2016 (6) TMI 111 - HC - Income Tax

Reopening of assessment - reasons to believe - long term capital loss set off against the short term capital gain claimed by the assessee necessitated re-computation and re-determination - Held that - Exercise of jurisdiction under Section 147 of the Act, in the present case, is not for the failure of the assessee to disclose fully and truly all material facts necessary for his assessment, but because the Assessing Officer was of the opinion that the set off claimed by the assessee earlier, and which was accepted by him while passing an assessment order earlier under Section 143(3) of the Act, necessitated re-computation and re-determination. As has been rightly held by the Tribunal such an exercise could not have been undertaken beyond the period of four years in view of the limitation prescribed under the proviso to Section 147 of the Act. The exercise undertaken by the Assessing Officer not only amounted to a change of opinion, but also a review of the earlier assessment order passed under Section 143(3) of the Act. - Decided in favour of assessee

Summary

Issues:
Reopening of assessment under Section 147 of the Income Tax Act, 1961 after the expiry of four years from the end of the relevant assessment year; Whether the conditions for reopening the assessment were satisfied; Whether the exercise of jurisdiction under Section 147 was justified based on failure to disclose material facts; Permissibility of set off of short term capital gains against long term capital loss; Assessment of gain from the sale of property as short term capital gain; Legality of reopening the assessment as a change of opinion or review of earlier assessment order.

Analysis:
The appeal before the High Court was made against the order passed by the Income Tax Appellate Tribunal in response to the Revenue's appeal against the order passed by the Commissioner of Income Tax (Appeals). The Tribunal held that an assessment could not be reopened after four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose all material facts necessary for assessment. The Tribunal found that the conditions for reopening the assessment were not satisfied in this case as there was no failure to disclose material facts. The Tribunal further determined that the Assessing Officer's reasons for reopening the assessment were already mentioned in the assessment order, and the reassessment was not based on any new information.

The Commissioner of Income Tax (Appeals) had earlier held that the reopening of the assessment was not justified as there was no new information, and it was merely a change of opinion by the Assessing Officer. The Tribunal concurred with this view and emphasized that the reopening of the assessment was beyond the permissible period and amounted to a review of the earlier assessment order. The Tribunal found that the conditions for reopening the assessment under Section 147 were not met, and the reassessment was not valid. The Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) and dismissed the appeal by the Revenue.

The High Court agreed with the Tribunal's findings, stating that the reassessment was not justified as it was based on a change of opinion and amounted to a review of the earlier assessment order. The Court held that the conditions for reopening the assessment were not satisfied, and the exercise of jurisdiction under Section 147 was beyond the prescribed limitation period. The Court found no error in the Tribunal's order and dismissed the appeal. The High Court concluded that no substantial question of law arose, warranting interference in the proceedings under Section 260A of the Income Tax Act.

In summary, the High Court upheld the Tribunal's decision, emphasizing that the reassessment was not valid as it was based on a change of opinion and exceeded the prescribed limitation period for reopening assessments. The Court found no grounds to interfere with the Tribunal's order and dismissed the appeal by the Revenue.