2024 (3) TMI 154 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - condition precedent to exercise jurisdiction u/s 147 - entitlement to exemption u/s 54F - HELD THAT - The assessee claimed the exemption u/s 54F of the Act for Assessment Year 2013-14 as well as purchased the residential plots furnishing the details for the same during the course of regular assessment for AY 2015-16 is in accordance with the above provisions. AO therefore cannot now again re-appreciate the same facts which was considered during the course of Assessment Year 2015-16 to disallow the exemption u/s 54F of the Act to assume the jurisdiction to reopen Assessment Year 2016- 17 on the ground that three years from the date of deposit in the capital gain deposit scheme would be over on 30.01.2016 which would fall in previous year relevant to the Assessment Year 2016-17. The Hon ble Apex Court in case of Calcutta Discount Company Ltd. 1960 (11) TMI 8 - SUPREME COURT has held that the alternative remedy available to the assessee would not affect right of the assessee to obtain relief under Article 226 of the Constitution of India as the condition precedent to exercise jurisdiction under Section 147 of the Act did not exist and therefore the AO has no jurisdiction to issue the impugned notice under Section 148 for the Assessment Year 2016-17. Thus there would be lack of jurisdiction to reopen the assessment on mere change of opinion. Therefore, the petition requires to be allowed by quashing and setting aside the impugned notice u/s 148 and the order rejecting the objection of the petitioner and all other sub-consequential action taken pursuant to the impugned notice by the respondents. Petition succeeds.

Summary

Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the reopening of the assessment was based on a mere change of opinion.
3. Validity of the exemption claimed under Section 54F of the Income Tax Act, 1961.

Summary:

1. Legality of the Notice Issued Under Section 148:
The petitioner challenged the notice dated 30.05.2019 issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2016-17, alleging escaped income assessment. The petitioner argued that the notice was issued without jurisdiction and was based on a mere change of opinion, as the exemption under Section 54F had already been scrutinized and accepted in previous assessments for the years 2013-14 and 2015-16.

2. Reopening Based on Mere Change of Opinion:
The court observed that during the regular assessment proceedings for Assessment Years 2013-14 and 2015-16, the petitioner's claim for exemption under Section 54F was thoroughly scrutinized and accepted. The Assessing Officer (AO) had allowed the exemption after considering all relevant details. The court noted that the reopening of the assessment for the year 2016-17 was based on the same material that had already been scrutinized, which constituted a mere change of opinion. The court referenced the Supreme Court's decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd., emphasizing that reassessment must be based on "tangible material" and not merely a change of opinion.

3. Validity of the Exemption Claimed Under Section 54F:
The petitioner had claimed an exemption under Section 54F for the Assessment Year 2013-14 by investing in a residential property, which was scrutinized and accepted by the AO. For the Assessment Year 2015-16, the AO had again scrutinized the petitioner's transactions and allowed the exemption under Section 54F. The court highlighted that Section 54F does not specify the area of the residential house required for claiming the deduction. The court found that the AO's attempt to disallow the exemption in the Assessment Year 2016-17 was unjustified and based on a misinterpretation of Section 54F(4).

Conclusion:
The court concluded that the notice issued under Section 148 was without jurisdiction as it was based on a mere change of opinion. The court quashed the notice and all consequential actions taken pursuant to it. The petition was allowed, and the rule was made absolute to the extent of quashing the impugned notice and related actions.