2014 (5) TMI 71 - AT - Income Tax

Validity of re-assessment proceedings u/s 147/148 of the Act - full value of consideration u/s 50C of the Act - Held that - There is no material available with the AO to form his opinion that income has escaped assessment - All material evidences were available at the stage of original assessment proceedings and the AO merely following the provisions of section 50C, as was not considered in the original assessment proceedings, reopened the assessment order - The assessee has disclosed all the facts which were known all along to the Revenue - Section 50C is not final determination to prove that it is a case of escapement of income - The report of approved valuer may give estimated figure on the basis of facts of each case - on mere applicability of section 50C would not disclose any escapement of income. Relying upon Commissioner of Income Tax Versus Kelvinator Of India Limited. 2002 (4) TMI 37 - DELHI High Court , Circular no.549 of CBDT has been followed and held that on mere change of opinion of AO cannot be a ground for re-assessment and that amendment of sec. 147 w.e.f. 1.4.89 has not altered the position - The AO at the original assessment stage considered all the documents and material produced before him and has accepted the cost of property as was declared by the assessee - on mere change of opinion, the AO was not justified in reopening the assessment - CIT(A) on proper appreciation of facts and law correctly quashed the reassessment proceedings Decided against Revenue.

Summary

Issues:
Reopening of assessment u/s. 147/148 of the IT Act based on change of opinion, applicability of section 50C for computation of capital gain, acceptance of sale consideration, quashing of reassessment proceedings by ld. CIT(A).

Analysis:
The appeal by the Revenue challenges the quashing of re-assessment proceedings u/s. 147/148 of the IT Act for the assessment year 2004-05. The AO reopened the assessment after finding that the assessee sold a property for Rs.6 lac against the stamp valuation of Rs.25,89,000, resulting in long term capital gain. The AO did not apply section 50C while passing the original assessment order. The assessee contended that the reopening was bad in law as the AO had already considered all material and evidence during the original assessment. The ld. CIT(A) agreed with the assessee, stating that it was a case of mere change of opinion and quashed the reassessment proceedings based on decisions from the Tribunal and High Courts.

The ld. CIT(A) found that the AO did not have any new material for reopening the assessment, as all relevant documents were already considered during the original assessment. The AO's reliance on section 50C for computation of capital gain was not sufficient to establish income escapement. The AO's decision to reopen the assessment was solely based on a change of opinion, which is not a valid ground for reassessment as per legal precedents. The AO's failure to consider section 50C earlier did not justify the reopening, as the assessee had disclosed all relevant facts known to the Revenue. The ld. CIT(A) correctly quashed the reassessment proceedings, emphasizing that the AO's actions were not justified.

The legal analysis referred to various court decisions, such as the Hon'ble Delhi High Court's ruling in Kelvinator India Ltd., emphasizing that mere change of opinion is not a valid ground for reassessment. Other court decisions highlighted the importance of material evidence and failure to disclose facts for valid reassessment. The Supreme Court's rulings reiterated that reassessment cannot be based on a mere change of opinion and that the assessee is only required to disclose primary facts. The conclusion was that the AO's decision to reopen the assessment lacked merit and the departmental appeal was dismissed accordingly.