2022 (10) TMI 1271 - AT - Income Tax

Reopening of assessment u/s 147 - change of opinion - use of information available at the time of original assessment u/s 143(3) - HELD THAT - The material based on which the reopening was done was available with the AO during the assessment proceeding and the same was duly considered during the original assessment proceedings while accepting the amount of taxable LTCG and determining the taxable income. As decided in Rasalika Trading Investment Co. (P.) Ltd. 2014 (2) TMI 851 - DELHI HIGH COURT wherein the issue with respect to use of information available at the time of original assessment u/s 143(3) which was apparently used by the AO for competing the assessment has been precisely explained. Such information was acknowledged as stale information and therefore based on such information an attempt to use the provisions of section 147 and initiating proceedings were termed as a result of change of opinion. On this submission of the assessee before AO during reassessment proceeding no comment was offered by the AO. Merely no query was raised or no view was expressed in the assessment order will not tantamount that the material available before the AO was not considered by him and once the issue has been examined by the AO in the original assessment proceedings then it is not open for the AO to change his view. Thus reopening proceedings initiated and assumption of jurisdiction u/s 147 by the AO without any fresh information against the assessee to establish the allegation which could validate the reopening u/s 147 thus in the present case the assumption of jurisdiction u/s 147 is beyond the authority of law - Decided in favour of assessee.

Summary

1. ISSUES PRESENTED and CONSIDERED

The judgment addresses the following core legal questions:

• Whether the notice issued under Section 148 for reopening the assessment was valid or constituted a change of opinion, making it bad in law.
• Whether the Assessing Officer (AO) erred in applying Section 50C without referring the matter to a Valuation Officer when the value adopted by the Stamp Valuation Authority was not disputed.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Notice under Section 148

• Relevant legal framework and precedents: The case hinges on the interpretation of Section 147 and the concept of "reason to believe" as opposed to a "mere change of opinion." The precedents cited include the Supreme Court's decision in Kelvinator of India Ltd., which emphasizes that reopening under Section 147 must be based on tangible material indicating income escapement, not merely a change of opinion.
• Court's interpretation and reasoning: The Tribunal found that the AO had all the necessary information during the original assessment under Section 143(3). The reopening was based on information already available, which does not constitute new material or evidence, thus indicating a change of opinion rather than a valid reason to believe income had escaped assessment.
• Key evidence and findings: The Tribunal noted that during the original assessment, the AO did not raise any query regarding the sale consideration of the property, and the long-term capital gain was accepted as declared by the assessee.
• Application of law to facts: The Tribunal applied the principles from the Kelvinator case, concluding that the reopening was based on information already considered during the original assessment, thus invalidating the notice under Section 148.
• Treatment of competing arguments: The Revenue argued that no opinion was formed during the original assessment, thus allowing for reopening. However, the Tribunal emphasized that the absence of a query does not mean the information was not considered, and reopening based on the same information constitutes a change of opinion.
• Conclusions: The Tribunal concluded that the reopening of the assessment was invalid as it was based on a change of opinion, not new information, and set aside the orders of the CIT(A) and the AO.

Issue 2: Application of Section 50C without Valuation Officer Referral

• Relevant legal framework and precedents: Section 50C of the Income Tax Act pertains to the deemed sale consideration for capital assets, where the value assessed by the Stamp Valuation Authority is considered. The section allows for a reference to a Valuation Officer if the assessee disputes the stamp valuation.
• Court's interpretation and reasoning: The Tribunal found that since the assessee did not dispute the stamp valuation, there was no requirement for the AO to refer the matter to a Valuation Officer.
• Key evidence and findings: The Tribunal noted that the assessee had not contested the value assessed by the Stamp Valuation Authority, and therefore, the AO's reliance on this value was appropriate.
• Application of law to facts: The Tribunal applied Section 50C, affirming that in the absence of a dispute from the assessee regarding the stamp valuation, the AO correctly used the assessed value for computing capital gains.
• Treatment of competing arguments: The assessee argued that the AO should have referred the matter to a Valuation Officer, but the Tribunal dismissed this argument due to the lack of any dispute over the stamp valuation.
• Conclusions: The Tribunal upheld the AO's application of Section 50C without a referral to a Valuation Officer, dismissing the assessee's appeal on this ground.

3. SIGNIFICANT HOLDINGS

• Preserve verbatim quotes of crucial legal reasoning: "One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer."
• Core principles established: The Tribunal reinforced the principle that reopening of assessments under Section 147 must be based on new, tangible material, not merely a change of opinion. It also clarified that Section 50C does not necessitate a referral to a Valuation Officer unless the stamp valuation is disputed by the assessee.
• Final determinations on each issue: The Tribunal set aside the reopening of the assessment under Section 147 as invalid due to it being based on a change of opinion. It upheld the AO's application of Section 50C without a Valuation Officer referral, as the stamp valuation was undisputed.

In conclusion, the Tribunal's judgment highlights the necessity for Assessing Officers to have tangible new material for reopening assessments and clarifies the application of Section 50C in the absence of a dispute over stamp valuation. The appeal was partly allowed, setting aside the reopening but upholding the application of Section 50C.