2022 (8) TMI 855 - AT - Income Tax

Validity of reopening of assessment u/s 147 - scope of new/fresh information or material initiating reassessment - Rental income receipts as deemed income - HELD THAT - Property in question which was situated at Milton Apartments Mumbai was rented upto assessment year 2008-09. For assessment 2008-09, the said property was rented for a sum and assessment order for AY 2008-09 u/s 143(3) was also passed including the above rented income. For the subsequent assessment years namely AY 2009-10 and AY 2010-11, no rental income was declared by the assessee in the return of income and order was passed u/s 143(1) and the Department had accepted the assessee s stand that there was no rental income earned by the assessee from the said property situated in Milton apartments. For the impugned assessment year AY 2011-12, no rental income was declared on the said property in the return of income, which was the same situation as was prevailing for the previous two years as well. During the impugned year, the property in question was sold by the assessee and the income from LTCG on sale of said property came for consideration before the AO. Details were called for by the AO during the course of assessment and an addition was made as LTCG on sale of the impugned property. Therefore, from the facts before us, it is evident that no new/fresh information or material came into the possession of the assessing officer necessitating him to initiate reassessment proceedings under section 147. All the information on the basis of which reassessment proceedings have been initiated by AO was within his knowledge at the time of passing of original assessment order. AO has initiated reassessment proceedings on reconsideration of the same facts which prevailed during the course of original assessment. No new facts/materials/information was discovered which led to the belief that income had escaped assessment, which was not in the knowledge of the assessing officer at the time of original assessment. Re-assessment proceedings were on a mere change of opinion and the AO is seeking a review of his earlier order vide the present reassessment proceedings. We are of the view that Ld. CIT(Appeals) has erred in facts and in law in confirming the additions made by the AO in the reassessment proceedings. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under Section 147 of the Income Tax Act.
2. Addition of notional rental income under the head "House Property."

Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147 of the Income Tax Act:
The primary issue revolves around whether the reopening of the assessment under Section 147 was valid. The assessee contended that the reopening was invalid as it was based on a "change of opinion" by the Assessing Officer (AO), which is impermissible in law. The original assessment was completed on 24-03-2014, where all details regarding the property were disclosed, and the AO had already considered the capital gains on the sale of the property. The reassessment was initiated without any new material coming into the possession of the AO, which the assessee argued was merely a review of the previously concluded assessment.

The Tribunal referred to several judgments to support this view:
- Tech Span India (P.) Ltd. and another (2018) 6 SCC 685: The Supreme Court held that Section 147 does not allow reassessment merely due to a change of opinion.
- Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 320 ITR 561(SC): The Court emphasized the difference between the power to review and the power to reassess, stating that reassessment must be based on new information.
- PCIT v. Fibres and Fabrics International (P.) Ltd [2022] 139 taxmann.com 562 (SC): Reopening based on the same set of information available during the original assessment was deemed invalid.
- Dell India (P.) Ltd. v. JCIT [2021] 123 taxmann.com 468 (Karnataka): An oversight or mistake by the AO does not justify reopening.
- Jivraj Tea Co. v. DCIT [2017] 88 taxmann.com 539 (Gujarat): Reopening on the same grounds as the original assessment was considered a change of opinion and thus impermissible.

The Tribunal concluded that since no new material was presented and the reassessment was based on the same facts as the original assessment, it amounted to a change of opinion. Therefore, the reopening of the assessment was invalid.

2. Addition of Notional Rental Income under the Head "House Property":
The second issue was whether the addition of notional rental income for the property in Mumbai was justified. The AO had added Rs.1,56,800/- as notional rental income, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) reasoned that the property was not self-occupied as claimed by the assessee, who was residing in Vadodara and engaged in business activities there. The CIT(A) found the assessee's claim of staying in the Mumbai property to negotiate its sale price for nine months to be implausible.

However, the Tribunal noted that for the assessment years 2009-10 and 2010-11, no rental income was declared for the same property, and this was accepted by the Department. During the assessment year 2011-12, the property was sold, and the capital gains were duly considered. The Tribunal found that the AO had all the relevant information during the original assessment and no new material had emerged to justify the reassessment.

The Tribunal concluded that the AO's addition of notional rental income was based on reconsideration of the same facts available during the original assessment, which was not permissible. Therefore, the addition of Rs.1,56,800/- under the head "House Property" was unjustified.

Conclusion:
The Tribunal allowed the appeal, holding that:
1. The reopening of the assessment under Section 147 was invalid as it was based on a change of opinion.
2. The addition of notional rental income was unjustified as it was based on the same facts considered during the original assessment.

Order:
The appeal of the assessee was allowed, and the order was pronounced in the open court on 29-07-2022.