2018 (6) TMI 35 - HC - Income Tax

Reopening of the assessment u/s 147 - change of opinion - unexplained investment - Held that - Assessment was completed under Section 143(3) based upon the valuation report of an approved valuer - inspection have been conducted after 7 years of assessmen by the Departmental valuer and difference in value of unexplained investments was found - since the report given by the Departmental valuer is only an estimate and based on such estimation, there cannot be any reopening and if the same is permitted, it would amount to a clear case of change of opinion - case is dismissed - Decided in favor of assessee.

Summary

Issues involved:
Appeal against reopening of assessment for the year 1991-1992 based on a report by Departmental valuer. Allegation of escapement of income due to difference in valuation. Contention of change of opinion and lack of material for reopening. Admissibility of Explanation 1 to Section 147 of the Income Tax Act.

Analysis:
The appeal before the Madras High Court concerned the reopening of an assessment for the year 1991-1992 based on a report by the Departmental valuer, following the original completion of assessment under Section 143(3) of the Income Tax Act in 1993. The appellant, the Revenue, challenged the order of the Income Tax Appellate Tribunal confirming the Commissioner of Income Tax (Appeals) decision to set aside the reopening. The substantial questions of law included whether the Tribunal was correct in holding the reopening improper and in not considering Explanation 1 to Section 147 of the Income Tax Act.

The appellant argued that the difference in valuation by the Departmental valuer, which led to the reopening, was merely an estimate and could not be a basis for alleging escapement of income. It was contended that the reopening was a change of opinion without sufficient material to support it. The Assessing Officer treated the difference in construction costs as unexplained investment, leading to the dispute.

The Commissioner of Income Tax (Appeals) allowed the appeal, referencing the necessity for reasons in the notice for reopening and the obligation of the assessee to disclose all material facts. The High Court upheld this decision, emphasizing that the duty of the assessee is to provide all relevant facts, with the Assessing Officer responsible for making decisions based on the disclosed information. The Court found the Departmental valuer's report to be inconclusive and based on estimation, not providing grounds for reopening the assessment.

Ultimately, the High Court dismissed the appeal, ruling in favor of the assessee and against the Revenue. It concluded that the reasons for reopening were insufficient, as there was no failure on the part of the assessee to disclose all material facts. The Court highlighted that permitting reopening based on estimations would amount to a change of opinion, which is impermissible under the law. Consequently, the appeal was rejected with no costs awarded.