2009 (10) TMI 12 - HC - Income Tax

Issue of notice u/s 147 denial of exemption u/s 54 held that - the matter went before the Commissioner of Income-tax (Appeals), who took the view that it was not really a case of escaped assessment, but was one of change of opinion by the assessing Authority - when the reassessment notices were issued and when admittedly there is no failure on the part of the assessee, who disclosed fully and truly all the material facts for assessment, it can only be construed as change of opinion and that it will not come under the category of escapement of assessment revenue appeal dismissed.

Summary

Issues:
1. Re-opening of assessment under section 147
2. Denial of exemption under Section 54 for the assessment year 1995-96

Re-opening of Assessment under Section 147:
The case involved a dispute regarding the re-opening of assessment under section 147 of the Income-tax Act, 1961 for the assessment year 1995-96. The assessing Authority had initially processed the assessee's return under Section 143(1)(a) and later scrutinized it under Section 143(3). The capital gain from the sale of a house property was known to the assessing Authority, and the assessee admitted the gain. The assessment was concluded under Section 143(3), determining a capital gain of Rs.1,00,000. Subsequently, reassessment proceedings were initiated under Section 148, alleging an escapement of capital gain taxed earlier under Section 54. The Commissioner of Income-tax (Appeals) held that it was a case of change of opinion by the assessing Authority and not escaped assessment. The Tribunal also upheld this view, considering the claim of deduction under Section 54 was already considered during the original assessment.

Denial of Exemption under Section 54:
The denial of exemption under Section 54 for the assessment year 1995-96 was a significant issue in the case. The assessing Authority had allowed a deduction claimed by the assessee under Section 54 to the extent of Rs.12,50,000 during the original assessment under Section 143(3). However, in the reassessment proceedings, the Authority sought to disallow this deduction, leading to a dispute regarding the validity of such denial. The Commissioner of Income-tax (Appeals) and the Tribunal both held that the reassessment was not justified as it amounted to a change of opinion rather than an escapement of assessment. The decision of the Honourable Supreme Court in a relevant case clarified that reassessment based on a change of opinion, without any failure on the part of the assessee to disclose material facts, does not constitute escapement of assessment.

In conclusion, the High Court dismissed the appeal, stating that there was no substantial question of law for consideration. The Court emphasized that the reassessment in this case was not valid as it was based on a change of opinion rather than an escapement of assessment, as clarified by the Supreme Court in a relevant case.