2019 (11) TMI 267 - AT - Income Tax

Re-opening of the assessment u/s 147 - validity of reason to believe - HELD THAT - In the present case, notice u/s 148 has been issued on 28.03.2016 in relation to assessment year 2011-12. Hence, the reopening of assessment is within a period of four years from the end of the relevant assessment year. In such cases, the AO would be clothed with jurisdiction to issue a notice for reopening of an assessment if he has reason to believe that income chargeable to tax has escaped the assessment. The requirement of failure to make true and full disclosure as provided in the proviso to Section 147 is not to be satisfied for issuing of re-opening notice within the period of four years from the end of the relevant assessment year. Thus, in the absence of cumulative satisfaction of reason to believe and in the absence of any income chargeable to tax escaping assessment, the Assessing Officer is not empowered with jurisdiction to reopen an assessment. In the present case, it is also a fact that original assessment for the year under consideration was framed under section 143(3) of the Act. In such a situation, another aspect that has to be kept in mind is as to whether the reopening is based upon any tangible material which has come to the knowledge of the Assessing Officer subsequent to the framing of the earlier assessment or whether the same is merely a change of opinion on the part of the AO. In the present case find force in the contention of the Ld AR that the impugned notice have been occasioned by a change of opinion. It is trite law that a mere change of opinion cannot constitute a reason for re-opening the assessment - notice of reopening the assessment u/s 148 of the Act is on account of change of opinion by the AO, which is not permissible as per law - Decided in favour of assessee.

Summary

Issues:
1. Validity of reassessment proceedings under Section 147 of the Income Tax Act.
2. Whether the reassessment was based on a change of opinion.
3. Disallowance of expenditure incurred in connection with property transfer.

Issue 1: Validity of reassessment proceedings under Section 147:
The appeal challenged the reassessment proceedings initiated by the Assessing Officer (AO) under Section 147 of the Income Tax Act. The Appellate Tribunal noted that the AO had re-opened the assessment within four years from the end of the relevant assessment year, as permitted by law. The Tribunal emphasized that for a valid reassessment, the AO must have a reason to believe that income chargeable to tax has escaped assessment. Additionally, if the reassessment is beyond four years, the Assessee must have failed to fully and truly disclose all material facts necessary for assessment. The Tribunal concluded that in this case, the reassessment was within the prescribed period and met the legal requirements, giving the AO jurisdiction to issue the notice for reassessment.

Issue 2: Whether the reassessment was based on a change of opinion:
The Appellate Tribunal considered whether the reassessment was based on a change of opinion by the AO, which is impermissible under the law. The Tribunal highlighted that the original assessment had been framed under Section 143(3) of the Act. It noted that for a reassessment to be valid, it must be based on tangible material discovered after the original assessment, not merely a change of opinion. The Tribunal agreed with the Assessee's argument that the notice for reassessment was indeed a result of a change of opinion. Citing legal precedent, including the decision in CIT Vs. Kelvinator India Limited, the Tribunal held that a mere change of opinion cannot be a valid reason for reopening an assessment. Consequently, the Tribunal quashed the reassessment proceedings, stating that they were based on a change of opinion and therefore not sustainable under the law.

Issue 3: Disallowance of expenditure incurred in connection with property transfer:
The Assessee had claimed an expenditure of ?23,74,841 incurred in connection with the transfer of property under question in the normal course of business. The AO, during the reassessment proceedings, treated this amount as income from the sale of land and added it to the total income. The Assessee appealed this decision before the Ld.CIT(A), who upheld the AO's order. The Appellate Tribunal, after quashing the reassessment proceedings on the grounds of a change of opinion, deemed the issue on merits as academic and requiring no adjudication. Therefore, the Tribunal allowed the Assessee's grounds, indicating that the disallowance of expenditure was not addressed due to the primary issue of the reassessment being set aside.

In conclusion, the Appellate Tribunal allowed the appeal of the Assessee, setting aside the reassessment proceedings for the assessment year in question. The Tribunal's decision was based on the finding that the reassessment was initiated due to a change of opinion, which is not a valid reason under the law. The issue regarding the disallowance of expenditure incurred in connection with property transfer was not addressed on merits as the reassessment proceedings were deemed void.