2017 (9) TMI 523 - AT - Income Tax

Reopening of assessment u/s 147 - disallowance in relation to such long term capital gains and claim of deduction under section 54EC and 54F - change of opinion - Held that - On perusal of the above reply dated 3.9.2010 of the assessee which is in response to specific queries raised by the AO, it is noted that at point 10, the assessee has stated clearly that Miss Adita Agarwal has invested ₹ 25 Lacs for purchase of house from Ace India Abodes Ltd. Ajmer Road, Jaipur and copy of related evidence for above investment was also submitted before the AO. This is the same transaction in respect of which the deduction under section 54F has been claimed while working out the capital gains. It is thus clear that relevant information and related evidence in support thereof was submitted and taken on record by the AO during the course of original assessment proceedings. Given the fact that the same was submitted in response to the specific query raised by the AO, we are left with no other view but to hold that the same was duly considered by the AO during the course of original assessment proceedings. It is clearly a case of change of opinion by the Assessing officer where he has allowed the deduction under section 54F during the course of original assessment proceedings and on the same pieces of information, he has reinitiated the proceedings by issuance of notice u/s 148 of the Act. Further, we donot see any failure on the part of the assessee to disclose relevant particulars during the course of original assessment proceedings as we have noted above. In the result, the reopening of assessment proceedings u/s 147 is not justified.- Decided in favour of assessee.

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Justification for initiating proceedings under section 147.
3. Legitimacy of the transaction of purchase of property.
4. Rejection of deduction claimed under section 54F.
5. Charging of interest under sections 234B, 234C, and 234D and withdrawal of interest under section 244A.

Detailed Analysis:

1. Reopening of Assessment under Section 147:
The assessee contested that the CIT(A) erred in holding that the Assessing Officer (AO) was justified in reopening the assessment under section 147. The Tribunal found that the original assessment was completed without any adjustment or disallowance concerning the long-term capital gains and the claim of deduction under sections 54EC and 54F. The AO issued a notice under section 148 based on the belief that the income had escaped assessment due to the non-completion of the house within the prescribed time under section 54F. The Tribunal concluded that the AO had not formed an opinion on the claim under section 54F during the original assessment, thus justifying the reopening.

2. Justification for Initiating Proceedings under Section 147:
The assessee argued that there was no justification for initiating proceedings under section 147, as all material facts were disclosed during the original assessment. The Tribunal noted that the AO had not specifically mentioned the failure of the assessee to disclose all material facts. However, it was discernible from the recorded reasons that there was a failure on the part of the assessee to disclose all material facts truly and fully, as the agreement did not reflect the completion of the house within the prescribed time under section 54F. Thus, the Tribunal held that the AO was justified in reopening the assessment.

3. Legitimacy of the Transaction of Purchase of Property:
The CIT(A) held that the transaction of purchase of property from M/s AIAL was not beyond doubt. The Tribunal found that the assessee had provided all necessary documents and evidence regarding the purchase of the property during the original assessment proceedings. The Tribunal observed that the AO had considered these documents and allowed the deduction under section 54F. Therefore, the reopening of the assessment was based on a change of opinion, which is not permissible.

4. Rejection of Deduction Claimed under Section 54F:
The CIT(A) upheld the AO's rejection of the deduction claimed under section 54F, stating that the assessee failed to satisfy the necessary conditions. The Tribunal found that the assessee had claimed the deduction for the purchase of a house property, not for its construction. The Tribunal noted that the assessee had provided all relevant documents during the original assessment, and the AO had accepted the claim. Therefore, the Tribunal concluded that the reopening of the assessment was not justified, and the rejection of the deduction under section 54F was not warranted.

5. Charging of Interest under Sections 234B, 234C, and 234D and Withdrawal of Interest under Section 244A:
The CIT(A) confirmed the AO's action of charging interest under sections 234B, 234C, and 234D and withdrawing interest granted under section 244A. However, since the Tribunal set aside the reassessment proceedings, it did not find it relevant to examine these grounds of appeal. Hence, these grounds were dismissed as infructuous.

Conclusion:
The Tribunal allowed the appeal of the assessee, setting aside the reassessment proceedings under section 147. The Tribunal held that the reopening of the assessment was based on a change of opinion and was not justified. Consequently, the other grounds of appeal were dismissed as infructuous. The order was pronounced in the open Court on 23/08/2017.

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