2016 (6) TMI 110 - HC - Income Tax

Reopening of assessment - addition on capital gain - Held that - Both by the Commissioner of Income Tax (Appeals) and the Tribunal, the order passed by the assessing officer, under Section 143 (3) of the Act, records the claim of the assessee that the sale of land was liable to tax as capital gains. It is not even the case of the assessing officer that the assessee had failed to disclose all material and necessary facts and, as a result, income has escaped assessment. The assessee s claim that the income was liable to be taxed, under the head capital gains, could have been disallowed by the assessing officer while passing an assessment order under Section 143 (3) of the Act, and the said income could have been treated as business income. Having failed to do so, the assessing officer could not have exercised jurisdiction under Section 147 of the Act beyond a period of four years. Even otherwise, as has been rightly held by the Tribunal, jurisdiction under Section 147 of the Act cannot be exercised for a mere change of opinion. We find no error in the order of the Tribunal, much less a substantial question of law, necessitating interference in this appeal. - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment beyond the prescribed period under Section 147 of the Income Tax Act, 1961.
2. Validity of reassessment proceedings based on change of opinion by the assessing officer.

Analysis:
1. The case involved an appeal against the order passed by the ITAT, Hyderabad, regarding the reopening of assessment under Section 147 of the Income Tax Act, 1961. The assessee, a real estate company, filed a revised return admitting long-term capital gains on the sale of land. The assessing officer sought to treat the capital gains as business income and issued a notice under Section 148 to reopen the assessment beyond the four-year period. The Commissioner of Income Tax (Appeals) held that the notice was issued after the prescribed period, and the appeal was allowed. The ITAT relied on precedents to emphasize that the concept of change of opinion cannot be a basis for reopening assessments. The Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner of Income Tax (Appeals).

2. The proviso to Section 147 of the Act sets limitations on reopening assessments beyond four years, allowing it only in specific circumstances like non-disclosure of material facts by the assessee. In this case, the assessing officer had already considered the issue of capital gains during the initial assessment under Section 143 (3) and did not treat it as business income. The Tribunal held that the assessing officer could not reopen the assessment merely based on a change of opinion. As the assessing officer failed to disallow the capital gains during the initial assessment, exercising jurisdiction under Section 147 beyond the prescribed period was unwarranted. The Tribunal found no error in its decision and dismissed the appeal, emphasizing that reassessment proceedings cannot be initiated solely for a change of opinion.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of adhering to the statutory provisions and limitations on reopening assessments beyond the prescribed period under Section 147 of the Income Tax Act, 1961. The judgment reiterated that reassessment cannot be initiated solely based on a change of opinion by the assessing officer, and there must be valid grounds as per the provisions of the Act.