HUF property purchase in individual's name doesn't invalidate Section 54 exemption claim under assessment reopening

The ITAT Ahmedabad ruled in favor of the assessee regarding the validity of reopening assessment under Section 147. The Department argued that an HUF cannot claim Section 54 exemption when property is purchased in an individual's name rather than the HUF's name. The Tribunal held that since the Section 54 exemption claim was already considered and decided in the original assessment under Section 143(3), and the CIT(A)'s order dated 03.08.2015 remained uncontested, reopening on the same issue constituted a mere change of opinion, which is impermissible under the Supreme Court precedent in CIT vs. Kelvinator of India Limited.

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Issues involved:
The appeal against the order dated 21.06.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2011-12.

Grounds of appeal:
1. The Assessment Order dated 23.12.2016 under Section 143(3) read with Section 147 for A.Y. 2011-12 passed by Assessing Officer II is challenged.
2. Dispute regarding reopening of assessment under Section 148 based on alleged escapement of income.
3. Validity and maintainability of Notice under Section 148 and Assessment Order dated 23.12.2016 under Section 143(3) read with Section 147.
4. Claim for deduction under Section 54 of the Act for investment in new residential house.

Details of the Judgment:

The assessee initially declared total income at Rs. 2,657/- for Assessment Year 2011-12, with the assessment completed on 25.02.2014 disallowing the claim of exemption under Section 54 of the Act. The Assessing Officer observed that the assessee, HUF, had not fulfilled the condition for claiming deduction under Section 54 as the new property was purchased in the name of an individual, not the HUF. Subsequently, a notice under Section 148 was issued on 30.03.2016, leading to a disallowance of Rs. 18,11,020/- under Section 54 of the Act.

The assessee appealed the Assessment Order before the CIT(A), who upheld the disallowance. The assessee argued that the reopening of the case was a change of opinion, as the matter had already been addressed in the original assessment and CIT(A) proceedings. The property was purchased in the name of an individual due to bank loan restrictions, and previous orders were not challenged by either party. The reopening on the same issue was deemed unjustified, citing legal precedents.

The Assessing Officer's invocation of Section 147 was supported by the Revenue, emphasizing that the property was not purchased in the name of the HUF, making the claim for exemption invalid. However, the Tribunal noted that the issue had been thoroughly examined in the initial assessment and CIT(A) proceedings, rendering the reopening as a clear case of change of opinion, which is impermissible as per legal precedents.

In conclusion, the Tribunal allowed grounds 1 to 3 of the assessee's appeal, finding the reopening unjustified due to being a change of opinion. The without prejudice ground did not require adjudication at that stage, resulting in the partial allowance of the assessee's appeal.

The appeal filed by the assessee was partly allowed, with the order pronounced on 31st January, 2024.

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