2007 (7) TMI 257 - HC - Income Tax

AO proposed to reopen the assessment for change of opinion with reference to valuation method adapted valuation of the property admitted by the assessee in the income tax return and the wealth tax return were accepted by the Assessing Officer - Held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion revenue appeal is dismissed

Summary

Issues:
1. Reopening of assessment based on change of opinion regarding property valuation.
2. Interpretation of Explanation 1 to Section 147 of the Income Tax Act.
3. Validity of reassessment proceedings under Section 147.

Issue 1: Reopening of assessment based on change of opinion regarding property valuation
The appeal was filed by the Revenue against an order favoring the assessee for the assessment year 1995-96. The dispute arose when the value of a property for calculating long-term capital gains was questioned due to a discrepancy between the value declared in the wealth tax return and the income tax return. The Revenue initiated proceedings under section 147 to reassess the income, claiming an escape from assessment. The assessee objected, arguing that all relevant information was disclosed during the initial assessment. The Commissioner accepted the assessee's case, stating that the valuation for wealth tax purposes did not dictate the valuation for capital gains tax. The Tribunal upheld this decision, emphasizing that no new information justified reassessment based on a change of opinion by the Assessing Officer.

Issue 2: Interpretation of Explanation 1 to Section 147 of the Income Tax Act
Explanation 1 to Section 147 was crucial in this case, clarifying that merely producing evidence that could have been discovered by the Assessing Officer does not constitute disclosure. The court highlighted that the assessee did not present evidence for discovery but rather argued against reassessment based on a change in valuation method. The court referenced legal precedents emphasizing the distinction between tax evasion and avoidance, stating that a mere change of opinion does not warrant reassessment. The court relied on previous judgments to assert that reassessment cannot be initiated solely on a change of opinion by the Assessing Officer.

Issue 3: Validity of reassessment proceedings under Section 147
The court reiterated that reassessment cannot be triggered by a mere change of opinion post initial assessment, as it would give undue advantage to the Assessing Officer. Citing precedents, the court emphasized that a regular assessment order implies application of mind and cannot be revisited solely due to a change in opinion. The court upheld the Commissioner's decision that the valuation discrepancy for wealth tax did not justify reassessment for capital gains tax. Additionally, the court addressed the Revenue's argument regarding the Tribunal's decision, affirming that the right of the assessee to support the Commissioner's order is protected under Rule 27 of the Income Tax Rules.

In conclusion, the court dismissed the appeal, finding no substantial question of law and affirming the decisions of the Commissioner and the Tribunal regarding the invalidity of reassessment based on a change of opinion by the Assessing Officer.