Reassessment proceedings cannot be initiated on change of opinion despite Section 147 amendment, deduction under Section 54B upheld

The HC held that reassessment proceedings cannot be initiated on change of opinion despite 1998 amendment to Section 147. The petitioner's deduction under Section 54B for agricultural land sold by brothers was initially accepted by AO during original assessment proceedings. Though AO did not record reasons for accepting the explanation, the HC found that AO had applied mind and formed an opinion on the issue. Since the matter was already considered and decided, reopening assessment constituted impermissible change of opinion. The notice under Section 148 for AY 2009-10 and order rejecting objections were quashed. WP allowed.

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Issues:
Quashing of notice under Section 148 of Income Tax Act for AY 2009-10 and rejection of objections.

Analysis:
The petitioner sought to quash the notice dated 31.03.2014 issued under Section 148 of the Income Tax Act, 1961 for AY 2009-10 and the order dated 05.06.2014 rejecting the objections. The petitioner had claimed a deduction under Section 54B of the Act for agricultural land sold by the brothers of the petitioner. The Assessing Officer (AO) initiated proceedings under Section 148 based on a change of opinion regarding the deduction claimed. The petitioner contended that the AO did not address the issue of deduction claimed under Section 54B previously. The petitioner relied on judgments such as Commissioner of Income Tax vs. Kelvinator of India Limited and Commissioner of Income Tax-VI, New Delhi Vs. Usha International Limited to support their case.

The AO had raised queries regarding the deduction claimed under Section 54B during the assessment proceedings for AY 2009-10. The notice dated 14.12.2011 specifically addressed this issue, questioning the eligibility of the petitioner to claim the deduction. The AO later finalized the assessment, making additions for unexplained investment in land purchase and bank interest receipts shown short. However, the AO did not address the deduction claimed under Section 54B in the final assessment order.

The notice issued on 31.03.2014 for reopening the assessment cited that the petitioner was not the owner of the land sold, therefore, the deduction under Section 54B was not allowable. The petitioner objected to the reopening, arguing it was a result of a change of opinion. The court emphasized that reassessment cannot be initiated solely on a change of opinion post the 1998 amendment to Section 147 of the Act.

The court referred to various judgments, including Commissioner of Income Tax vs. Kelvinator of India Limited and Income Tax Officer Ward No. 16(2) Vs. TechSpan India Private Ltd., to establish that reassessment cannot be based on a mere change of opinion. The court noted that the AO had previously considered and accepted the petitioner's explanation regarding the deduction under Section 54B, indicating that an opinion had been formed, even if not explicitly recorded.

Considering the precedents and the facts of the case, the court concluded that the notice issued under Section 148 for AY 2009-2010 and the order rejecting objections were quashed, and the writ petition was allowed.

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