Reassessment under Section 147 invalid as mere change of opinion; Section 54F deduction allowed only for residential portion

HC held reopening under section 147 was invalid as a change of opinion: the AO had relevant material during original proceedings and no new tangible evidence justified reopening, and the Tribunal correctly quashed the reassessment. The Tribunal's finding that the land constituted agricultural land for income-tax purposes was upheld, noting co-owners' identical treatment. On section 54F, HC affirmed the Tribunal's allowance of deduction but limited it to the residential portion, observing post-purchase commercial leasing did not alter the property's nature for that provision. Decision against the revenue.

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Issues:
1. Validity of reopening assessment under Section 147 of the Income Tax Act.
2. Entitlement to claim deduction under Section 54F of the Act.

Analysis:

Issue 1: Validity of Reopening Assessment
The appellant/revenue challenged the order of the ITAT regarding the reopening of assessment under Section 147 of the Income Tax Act for the assessment year 2011-2012. The assessing officer reopened the assessment due to the contention that the properties sold by the assessee were not agricultural lands but were liable for long-term capital gains. The ITAT held that the reopening was a mere 'change of opinion' based on the fact that the land was within the Corporation of Chennai limits only after a specific date, and the co-owner's assessment of the same land as agricultural remained undisturbed. The Tribunal concluded that the land sold was indeed agricultural, thus justifying the assessee's appeal against the reopening.

Issue 2: Entitlement to Deduction under Section 54F
The assessee claimed deduction under Section 54F for the property purchased after selling the Uthandi property. The assessing officer rejected this claim, stating that the property was converted for commercial use shortly after being purchased for residential purposes. However, the Tribunal found that the property was initially intended for residential use, as confirmed by the certificate from the Greater Chennai Corporation. The Tribunal also noted that the property's commercial use occurred after the purchase and lease agreement, making the assessee eligible for the deduction under Section 54F, limited to the residential portion only. The Tribunal's decision was based on the property's primary residential zoning and sanctioned building plan, disregarding its temporary commercial use post-purchase.

In conclusion, the High Court dismissed the revenue's appeal, upholding the ITAT's decision on both issues. The Court found the reopening of assessment to be a 'change of opinion' and supported the assessee's entitlement to claim deduction under Section 54F for the residential portion of the property acquired.

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