2022 (4) TMI 381 - AT - Income Tax

Reopening of assessment u/s 147 - reopening has been done beyond four years - Addition of Income to Income from House Property made by the Learned Assessing Officer - HELD THAT - In the present case as mandated by the Act no reopening can be done unless there is failure on the part of the assessee to disclose fully and truly all material facts. Since details of the house property was duly available with the Assessing Officer when original assessment under section 143(3) was done in my considered opinion the reopening after four years is bad and liable to be quashed. Accordingly, hold that the Assessing Officer has no jurisdiction to pass the order in this case. As regards the merits of the case addition has been made on the basis of percentage of the value of the house property. No case has been made out by the Assessing Officer that there was attempt by the assessee to reduce value of the house property income. It is not the case that the Assessing Officer has made any inquiry about the prevalent rental income or he has examined the State Municipal value. Without such examination, such a substitution of house property income upon whimsies and fancies of the Assessing Officer is not sustainable on the touchstone of Tip Top Typography 2014 (8) TMI 356 - BOMBAY HIGH COURT - Thus hold that addition on merits is also not sustainable. Appeal of assessee allowed.

Summary

Issues:
1. Validity of Notice u/s. 148
2. Addition of Income from House Property

Validity of Notice u/s. 148:
The case involved the validity of a notice issued under section 148 of the Income Tax Act. The Assessing Officer had reopened the assessment after four years, alleging that the income from house property had escaped assessment. The Assessing Officer estimated the income at a certain amount, which the assessee contested. The assessee argued that all necessary details were provided during the original assessment. However, the Assessing Officer proceeded with the addition. The assessee appealed before the CIT(A), claiming that the notice u/s. 148 was based on a change of opinion and was thus invalid. The CIT(A) rejected this contention, stating that the availability of details during the original assessment did not imply that the Assessing Officer had formed an opinion regarding the specific income in question. The ITAT, in its judgment, disagreed with the CIT(A)'s reasoning. It held that since the details were available during the original assessment and there was no failure on the part of the assessee to disclose material facts, the reopening after four years was unjustified. The ITAT concluded that the Assessing Officer lacked jurisdiction to pass the order in this case.

Addition of Income from House Property:
Regarding the addition of income from house property, the Assessing Officer had made the addition based on a percentage of the value of the property without conducting a detailed inquiry into the rental income or municipal value. The ITAT observed that there was no evidence of the assessee attempting to manipulate the property value to reduce income. The ITAT cited a case law to emphasize that such arbitrary additions without proper examination were not sustainable. Therefore, the ITAT held that the addition on merits was also not justified. Consequently, the ITAT allowed the appeal filed by the assessee, ruling in favor of the assessee on both issues.

In summary, the judgment by the ITAT Mumbai addressed two main issues. Firstly, it analyzed the validity of the notice issued under section 148 of the Income Tax Act, emphasizing the requirement for failure to disclose material facts for reopening assessments after four years. The ITAT concluded that since the details were available during the original assessment and no failure to disclose facts occurred, the reopening was deemed unjustified. Secondly, the judgment examined the addition of income from house property, highlighting the Assessing Officer's lack of proper inquiry before making the addition. The ITAT ruled that the addition based solely on a percentage of property value without substantial examination was not sustainable, citing relevant case law. Ultimately, the ITAT allowed the appeal filed by the assessee, granting relief on both the validity of the notice and the addition of income from house property.