2017 (3) TMI 1847 - AT - Income Tax

Tribunal quashes reassessment order for impermissible reopening based on change of opinion. Notional rental income issue remains unaddressed.

M/s. M.R. Narayanan, Versus The Deputy Commissioner of Income Tax, Chennai

The Tribunal allowed the appellant's appeal, quashing the reassessment order as the reopening was deemed impermissible based on a change of opinion. The ... Reopening of assessment u/s 147 - CIT-A sustaining the notional rental income determined by the Assessing Officer - HELD THAT:- Admittedly, in this case, the return filed by the assessee was processed under section 143(1) of the Act on 29.03.2010. Subsequently, the case of the assessee was selected for scrutiny and assessment was completed under section 143(3) of the Act on 20.12.2010. Thereafter, the assessment passed under section 143(3) of the Act was reopened by issue of notice under section 148 of the Act. It is a fact that there was any search or survey in assessee’s case and the Department found any tangible material to form a opinion as there was escapement of income and the assessment was reopened under section 147 of the Act even within four years. The assessee has furnished all particulars at the time of filing of return of income and after examining the details, the return filed by the assessee was processed under section 143(1) of the Act, which is subjected to 143(3) scrutiny assessment and the assessment under section 143(3) of the Act was completed. Thus we of the considered opinion that the Assessing Officer has not validly initiated the proceedings under section 147 of the Act and therefore, the assessment order passed under section 143(3) r.w.s. 147 of the Act on 24.03.2014 is quashed. Once the reassessment order passed by the Assessing Officer is quashed, there is no need to adjudicate the issue on merits. Thus, the appeal filed by the assessee is allowed in pro tanto Issues:1. Condonation of delay in filing the appeal before the Tribunal.2. Validity of reopening of assessment under section 147 of the Income Tax Act.3. Determination of notional rental income by the Assessing Officer.Issue 1: Condonation of delay in filing the appeal before the TribunalThe appellant filed the appeal late by ninety-four days and sought condonation of the delay. The appellant's counsel explained that the delay was due to misplacement of the appellate order and subsequent retrieval of the same. The Tribunal, after reviewing the affidavit and petition, found sufficient cause for the delay and granted condonation, admitting the appeal for hearing and adjudication.Issue 2: Validity of reopening of assessment under section 147 of the Income Tax ActThe appellant challenged the reopening of assessment under section 147, contending that the original assessment was completed under section 143(3) and there was no valid reason for reopening. The Assessing Officer had accepted the appellant's claims during the original assessment, indicating no default on the appellant's part. The Tribunal held that the reopening was based on a change of opinion, which is impermissible under the law. Citing relevant case law, the Tribunal quashed the reassessment order, concluding that the reopening was solely on a change of opinion and not valid.Issue 3: Determination of notional rental income by the Assessing OfficerThe Assessing Officer, during reassessment, determined the notional rental income from the appellant's property at Chennai. The appellant appealed this determination before the CIT(A), who dismissed the appeal. However, the Tribunal, after invalidating the reopening of assessment, did not find it necessary to adjudicate the issue on merits. Consequently, the appeal filed by the appellant was allowed.In conclusion, the Tribunal allowed the appeal filed by the appellant, quashing the reassessment order and determining that the reopening of assessment was solely based on a change of opinion, which was not valid under the law. The issue of notional rental income determination was not adjudicated upon due to the quashing of the reassessment order.