2024 (11) TMI 1388 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - income from Long Terms Capital Gain ('LTCG ) and this entitles the petitioner to claim deduction u/s 54-B - HELD THAT - From the perusal of the reply filed during assessment proceedings and the assessment order, it is evident that there was no specific question raised with regard to deduction claimed u/s 54B. The case would have been on different pedestal if the AO during the assessment proceedings had raised query with regard to deduction u/s 54B. In that case the reply and material filed by the petitioner relating to the deduction would have either been accepted or rejected or further probe ordered. There is no quarrel with the proposition of law that the reassessment proceedings cannot be initiated merely on change of opinion. The reasons for reopening clearly indicates that the AO had reason to believe that income had escaped assessment. We at this stage are not at all suggesting that the inference drawn is correct. What is required at this stage is that the AO has reason to believe that there was an escaped assessment. There is no bar that u/s 147 of the Act that the reasons to believe cannot be based upon the material already available on record. It is not a case of change of opinion, the petition is dismissed.

Issues:
1. Quashing of notice under Section 148 of Income Tax Act, 1961 for Assessment Year 2009-10 and rejection of objections.
2. Claimed deduction under Section 54B of the Act leading to reassessment.
3. Consideration of deduction under Section 54B during assessment.
4. Application of mind by Assessing Officer on deduction claimed.
5. Jurisdiction under Section 147 for reassessment.
6. Reopening assessment based on reasons to believe income escaped assessment.
7. Material for reasons to believe can be based on existing records.

Analysis:

1. The petitioner sought to quash the notice under Section 148 of the Income Tax Act, 1961 for AY 2009-10 and the rejection of objections. The notice was issued due to the alleged wrongful claim of deduction under Section 54B, resulting in an alleged escapement of tax.

2. The respondent argued that the Assessing Officer had not considered the deduction under Section 54B previously. Citing a decision from the High Court of Calcutta, it was contended that the petitioner claimed the deduction for land sold by their brothers.

3. The petitioner's counsel highlighted that the assessment case was scrutinized, and the deduction under Section 54B was examined. It was argued that the reassessment was based on a change of opinion by the AO.

4. The court noted that during the assessment, there was no specific inquiry regarding the deduction claimed under Section 54B. Had such a query been raised, the petitioner's submission on the deduction could have been accepted, rejected, or further investigated.

5. The court emphasized the Assessing Officer's authority under Section 147 to reassess income if there is a reason to believe that income has escaped assessment. The notice was issued based on the alleged wrongful deduction claim, indicating a potential escapement of income.

6. It was argued that the petitioner was entitled to claim the deduction under Section 54B due to income from Long Term Capital Gains. The court observed that the AO did not address this deduction issue during the initial assessment, leading to the reassessment.

7. Referring to legal precedents, the court clarified that reassessment cannot be initiated solely on a change of opinion. The Assessing Officer must have a genuine reason to believe that there was an escapement of income, even if based on existing record material.

8. Ultimately, the court concluded that the case did not involve a mere change of opinion, leading to the dismissal of the petition. The judgment underscored the necessity for a valid reason to believe income had escaped assessment for initiating reassessment proceedings.

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