2016 (4) TMI 559 - HC - Income Tax

Court deems reopening of assessment under Income Tax Act illegal due to change of opinion

The court held that the notice issued under Section 148 of the Income Tax Act for reopening the assessment was illegal as it was based on a mere change of ... Reopening of assessment - petitioner had produced misguiding valuation report of the Registered Valuer which resulted in under-assessment of long term capital gain - Held that:- On a perusal of the reasons recorded for reopening the assessment, it is amply clear that the only reason for stating that the assessee had submitted an incorrect/misguiding valuation report is that the Assessing Officer in the case of the co-owner did not accept such report. In the case of the petitioner, the Assessing Officer while framing assessment under section 143(3) of the Act had, after considering the material produced by the petitioner, accepted the valuation report and computed long term capital gain accordingly. Now in view of a contrary opinion of the Assessing Officer in the case of the co-owner, the Assessing Officer seeks to reopen the assessment of the petitioner on the ground that the assessment order passed by another Assessing Officer in the case of the co-owner is tangible material for the purpose of reopening the assessment under section 147. In the opinion of this court, the fact that the Assessing Officer in the case of the petitioner accepted the valuation report, whereas another Assessing Officer, in the case of the co-owner took a different view and did not accept the valuation of the Registered Valuer which resulted in assessment of higher income, would not constitute fresh tangible material to reopen the assessment. The view taken by the Assessing Officer in the case of the coowner, being just one of two possible views, is merely another opinion on the same set of facts. Clearly, therefore, the reopening of assessment based upon the assessment order made in the case of the co-owner is clearly a change of opinion. Having second thoughts on the same material does not warrant the initiation of a proceeding under section 147 of the Act. Excessive deduction under section 54EC claimed - Held that:- From the reasons recorded, it appears that the ground for reopening is that according to the Assessing Officer the assessee is entitled to deduction of only ₹ 50,00,000/- under section 54EC of the Act and that against the decision of the Tribunal in the above case, an appeal is pending consideration before the High Court. Thus, it appears that the present Assessing Officer now believes that the Assessing Officer who had framed the assessment under section 143(3) of the Act had made a mistake in allowing deduction in excess of ₹ 50,00,000/- and now wants to correct the mistake. From the facts as emerging from the record, it appears that the Assessing Officer while allowing deduction in excess of ₹ 50,00,000/- under section 54EC of the Act has placed reliance upon a decision of the jurisdictional Tribunal, under the circumstances, the view adopted by the Assessing Officer cannot be said to be erroneous. Moreover, assuming that the Assessing Officer made a mistake, section 147 of the Act cannot be availed of for the purpose of correcting a mistake. In effect and substance, therefore, the present Assessing Officer wants to sit in appeal over the decision of his predecessor Assessing Officer, who has examined the claim and allowed the claim of deduction of ₹ 81,00,000/- under section 54EC of the Act, on the ground that the assessee was eligible for deduction only to the extent of ₹ 50,00,000/- for the year under consideration. Thus, the reopening of assessment is not sustainable on either of the two grounds. - Decided in favour of assessee. Issues Involved:1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.2. Whether the reopening was based on a mere change of opinion.3. Validity of the valuation report and the claim of exemption under Section 54EC of the Act.Issue-Wise Detailed Analysis:1. Legality of the Notice Issued Under Section 148 of the Income Tax Act, 1961:The petitioner challenged the notice dated 23.03.2015 issued under Section 148 of the Income Tax Act, 1961, which sought to reopen the assessment for the assessment year 2011-12. The petitioner argued that the reopening was illegal, unlawful, and without jurisdiction, as it was based on a mere change of opinion. The court examined whether the Assessing Officer had valid grounds to reopen the assessment within four years, considering the wider scope of proceedings under Section 147 of the Act.2. Whether the Reopening was Based on a Mere Change of Opinion:The petitioner contended that the reopening was based on a mere change of opinion, as the valuation report and the claim of exemption under Section 54EC were thoroughly examined during the original assessment proceedings. The court noted that the Assessing Officer had called for various details during the original assessment, including the valuation report and REC bonds, and had accepted the material produced by the petitioner. The court held that the reopening based on the assessment order made in the case of the co-owner constituted a change of opinion and did not warrant the initiation of proceedings under Section 147 of the Act.3. Validity of the Valuation Report and the Claim of Exemption Under Section 54EC of the Act:The petitioner had submitted a valuation report prepared by a Registered Valuer and claimed exemption under Section 54EC of the Act. The Assessing Officer sought to reopen the assessment on the grounds that the valuation report was misguiding and that the petitioner had claimed excessive deduction under Section 54EC. The court found that during the original assessment, the Assessing Officer had accepted the valuation report and allowed the deduction based on the decision of the Tribunal in the case of Aspi Ginwala v. ACIT. The court held that the view adopted by the Assessing Officer during the original assessment could not be said to be erroneous, and the reopening of the assessment was not sustainable on either of the two grounds.Conclusion:The court concluded that the assumption of jurisdiction by the Assessing Officer through the issuance of the impugned notice under Section 148 of the Act was without authority of law. Consequently, the impugned notice dated 23.03.2015 was quashed and set aside. The petition was allowed with no order as to costs.