2022 (1) TMI 290 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - reopening on the basis of the audit objection - escapement of rental income received - HELD THAT - In the impugned assessment year is Assessment Year 2009-10, which was originally assessed u/s 143(3) on 12.12.2011 and reopening was initiated by issuing of notice on 18.03.2014 without having any tangible material in possession of the AO - Therefore, as the case of the assessee is reopened on reappraisal of the same material available before the AO during original assessment proceedings, we do not have any hesitation in holding that the assumption of jurisdiction by the AO u/s 148 of the Act is not in proper. Accordingly, we quash the reassessment proceedings. On the merits, it is apparent that assessee has received rent only for 11 months and for one month, property of assessee was vacant. There is no under assessment in case of rental income offered by the assessee. Claim of deduction of the property tax it is apparent that assessee has claimed the 50% of property tax pertaining to property No.101B and 101C after credit for excess property tax of ₹ 20,40,956/-. AO got confused for the reason that three properties were given on rent to one tenant out of which 1 property is owned by a Private Limited Company and two properties are owned by the assessee jointly along with his brother. The assessee has claimed only 50% share of property tax which pertains to properties owned by assessee and his brother. The Assessing Officer has incorrectly computed that assessee should be entitled to deduction only of ₹ 15,16,568/-. In facts assessee is correctly eligible to claim deduction of house tax of ₹ 20,40,956/- . In view of this there is no excess deduction claimed and allowed to assessee. AO has wrongly construed Rent agreement and confused him as rent agreement was with one common tenant for three premises owned by two different owners, one of the property is jointly owned by the assessee with 50 % share. CIT (A) also confirmed the action of the ld AO without giving any reason but merely upholding views of ld AO confirmed the order of assessment.

Issues Involved:
1. Validity of the assessment order.
2. Legality of the reopening of assessment under section 148.
3. Validity of reassessment proceedings based on audit objections.
4. Allegation of change of opinion in reopening the assessment.
5. Addition of ? 496,125 as alleged escaped rental income.
6. Disallowance of excess municipal taxes claimed.

Detailed Analysis:

1. Validity of the Assessment Order:
The appellant argued that the assessment order was "bad in law and an illegal and invalid order" and should have been quashed. However, the Tribunal did not specifically address this issue separately, as it was intertwined with the other grounds of appeal.

2. Legality of the Reopening of Assessment under Section 148:
The appellant contended that the reopening of the assessment was void ab initio and illegal, as there was no tangible material to justify the reopening. The Tribunal found that the reasons recorded for reopening were based on a reappraisal of the same material available during the original assessment. The Tribunal held that the Assessing Officer (AO) did not have any new tangible material and thus, the reopening of the assessment was not justified. The Tribunal quashed the reassessment proceedings, stating that "re-appreciation of the same evidence available before Assessing Officer at the time of original assessment does not entitle the Assessing Officer to reopen the assessment proceedings."

3. Validity of Reassessment Proceedings Based on Audit Objections:
The appellant argued that the reassessment was initiated based on audit objections and not on the AO's opinion. The Tribunal noted that the AO had reopened the assessment based on the same material that was available during the original assessment proceedings and not on any new tangible material. Thus, the reassessment proceedings were invalid.

4. Allegation of Change of Opinion in Reopening the Assessment:
The appellant claimed that the reopening of the assessment was merely a change of opinion, which is not permissible under the law. The Tribunal agreed, stating that the AO had reopened the assessment based on a reappraisal of the same material, which constituted a change of opinion. The Tribunal concluded that "there was no 'tangible material' a came in to possession of ld AO but it was 'reappraisal of the same material' by the learned Assessing Officer for reopening of assessment."

5. Addition of ? 496,125 as Alleged Escaped Rental Income:
The AO had added ? 496,125 as escaped rental income, alleging that the appellant had not declared the full rental income. The appellant argued that the property was vacated in February 2009, and no rent was recoverable for March 2009. The Tribunal found that the appellant had indeed received rent only for 11 months, as evidenced by the rental agreement, bank statements, and Form 26AS. The Tribunal deleted the addition, stating that "there is no under assessment in case of rental income offered by the assessee."

6. Disallowance of Excess Municipal Taxes Claimed:
The AO disallowed ? 8,77,820 on account of excess municipal taxes claimed, arguing that the appellant's share should be 32.17% instead of 50%. The Tribunal found that the AO had incorrectly computed the appellant's share by considering the total property tax for all three properties, including one not owned by the appellant. The Tribunal held that the appellant was entitled to claim 50% of the property tax for the properties jointly owned with his brother. The Tribunal deleted the disallowance, stating that "assessee is correctly eligible to claim deduction of house tax of ? 20,40,956."

Conclusion:
The Tribunal quashed the reassessment proceedings and deleted the additions made by the AO. The appeal filed by the assessee was partly allowed, and the orders of the lower authorities were reversed. The Tribunal did not find it necessary to adjudicate on other grounds of appeal as they did not survive after the primary issues were resolved.

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