2017 (9) TMI 477 - AT - Income Tax

Reopening of assessment - change of opinion - entitled to benefit of the provisions of section 11 - Held that - The assessee had renewed certain earlier fixed deposit and same had no connection with the compensation received on sale of plot of land. After considering the above submissions of the assessee and after deliberating upon the documents furnished by it, the AO had passed scrutiny assessment. He had formed an informed opinion that it was entitled to benefit of the provisions of section 11 of the Act and that it had made investment on sale of one kind of assets in other assets within the stipulated time and in prescribed manner. Later on, he issued a notice u/s. 148 of the Act and has reappraised the same facts and has reached on a different conclusion. In our opinion, it is a clear case of change of opinion. Not only this, there is no failure on part of the assessee to disclose fully and truly the material facts for the year under appeal, as it had filed all the details of the impugned transaction. Considering the peculiar facts and circumstances of the case, we are of the opinion that there was no failure on part of the assessee to disclose fully and truly the material facts, so, the reassessment proceedings, initiated by the AO in its case under appeal, are not valid. Reversing the order of the FAA, we decide the first effective ground of appeal in favour of the assessee. Reassessment proceedings were invalid, so, we are not deciding the other issues raised by the assessee. - Decided in favour of the assessee.

Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act after a lapse of four years.
2. Compliance with Section 11(5) of the Income Tax Act regarding investment of sale consideration.
3. Entitlement to exemption under Section 11(1A) of the Income Tax Act.

Detailed Analysis:

1. Validity of the Reopening of Assessment under Section 147:
The primary issue was whether the reopening of the assessment under Section 147 after four years was valid. The assessee, a charitable trust, argued that the reopening was bad in law and illegal, asserting that there was no failure on its part to disclose fully and truly all material facts. The Assessing Officer (AO) issued a notice under Section 148, believing that taxable income had escaped assessment due to the assessee's failure to invest the sale consideration of ?7.80 crores as per Section 11(5) of the Act.

The First Appellate Authority (FAA) upheld the reopening, stating that essential and material facts regarding the nature and mode of capital assets held and sold by the trust were not fully disclosed. The FAA also noted discrepancies in the record of cash and bank balances and held that there was no full and true disclosure by the assessee.

The Tribunal, however, found that the AO's belief was based solely on material already examined during the initial assessment proceedings. The Tribunal emphasized that the AO did not refer to any new tangible material for forming his belief that income had escaped assessment. The Tribunal concluded that the reopening was based on a reappraisal of the same material, amounting to a change of opinion, which is not permissible. The Tribunal also noted that the AO failed to pass a speaking or reasoned order regarding the objections raised by the assessee.

2. Compliance with Section 11(5) of the Income Tax Act:
The AO observed that the assessee had sold a plot of land and received a sale consideration of ?7.80 crores but failed to invest it as per the provisions of Section 11(5). The AO added the sale consideration to the total income, stating that the assessee was not entitled to the benefit of accumulation under Section 11(2)(b).

The Tribunal found that the assessee had disclosed all details about the sale of development rights and the investments made in fixed deposits during the original assessment proceedings. The Tribunal noted that the AO had already deliberated upon these details and allowed the benefits under Section 11(1A) during the initial assessment. Therefore, the Tribunal held that there was no failure on the part of the assessee to disclose material facts fully and truly.

3. Entitlement to Exemption under Section 11(1A):
The assessee contended that the entire sale consideration was invested in another capital asset, i.e., bank fixed deposits, and thus, it was entitled to exemption under Section 11(1A). The AO, however, argued that some of the fixed deposits were for short periods and some were withdrawn before maturity, thus not qualifying for exemption.

The Tribunal found that the assessee had provided detailed information about the sale consideration and the fixed deposits during the original assessment. The Tribunal noted that the AO had already examined these details and allowed the exemption. The Tribunal concluded that the reassessment was merely a change of opinion and not based on any new tangible material.

Conclusion:
The Tribunal held that the reassessment proceedings initiated by the AO were invalid due to the absence of new tangible material and the failure to demonstrate any omission or failure on the part of the assessee to disclose material facts. Consequently, the Tribunal reversed the FAA's order and decided the appeal in favor of the assessee. The Tribunal did not address other issues raised by the assessee, as it had already held the reassessment proceedings to be invalid. The appeal for both assessment years was allowed.

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