2022 (4) TMI 1183 - AT - Income Tax

Reopening of assessment u/s 147 - findings of fact made on the basis of fresh materials - investment was made with unrelated and independent people and does not fall for the inclusion of number of residential house property for the deduction u/s. 54 - HELD THAT - AO who completed the regular assessment u/s. 143(3) during the course of assessment has in fact called for details relating to properties and has verified the details before passing the order and hence ought to have applied his mind while passing the order - AO had called for details pertaining to various sources of income declared by the assessee i.e. details pertaining to professional income income from house property etc. and has concluded the assessment after thorough verification of these details. Hence it would not be prudent to say that there has not been an application of mind on the part of the AO while completing the original assessment u/s.143(3) even if one wants to take cannot take shelter under clause (c) to explanation 2 to section 147 for the purpose of reopening the assessment. There is no new material has been brought on record where the AO has a reason to believe that the income has escaped assessment when all the relevant materials have already been made available at the time of original assessment. The decision relied on by the revenue of Ess There is no new material has been brought on record where the AO has a reason to believe that the income has escaped assessment when all the relevant materials have already been made available at the time of original assessment. The decision relied on by the revenue of Ess Ess Kay Engineering Co. P. Ltd 1997 (7) TMI 114 - SC ORDER is distinguishable as the Hon ble Supreme Court in that case held that the AO may reopen the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. In the case under consideration no fresh materials are found and the reopening is done basis of the materials which were already with AO during the course of regular assessment u/s.143(3). Co. P. Ltd (supra) is distinguishable as the Hon ble Supreme Court in that case held that the AO may reopen the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. In the case under consideration no fresh materials are found and the reopening is done basis of the materials which were already with AO during the course of regular assessment u/s.143(3). Appeal of assessee allowed.

Summary

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Denial of deduction under Section 54F of the Income Tax Act, 1961.
3. Calculation of interest under Section 234B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 148:
The primary issue raised by the assessee was the legality of the reopening of the assessment under Section 148. The assessee argued that the reopening was based on a mere change of opinion by the Assessing Officer (AO) and not on any new material evidence. The Tribunal noted that during the original assessment under Section 143(3), the AO had called for and reviewed various details, including the statement of income, balance sheet, profit and loss account, property details, and rental agreements. The balance sheet clearly showed the properties owned by the assessee.

The Tribunal referred to the provisions of Section 147, which allows reopening if the AO has "reason to believe" that income has escaped assessment. The Tribunal emphasized that the AO must have new material evidence to justify the reopening. The Tribunal cited the decision in CIT vs. Kelvinator of India Ltd., which held that a mere change of opinion does not justify reopening an assessment. The Tribunal concluded that since the AO had already reviewed all relevant details during the original assessment, the reopening was based on a mere change of opinion and was therefore invalid.

2. Denial of Deduction under Section 54F:
The assessee also challenged the denial of deduction under Section 54F. The AO had reopened the assessment to verify the claim under Section 54F, as he believed the assessee owned more than one residential house during the assessment year 2013-14, making him ineligible for the deduction. The Tribunal did not delve deeply into this issue, as it had already concluded that the reopening of the assessment itself was invalid. Therefore, the grounds challenging the denial of deduction under Section 54F were rendered academic and did not warrant separate adjudication.

3. Calculation of Interest under Section 234B:
The assessee raised an issue regarding the calculation of interest under Section 234B. However, since the Tribunal allowed the appeal in favor of the assessee on the grounds of the invalidity of the reopening of the assessment, the issue of interest calculation under Section 234B became moot and was not separately adjudicated.

Conclusion:
The Tribunal concluded that the reopening of the assessment under Section 148 was invalid as it was based on a mere change of opinion and not on any new material evidence. Consequently, the appeal was allowed in favor of the assessee. The issues regarding the denial of deduction under Section 54F and the calculation of interest under Section 234B were rendered academic and were not separately adjudicated. The order was pronounced in court on the 22nd day of April, 2022.