2022 (9) TMI 1332 - HC - Income Tax

Reopening of the assessment u/s 147 - nature of jurisdiction conferred by Section 147 - Eligibility of reasons to believe - value of consideration for computation of capital gains - HELD THAT - In the reasons accompanying the impugned notices significantly there was not even an allegation about suppressing or concealing the deed of sale or MOU. The reasons referred to record and based on the records suggested that the Assessing Officer may have erred in deducting because there was no reason to pay Resicom Homes Pvt Ltd. and D Souza Estate Holidays Pvt. Ltd. any compensation. From the reasons furnished it is apparent that this is a case of change of opinion and not a case of any concealment or suppression of material facts. After the Petitioners raised the objections the objections were disposed of by order/communication - In this order/communication there was a reference made to the Petitioners concealing the fact of the sale deed. The order/communication claim that the Assessing Officer had not considered of the sale deed before allowing the deductions under Section 48 of the I.T. Act. Respondents will have to stand or fall based on the reasons recorded by the Assessing Officer at the time of issuing impugned notices for the reopening of the assessment. Those reasons nowhere referred to any concealment of documents by the Petitioners or concealment of sale deed by the Petitioners. The record fairly bears out that there was no concealment. After taking up the Petitioners cases for limited scrutiny the Assessing Officer considered the material on record and allowed the deductions under Section 48 of the I.T. Act. Therefore the Respondents cannot now be permitted to add to the reasons recorded by the Assessing Officer at the time of issuing notices for reopening the assessment. There appears to be no merit in the claim of the concealment of documents like the sale deed or MOU. After the Petitioners cases were selected for limited scrutiny particularly on the aspect of the claim for deductions on capital gains the Petitioners have stated on oath that all documents including the sale deed and the MOU were produced before the Assessing Officer in response to his questionnaire. The record shows that the deductions were granted after considering the relevant documents. This is possibly why at the time of issuing notice for reopening the assessment the reasons do not refer to any alleged concealment of documents or suppression of documents. In the present case it is apparent that reassessment is based on a mere change of opinion. The reassessment based on a mere change of opinion is nothing but a review. Admittedly no such powers of review have been conferred on the Assessing Officer when purporting to exercise powers under Sections 147 and 148 - the impugned notices issued in excess of the jurisdiction conferred upon the Respondents are liable to be quashed and set aside. They are accordingly quashed and set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment under Section 147/148 of the Income Tax Act, 1961.
2. Deduction of compensation paid under Section 48 of the Income Tax Act, 1961.
3. Allegation of non-disclosure of material facts.
4. Concept of "change of opinion" in tax reassessment.

Detailed Analysis:

1. Reopening of Assessment under Section 147/148:
The Petitioners filed their income tax returns for the Assessment Year 2016-2017, which were initially accepted by the Assessing Officer after a limited scrutiny. However, the Assessing Officer later issued notices under Section 148 to reopen the assessment, citing reasons related to the deduction of compensation paid. The Petitioners challenged these notices, arguing that there was no tangible material to justify the reopening and that it was merely a "change of opinion."

2. Deduction of Compensation Paid under Section 48:
The core issue revolved around the deduction of Rs. 1,64,45,000/- claimed by the Petitioners under Section 48 of the Income Tax Act. This amount was paid as compensation to previous buyers due to the cancellation of a sale agreement. The Assessing Officer initially allowed this deduction, but later questioned its validity, arguing that the compensation was not directly related to the transfer of the property and should not be deducted from the capital gains.

3. Allegation of Non-Disclosure of Material Facts:
The Respondents contended that the Petitioners had not disclosed the sale deed and the memorandum of understanding (MOU) during the initial assessment, which constituted fresh or tangible material sufficient for reopening the assessment. However, the court observed that there was no allegation of suppression or concealment of these documents in the reasons recorded at the time of issuing the notice for reopening the assessment.

4. Concept of "Change of Opinion":
The court emphasized that the reassessment was based on a mere change of opinion, which is not permissible. The court cited several precedents, including the Supreme Court's ruling in Commissioner of Income Tax Vs Kelvinator of India Ltd., which held that a mere change of opinion cannot justify reopening an assessment. The court reiterated that the Assessing Officer has no power to review his own order under the guise of reassessment.

Conclusion:
The court concluded that the impugned notices for reopening the assessment were issued in excess of the jurisdiction conferred upon the Respondents. The reassessment was based on a mere change of opinion, and there was no tangible material to justify the reopening. Consequently, the court quashed and set aside the impugned notices, making the rule absolute in terms of the prayer clauses (a) and (b) in both petitions. There was no order for costs in both petitions.