2018 (4) TMI 1532 - HC - Income Tax

Reassessment / Income escaping assessment - land was agricultural land or not - Notice issued after four years - originally scrutiny assessment passed u/s 143(3) - Held that - It is nobody s case that the income chargeable to tax had escaped assessment for the assessment year in question by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice under sub-section (1) of Section 142 or Section 148 of the said Act. Where the assessee discloses all primary facts, but still income escapes assessment because of the failure on the part of the Assessing Officer to draw the correct inference in law, initiation of reassessment proceedings after expiry of 4 years from the end of the relevant assessment year cannot be justified, in view of the clear language appearing in proviso to section 147. This view finds support from the judgment of the Supreme Court in Gemini Leather Stores v. ITO, 1975 (5) TMI 1 - SUPREME Court In number of cases, the Courts held that there could be no justification in law in initiation of reassessment proceedings on the basis of facts and materials already disclosed in course of the original proceedings. First of all, the materials on record relied upon by the Appellate Commissioner and the Appellate Tribunal clearly indicate that the question whether the land was agricultural land or not was considered at the time of initial assessment. The Appellate Commissioner as also the Appellate Tribunal clearly held that there was an opinion found at the time of initial assessment. Appeal dismissed - Decided against the revenue.

Issues Involved:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961.
2. Failure to disclose material facts by the assessee.
3. Change of opinion as a basis for reassessment.
4. Jurisdiction of the Assessing Officer to reopen assessment after four years.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147:
The appeal challenges the order dated 26.4.2017 by the Income Tax Appellate Tribunal, which upheld the decision of the Commissioner of Income Tax (Appeals) allowing the respondent assessee's appeal against the reassessment order under Section 143(3) read with Section 147 for the assessment year 2008-09. Section 147 allows reassessment if income has escaped assessment, subject to conditions in Sections 148 to 153. The proviso to Section 147 restricts reassessment after four years unless there is a failure to disclose fully and truly all material facts necessary for assessment.

2. Failure to Disclose Material Facts by the Assessee:
The court examined whether the assessee failed to disclose all material facts necessary for the assessment year 2008-09. The Appellate Commissioner and Tribunal concluded that the assessee did not fail in this regard. The Appellate Commissioner noted that the original assessment included detailed scrutiny and verification of the land transaction, including site inspection and local inquiries. The Assessing Officer had accepted the land as agricultural based on this thorough investigation.

3. Change of Opinion as a Basis for Reassessment:
The reassessment was initiated based on an audit objection, which the Appellate Commissioner and Tribunal found to be a mere change of opinion. The Supreme Court in CIT v. Kelvinator of India Limited held that a mere change of opinion cannot justify reassessment. The Appellate Commissioner found no new tangible material to justify the reassessment, as the original assessment had already considered and accepted the facts regarding the land's agricultural status.

4. Jurisdiction of the Assessing Officer to Reopen Assessment after Four Years:
The reassessment notice was issued after the expiry of four years from the end of the relevant assessment year. The court reiterated that reassessment after four years is permissible only if there is a failure to disclose material facts by the assessee. Since the assessee had disclosed all primary facts, and the reassessment was based on a change of opinion without any new material, the reassessment was held invalid. The court cited several judgments, including Calcutta Discount Company Ltd. v. ITO and Parashuram Pottery Works Co. Ltd. v. ITO, to support the principle that reassessment based on the same material without new evidence is not justified.

Conclusion:
The court dismissed the appeal, affirming that the reassessment proceedings were invalid as they were based on a change of opinion and initiated after four years without any failure on the part of the assessee to disclose material facts. The decision of the Appellate Commissioner and Tribunal was upheld, emphasizing the principle that reassessment cannot be justified by a mere change of opinion.

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