2020 (2) TMI 122 - HC - Income Tax

Reopening of assessment u/s 147 - failure on the part of the assessee to disclose fully and truly all the material facts - deduction u/s 53(b) and 54(1)(i) - ITAT allowed the appeal of the Revenue - HELD THAT - It cannot be said that there was no full and true disclosure at the end of the assessee of the material facts. In such circumstances, it could be said that there was no tangible material with the Assessing Officer for the purpose of reopening the assessment except the change of opinion that the deductions could not have been claimed and allowed under Sections 53(b) and 54(1)(i) of the Act. The conveyance deed; permission of the appropriate authority to sell the property and other documents were filed by the appellant at the time of original assessment proceedings. Nothing was suppressed. The Form 37-I as referred to above speaks for itself. It is not in dispute that the notice under Section 148 of the Act came to be issued beyond the period of four years. The CIT(A) recorded a finding of fact that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. Such finding of fact could not have been disturbed by the appellate tribunal without any basis for the same. - we hold that the impugned order passed by the appellate tribunal is not sustainable in law. Decided in favour of assessee.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act.
2. Whether the assessee made full and true disclosure of all material facts necessary for the assessment.

Detailed Analysis:

1. Validity of Reopening the Assessment:

The primary issue was whether the reopening of the assessment under Section 147 of the Income Tax Act was valid. The assessment was initially completed under Section 143(3) on 28th March 1994, including long-term capital gains. The assessee claimed deductions under Sections 53(b), 54(1)(i), and 54E, which were allowed. However, the Assessing Officer later noticed that the property in question was agricultural land, not residential, and thus the deductions were wrongly allowed. Consequently, the assessment was reopened by issuing a notice under Section 148, and the reassessment was completed, withdrawing the deductions.

The Commissioner of Income Tax (Appeals) [CIT(A)] annulled the reassessment, holding that there was no failure on the part of the assessee to disclose all material facts necessary for the assessment. The CIT(A) noted that the reopening was based on a change of opinion without any new material facts coming to light. The appellate tribunal, however, reversed this decision, stating that the assessee failed to make a full and true disclosure of all material facts, thereby justifying the reopening of the assessment.

2. Full and True Disclosure of Material Facts:

The second issue was whether the assessee had made a full and true disclosure of all material facts necessary for the assessment. The CIT(A) found that the assessee had disclosed all relevant documents, including the conveyance deed and permission from the appropriate authority, during the original assessment proceedings. The CIT(A) concluded that the reopening of the assessment was based on a mere change of opinion by the Assessing Officer, without any new tangible material.

The appellate tribunal disagreed, stating that the assessee did not disclose crucial details such as the nature of the property being agricultural land, the total area of the land, and the manner in which the sale rate was determined. The tribunal emphasized that the disclosure of primary facts was insufficient and that the assessee's failure to provide a full and true disclosure justified the reassessment.

Judgment:

The High Court examined the principles governing reassessment and concluded that the reopening of the assessment was invalid. The court emphasized that the validity of the reassessment must be determined with reference to the reasons recorded for reopening, and the Assessing Officer must have a prima facie belief based on tangible material that income had escaped assessment. The court found that the reopening was based on a change of opinion without any new material facts, and the assessee had made a full and true disclosure of all material facts during the original assessment.

The court cited the Supreme Court's decision in Kelvinator of India Ltd. and other relevant case law, emphasizing that the power to reopen assessments should not be exercised casually or mechanically. The court concluded that the appellate tribunal's decision was not sustainable in law and quashed the order, answering the substantial questions of law in favor of the assessee.

Conclusion:

The High Court allowed the appeal, holding that the reopening of the assessment was invalid as it was based on a change of opinion without any new tangible material. The court affirmed that the assessee had made a full and true disclosure of all material facts necessary for the assessment. The order of the appellate tribunal was quashed, and the substantial questions of law were answered in favor of the assessee.

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