2023 (10) TMI 626 - HC - Income Tax

Reopening of assessment - notice was issued based on audit objections received by the assessing officer - petitioner had gifted a flat to Bezan Chenoy as per the Memorandum of Family arrangement and, therefore, has resorted to colorable device by way of gift of the said property to avoid tax liability. Therefore, this is a fit case for invoking provisions of Sec. 50C and value as per Stamp Duty-authority was required to be considered as sale consideration and taxed as short-term capital gain - HELD THAT - As decided in Jet Speed Audio (P) Ltd. 2015 (2) TMI 766 - BOMBAY HIGH COURT the court has held that the tangible material urged should emanate from the reasons recorded for issuing reopening notice u/s 148 - The tangible material as stated in the affidavit in reply and by counsel for revenue are the audit objections received by the assessing officer. But there is no mention of this in the reasons recorded for issuing reopening notice u/s148 - Therefore, the audit objection cannot be termed as tangible material. A Division Bench of this court in Aroni Commercials Ltd. 2014 (2) TMI 659 - BOMBAY HIGH COURT has held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the AO to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Therefore, there can be no doubt in the facts of this case that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion of the assessing officer from that held earlier during the course of assessment proceedings leading to the assessment order dated 30th September 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Petitioner has explained under Section 50C of the Act what is contemplated is a positive figure of consideration received or accruing as a result of a transfer being less than the value adopted by the stamp valuation authority. If consideration figure is zero or NIL, deeming fiction under Section 50C cannot come into play especially when gifts are categorically not considered as transfers under Section 47. After considering the submissions, the assessing officer has consciously dropped in the issue of Section 50C or not to levied any tax under Section 50C in respect of the said transaction. For the same reasons Phoolchand Bajrang Lal 1993 (7) TMI 1 - SUPREME COURT will not be applicable to the facts of this case because the Apex Court has held that the assessing officer may start reassessment proceedings either because of some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. No justification in reopening the assessment.

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act for reopening the assessment.
2. Applicability of Section 50C of the Income Tax Act to the transaction of gifting a residential flat.
3. Whether the reopening of assessment was based on a change of opinion.
4. Role of audit objections in the reopening of assessment.

Summary of Judgment:

1. Validity of the Notice under Section 148:
The petitioner challenged the notice dated 30th March 2013 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for A.Y. 2008-2009. The court found that the reopening of the assessment was not justified as it was based on a change of opinion, which is not permissible under Section 147 of the Act.

2. Applicability of Section 50C:
During the original assessment proceedings, the applicability of Section 50C was specifically queried by the assessing officer. The petitioner had explained why Section 50C was not applicable to the transaction of gifting the flat. The assessing officer accepted this explanation, and the issue was not pursued further in the assessment order. The court held that reopening the assessment to apply Section 50C on the same transaction was not permissible as it would amount to a change of opinion.

3. Change of Opinion:
The court emphasized that once a query is raised during the assessment proceedings and responded to by the assessee, it follows that the query was considered by the assessing officer. Reopening the assessment on the same issue would constitute a change of opinion, which does not justify reopening under Section 147. The court cited previous judgments to support this view, including Commissioner of Income Tax-II Vs. Jet Speed Audio (P) Ltd. and Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax-2(1).

4. Role of Audit Objections:
The court noted that the reopening notice did not mention audit objections as the basis for reopening. The tangible material required for reopening should emanate from the reasons recorded for issuing the notice under Section 148. Since the audit objections were not mentioned in the reasons recorded, they could not be considered as tangible material. The court also referred to the judgment in Commissioner of Income Tax Vs. PV.S. Beedies (P) Ltd., which held that reopening based on audit objections is permissible only if they point out a factual error or omission, not a legal opinion.

Conclusion:
The court quashed and set aside the impugned notice dated 30th March 2013 and the impugned order dated 6th February 2014, ruling that the reopening of the assessment was not justified. The petition was disposed of accordingly.