant reopening. The notice u/s 148, is without jurisdiction and set aside the same. In favour of assessee

Issues Involved:
1. Jurisdiction to reopen assessment under Section 148 of the Income-tax Act, 1961.
2. Validity of reopening based on a change of opinion.
3. Applicability of CBDT Circular No. 359, dated May 10, 1983, to Section 54EC.
4. Requirement of tangible material for reopening assessment.
5. Presumption of application of mind in original assessment proceedings.

Issue-wise Detailed Analysis:

1. Jurisdiction to Reopen Assessment under Section 148 of the Income-tax Act, 1961:
The petitioner challenged the notice dated March 31, 2011, issued by the Deputy Commissioner of Income-tax under Section 148 of the Income-tax Act, seeking to reopen the assessment for the assessment year 2006-07. The petitioner argued that the reopening was without jurisdiction as it was based on a change of opinion. The court held that the power to reopen an assessment within four years is wide but does not permit a review of an assessment order. The Supreme Court in CIT v. Kelvinator of India Ltd. emphasized that there must be tangible material to conclude that income has escaped assessment, and reopening cannot be based on a mere change of opinion.

2. Validity of Reopening Based on a Change of Opinion:
The petitioner argued that the reopening was merely based on a change of opinion as the facts and material were already available on record at the time of the original assessment. The court noted that the original assessment order dated November 28, 2008, had considered the petitioner's claim for deduction under Section 54EC, and the details were provided during the assessment proceedings. The court held that reopening on the same set of facts amounts to a review, which is not permissible under the law. The court referenced the decision in Cartini India Ltd. v. Addl. CIT, which held that reopening based on material already on record is not justified.

3. Applicability of CBDT Circular No. 359, dated May 10, 1983, to Section 54EC:
The petitioner relied on CBDT Circular No. 359, which clarifies that if earnest money or advance received as part of the sale consideration is invested in specified assets before the date of transfer, it qualifies for exemption. The court observed that the view taken by the Assessing Officer in the original assessment was a possible view supported by the circular and the Tribunal's decision in Ramesh Narhari Jakhadi v. ITO. The court held that the circular's interpretation aligned with the petitioner's claim for exemption under Section 54EC.

4. Requirement of Tangible Material for Reopening Assessment:
The court emphasized that there must be tangible material to justify the reopening of an assessment. The reasons recorded for reopening in the present case referred only to facts already on record, indicating no new tangible material had come to light. The court reiterated that reopening based on a mere change of opinion without new material is not permissible, as established in Kelvinator of India Ltd.

5. Presumption of Application of Mind in Original Assessment Proceedings:
The court addressed the respondent's argument that the original assessment order did not reflect the application of mind regarding the investment made under Section 54EC. The court held that if a query is raised and the assessee provides the required information, it is presumed that the Assessing Officer was satisfied, even if not explicitly discussed in the order. The court referenced CIT v. Nirma Chemical Works P. Ltd., which stated that an assessment order need not incorporate detailed reasons for granting a claim of deduction.

Conclusion:
The court found that the notice under Section 148 dated March 31, 2011, and the order rejecting the petitioner's objections dated November 14, 2011, were without jurisdiction. The reopening of the assessment was based on a change of opinion without new tangible material, violating the principles established by the Supreme Court. Consequently, the court set aside the notice and the order, making the rule absolute in terms of prayer clause (a), with no order as to costs.

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