2022 (4) TMI 1325 - HC - Income Tax

Reopening of assessment u/s 147 - Change of opinion - value of unsold flats for two projects which has not been offered to tax under the head Income from house property - HELD THAT - On identical reasons were recorded for A.Y.2016-17 and this Court was pleased to pass the order 2022 (1) TMI 1234 - BOMBAY HIGH COURT that assessment order in this case has been passed on 20th December, 2019 and the query on this issue has been raised on 19th October, 2019 and replied by petitioner vide its letter dated 14th November, 2019 and 12th December 2019. Therefore, the Assessing Officer had benefit of the judgment of the Delhi High Court relied upon by the Assessing Officer wanting to re-open the assessment but still did not find anything wrong in the case made out by petitioner and proceeded to pass the assessment order. Market value being more than the agreement value and applicability of Section 43CA(1) - As held by this Court in Aaroni Commercials Ltd . 2014 (2) TMI 659 - BOMBAY HIGH COURT once a query is raised during assessment proceedings and assessee has replied to it, it follows that the query raised was a subject matter of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. In this case, during the original assessment proceedings, a notice dated 19th October 2019 was issued under Section 142(1) of the Act by which petitioner was called upon to furnish copies of Index II(s) of three flats sold during the year. Petitioner responded by its letter dated 14th November 2019 and provided copies of Index II of flats sold during the year. Therefore, it is abundantly clear that the second issue relating to nine flats out of the twelve flats mentioned in the reasons for reopening was a subject of consideration of the Assessing Officer while completing the assessment. There can be no doubt in the present facts that the subject matter of the market value of nine flats as against the agreement value was a subject matter of consideration by the Assessing Officer. It would, therefore, follow that the reopening of the assessment for this reason is merely on the basis of change of opinion of the Assessing Officer. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice dated 30th March 2021 issued under Section 148 of the Income Tax Act, 1961 for A.Y. 2017-18 and the order dated 10th December 2021 rejecting petitioner's objections.

Analysis:
The High Court examined the re-opening of assessment before the expiry of four years from the relevant assessment year. It was noted that if an assessment has been completed under Section 143(3), re-opening cannot be based on a change of opinion. The Court analyzed the reasons for re-opening and found that the proposed re-opening was indeed on the basis of a change of opinion. Two main issues were raised in the reasons for re-opening: firstly, the treatment of unsold flats in the profit and loss account and balance sheet, and secondly, the market value of certain flats exceeding the agreement value, triggering the provisions of Section 43CA(1) of the Act.

Regarding the first issue, the Court referred to a previous order where identical reasons were recorded for a different assessment year. The Court highlighted that the Assessing Officer had the benefit of relevant judgments but did not find any discrepancies during the original assessment proceedings. This led the Court to conclude that the re-opening based on this issue was merely a change of opinion and not a valid reason to believe that income had escaped assessment.

On the second issue concerning the market value of certain flats, the Court noted that this aspect was already considered during the original assessment proceedings, even though it was not explicitly discussed in the assessment order. The Court emphasized that once a query is raised and responded to by the assessee, it is deemed to have been considered by the Assessing Officer. Therefore, the Court held that the re-opening based on this issue was also unjustified and constituted a change of opinion.

Ultimately, the Court allowed the petition and quashed the notice dated 30th March 2021 under Section 148 for A.Y. 2017-18, the order rejecting petitioner's objections, and a subsequent notice under Section 143(2) dated 29th December 2021. The Court concluded that the re-opening of the assessment lacked valid reasons and was merely based on a change of opinion, thus ruling in favor of the petitioner.