2021 (9) TMI 610 - HC - Income Tax

Reopening proceedings u/s 147/148 - event of tracing out new tangible material or information - change of opinion - non-disclosure on the part of the assessee proved or not? - reopening beyond period of four years - deduction u/s 54F was sought for. Long term capital gain - reasons of reopening reveals that as per sub-section (2) of Section 54F, the assessee should not acquire another asset other than the new asset within two years - HELD THAT - Here, the petitioner had acquired two more houses on the same date. The exemption under Section 54F is required to be withdrawn for violation of condition under sub-section (2) of Section 54F. Thus, it is apparently clear that for the purpose of withdrawal of the exemption granted under Section 54F, the assessment is reopened. Such a reopening cannot be construed as based on new tangible material. If at all any lapse committed during the original assessment proceedings or erroneous consideration based on the opinion formed by the Assessing Officer during the relevant point of time, the other possible opinion if at all raised for reopening of assessment is to be construed as change of opinion and cannot be considered as new materials for the purpose of reopening of assessment. In the present case, admittedly the assessee had submitted all the documents pertaining to the purchase of the three properties and all those documents were placed before the Assessing Officer and the Assessing Officer considered all those three documents and formed an opinion that, the petitioner / assessee is eligible to grant exemption under Section 54F of the Income Tax Act only in respect of one property. Exemption under Section 54F is required to be withdrawn for violation of condition under sub-section (2) of Section 54F - AO during the relevant point of time, when this issue was considered was very much aware of the fact regarding the implication of sub-section (2) of Section 54F and by considering all those aspects, he granted exemption for only one property alone. This being the factum, the Assessing Officer clearly formed an opinion for the purpose of grant of exemption under Section 54F while passing the original assessment order and now the reasons furnished for reopening of assessment would reveal that they are taking a different opinion on the same set of facts. Thus, the said reasons furnished for reopening the proceedings dated 06.04.2016 amounts to change of opinion beyond any pale of doubt. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under Sections 147/148 of the Income Tax Act, 1961.
2. Disclosure of material facts by the petitioner.
3. Applicability of exemption under Section 54F of the Income Tax Act.
4. Allegation of change of opinion by the Assessing Officer.
5. Compliance with conditions stipulated in the proviso to Section 147 of the Income Tax Act.

Detailed Analysis:

1. Validity of Reopening Assessment Under Sections 147/148 of the Income Tax Act, 1961:
The petitioner challenged the reopening of assessment initiated under Sections 147/148 of the Income Tax Act, 1961, arguing that the reasons provided for reopening were based on the same documents and facts that were already considered during the original assessment. The petitioner contended that the reopening was merely a change of opinion and not based on new tangible material. The court examined whether the conditions for reopening, particularly beyond four years but within six years, were met, emphasizing the necessity of compliance with the proviso to Section 147.

2. Disclosure of Material Facts by the Petitioner:
The petitioner asserted that all relevant documents and information pertaining to the purchase of properties were disclosed during the original assessment. The court reviewed the assessment order and found that the petitioner had indeed provided all necessary documents, and the Assessing Officer had considered these while granting exemption under Section 54F for one property. The court noted that there was no omission or failure to disclose material facts by the petitioner.

3. Applicability of Exemption Under Section 54F of the Income Tax Act:
The petitioner claimed an exemption under Section 54F for the investment made in a residential house. The original assessment allowed this exemption for one property, which was upheld by the Income Tax Appellate Tribunal after considering a detailed inspection report. The court found that the exemption was granted based on a thorough evaluation of facts and documents, and the reopening of assessment sought to withdraw this exemption without new material evidence.

4. Allegation of Change of Opinion by the Assessing Officer:
The court scrutinized the reasons provided for reopening the assessment, which cited the acquisition of additional properties as a violation of Section 54F(2). The court concluded that the reopening was based on a different interpretation of the same facts already considered during the original assessment, amounting to a change of opinion. The court emphasized that reopening on such grounds is not permissible.

5. Compliance with Conditions Stipulated in the Proviso to Section 147 of the Income Tax Act:
The court highlighted the necessity of establishing non-disclosure of material facts for reopening assessments beyond four years. In this case, the court found that the petitioner had fully disclosed all relevant facts, and the Assessing Officer had considered these during the original assessment. The court held that the respondent failed to prove any non-disclosure, thus failing to meet the conditions stipulated in the proviso to Section 147.

Conclusion:
The court quashed the impugned order of reopening the assessment, ruling that the reopening was based on a change of opinion and not on new tangible material. The court emphasized that the petitioner had disclosed all material facts fully and truly, and the conditions for reopening beyond four years were not met. The writ petition was allowed, and the reopening proceedings were deemed invalid.