2014 (6) TMI 248 - AT - Income Tax

Validity of reopening of assessment u/s 148 of the Act Mere change of opinion - Held that - The AO noticed from the statement of income, the assessee has offered income on sale of land at Gachibowli after claiming land cost though the land was sold - the assessee has sold the property along with 3 other co-owners for a consideration of Rs. 2 crores - The AO while framing assessment u/s 143(3) accepted the assessee s contention and completed the assessment and there being no tangible fresh material assessment cannot be reopened - Relying upon Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT OF INDIA - the AO has no power to review, he has the power to reassess - reassessment has to be based on fulfilment of certain pre-conditions and if the concept of change of opinion is removed, then, in the garb of reopening the assessment, review would take place - there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of the assessment - otherwise, a mere change of opinion on the part of the AO in the course of assessment for a subsequent assessment year would not by itself legitimise reopening of assessment for an earlier year thus, the order of the reassessment made by the AO u/s 147 of the Act is set aside Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment u/s 148 of the IT Act for the assessment year 2007-08.
2. Disallowance of ULC charges and deduction u/s 54F.
3. Validity of notice u/s 148 and denial of exemption u/s 54F.

Analysis:

Issue 1: Reopening of assessment u/s 148
The assessee challenged the reopening of assessment u/s 148, claiming it was based on a change of opinion without fresh material. The CIT(A) found no discussion on capital gains in the original assessment order and upheld the reopening, citing lack of clarity on crucial issues raised by the AO. The assessee relied on the case of GMR Holdings Pvt Ltd. v. DClT but the CIT(A) dismissed the ground. The ITAT considered the judgments in S. Ranjit Reddy Vs. DCIT and CIT Vs. Kelvinator of India Ltd., emphasizing the need for tangible material for reopening. Ultimately, the ITAT quashed the reassessment, stating that the AO lacked sufficient grounds for reopening.

Issue 2: Disallowance of ULC charges and deduction u/s 54F
The AO disallowed ULC charges and deduction u/s 54F in the reassessment. The CIT(A) upheld these disallowances, stating the ULC charges were not part of the cost of acquisition. The AO argued that income had escaped assessment, leading to the disallowance. The ITAT, however, found no tangible fresh material to justify the disallowances and relied on legal precedents to emphasize the importance of a valid reason to believe for reassessment. Consequently, the ITAT allowed the assessee's appeal on this issue.

Issue 3: Validity of notice u/s 148 and denial of exemption u/s 54F
The notice u/s 148 was issued based on alleged escapement of income from the sale of land. The AO contended that the assessee did not offer the entire sale consideration as LTCG. The ITAT, following the principles laid down in various judgments, including Kelvinator India Ltd. and Usha International, held that the reassessment lacked a valid reason to believe and quashed it. As a result, the denial of exemption u/s 54F was also set aside. The ITAT dismissed the revenue's appeal as infructuous due to quashing the reassessment.

In conclusion, the ITAT allowed the assessee's appeal, quashed the reassessment, and dismissed the revenue's appeal, emphasizing the importance of tangible material and a valid reason to believe for reopening assessments under section 147 of the IT Act.