2020 (12) TMI 600 - AT - Income Tax

Validity of Reopening of assessment u/s 147 - denying excess allowance of deduction claimed u/s. 54F - HELD THAT - Reasoning for reopening as mentioned in the order sheet clearly shows that the same material which was considered by the AO in the original assessment order was again considered by the Assessing Officer in the re-assessment order and based on that, the reassessment proceedings were finalized and income of the assessee was computed denying excess allowance of deduction claimed u/s. 54F. The ground that inadvertently deduction was allowed u/s.54 of the Act, in our considered opinion, cannot be a ground to reopen the assessment, which was completed u/s.143(3) of the Act and as it appears from the order sheet, the assessee has appeared time to time and produced the documents as directed by the AO. If there is any advertent mistake pointed out by the AO, the same could have been rectified under section 154 of the Act and not reopening the assessment. Therefore, on reading of the order sheet, we find that the reopening of the assessment has no jurisdictional foundation and, therefore, the reassessment order is liable to be annulled. See M/S. KELVINATOR OF INDIA LIMITED 2010 (1) TMI 11 - SUPREME COURT - Decided in favour of assessee.

Summary

Issues:
Challenge to jurisdiction of Assessing Officer and invocation of reassessment proceedings u/s.147 based on change of opinion and same material facts.

Analysis:
1. The appeal was filed against the CIT(A)'s order for the assessment year 2012-13. The assessee challenged the jurisdiction of the Assessing Officer (AO) and the initiation of reassessment proceedings u/s.147 of the Act on the grounds of mere change of opinion and same material facts.

2. The original assessment was completed u/s.143(3) of the Act in 2015. Subsequently, the AO issued a notice for reopening the assessment u/s.147 in 2016 based on the claim of deduction u/s.54F. The AO contended that the exemption was allowable for only one residential property, contrary to the assessee's claim for two flats. The assessee argued that there was no fresh material justifying the reassessment and that the AO failed to establish any non-disclosure of material facts by the assessee.

3. The AO issued a show cause notice to the assessee regarding the deduction claimed u/s.54F. The assessee provided a written explanation citing legal interpretations and case law to support their claim. The AO, however, did not accept the assessee's contentions, leading to the initiation of reassessment proceedings.

4. The assessee argued that if there was an inadvertent mistake in allowing the deduction, it could have been rectified under section 154 of the Act, rather than reopening the assessment. The assessee relied on the principle that the AO cannot change his view once an issue has been examined in the original assessment, citing relevant case law to support this contention.

5. The Tribunal observed that the reassessment was based on the same material considered in the original assessment, without any new tangible information. The Tribunal held that the reopening lacked jurisdictional foundation and annulled the reassessment order, citing the decision in Kelvinator of India case to emphasize the importance of tangible material for reopening assessments.

6. Consequently, the Tribunal quashed the reassessment proceedings and the first appellate order, as the reassessment was deemed invalid due to being based on a mere change of opinion. Since the reassessment order was annulled, other grounds raised by the assessee became irrelevant, leading to the allowance of the assessee's appeal.

7. The Tribunal's decision highlighted the necessity of tangible material to support the reopening of assessments post the Direct Tax Laws (Amendment) Act, 1987, emphasizing that a mere change of opinion is insufficient grounds for reassessment. The judgment reinforced the distinction between the power to review and reassess, emphasizing the need for a live link between reasons recorded and the formation of belief for reassessment.