2016 (8) TMI 221 - HC - Income Tax

Reopening of assessment - Claim of deduction under section 54EC not to be allowable - Held that - The Assessing Officer has gone a step beyond. He not only accepted the claim of the assessee in the order of assessment, he gave brief reasons for the same. He recorded that he was convinced about the classification adopted by the assessee and that the respective incomes were correctly classified. There is no scope for the Revenue to argue at this stage that this issue was not examined by the Assessing Officer in such assessment and that reopening within a period of four years was permissible. When we find that the Assessing Officer has no jurisdiction to reopen the assessment, question of relegating the assessee to the gamut of submitting to the reassessment proceedings simply would not arise. This suggestion of the counsel for the Revenue is therefore turned down. - Decided in favour of assessee

Issues Involved:
1. Legitimacy of the notice to reopen the assessment for the assessment year 2010-11.
2. Classification of income from the sale of land as business income or long-term capital gain.
3. Allowability of deduction under section 54EC of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legitimacy of the notice to reopen the assessment for the assessment year 2010-11:
The petitioner challenged the notice dated 25.03.2015 issued by the respondent Assessing Officer to reopen the assessment for the assessment year 2010-11. The petitioner argued that the issue of deduction under section 54EC of the Act was already examined during the original assessment proceedings, and any attempt to revisit the claim would be based on a mere change of opinion. The court observed that the reasons recorded by the Assessing Officer for reopening the assessment relied solely on the assessee's claim of deduction under section 54EC. The court concluded that the entire issue was already scrutinized during the original assessment, and any attempt to reopen the issue would be a mere change of opinion, which is not permissible.

2. Classification of income from the sale of land as business income or long-term capital gain:
The Assessing Officer believed that the income from the sale of land should be classified as business income rather than long-term capital gain, as the petitioner was engaged in the business of purchase and sale of land. The court noted that during the original assessment proceedings, the Assessing Officer had raised specific queries regarding the nature of activities and the details of long-term capital gain on the sale of land. The petitioner had provided detailed responses, and the Assessing Officer had accepted the classification of income as long-term capital gain. The court held that the Assessing Officer had formed an opinion during the original assessment, and any attempt to change this classification now would be a mere change of opinion.

3. Allowability of deduction under section 54EC of the Income Tax Act:
The Assessing Officer contended that the deduction under section 54EC was not allowable as the income from the sale of land was business income. The court observed that the Assessing Officer had examined the petitioner's claim of deduction under section 54EC during the original assessment proceedings. The petitioner had provided necessary details and evidence regarding the investment in Rural Electrification Corporation Limited bonds. The Assessing Officer had verified the claim and accepted it in the original assessment order. The court held that the Assessing Officer had no jurisdiction to reopen the assessment on this ground, as it would amount to a change of opinion.

Conclusion:
The court set aside the impugned notice dated 25.03.2015, allowing the petition and disposing of the case. The court emphasized that the Assessing Officer had already scrutinized the entire issue during the original assessment, and any attempt to reopen the assessment would be based on a mere change of opinion, which is not permissible under the law.

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