2024 (2) TMI 844 - HC - Income Tax

Reopening of assessment - concept of change of opinion - eligibility of reasons to believe - short term capital gain on asset/flat sold - HELD THAT - It is clear case of change of opinion. We say this because the issue as to whether there was a short term capital gain with respect to the said flat, was the subject matter of consideration during the assessment proceedings. It is settled law 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. In fact, the AO in the assessment order has noted that the issue of investment in immovable property and capital gain / income on sale of property was considered under limited scrutiny assessment and in view of the material on record no addition on the issue is made. The information relied upon while issuing notice under Section 148A(b) also relates to the said flat and entirely contradictory view is taken in the impugned order that the asset sold was short term capital asset and gain arising on transfer of the said flat is short term capital gain. Thus the reopening of the assessment is purely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings. This change of opinion does not constitute justification for assuming that income chargeable to tax has escaped assessment. Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the reassessment proceedings.
2. Concept of change of opinion in reassessment.
3. Legal standing of the reassessment under new provisions of the Finance Act 2021.

Summary:

1. Validity of the reassessment proceedings:

The petitioner filed a return of income for AY-2018-19, which was selected for limited scrutiny concerning investments in immovable property and capital gains. After providing the required details, an assessment order was passed on 28th April 2021, accepting the income computed without any additions. Subsequently, almost a year later, the petitioner received a notice under Section 148A(a) of the Income Tax Act, seeking details of the same property sale. Despite the petitioner's objections, an order dated 31st March 2022, under Section 148A(d), and a notice under Section 148 were issued, treating the asset as a short-term capital asset.

2. Concept of change of opinion in reassessment:

The petitioner argued that the reassessment was based on a change of opinion, which is not permissible. The court referred to the case of Siemens Financial Services Private Limited Vs. Deputy Commissioner of Income Tax & Ors., which held that reassessment cannot be initiated on the basis of a change of opinion. The court emphasized that the Assessing Officer (AO) does not have the power to review but only to reassess. The concept of change of opinion serves as a check against the abuse of power by the AO. The court cited several precedents, including the Supreme Court's decision in Kelvinator of India Ltd., which stated that reassessment must be based on tangible material and not merely on a change of opinion.

3. Legal standing of the reassessment under new provisions of the Finance Act 2021:

The respondents argued that the reassessment scheme had changed with the new provisions introduced by the Finance Act 2021, rendering the concept of change of opinion inapplicable. However, the court noted that its judgment in Siemens Financial Services Private Limited still upheld the applicability of the change of opinion concept. The court concluded that the reassessment in this case was indeed based on a change of opinion, as the issue of short-term capital gain on the said flat had already been considered and resolved in the original assessment proceedings.

Conclusion:

The court found that the reopening of the assessment was purely on the basis of a change of opinion, which does not justify the assumption that income chargeable to tax had escaped assessment. Therefore, the impugned order and notice dated 31st March 2022 were quashed. The petition was allowed, and the rule was made absolute, disposing of the petition in favor of the petitioner.