2025 (9) TMI 566 - AT - Income Tax

Reassessment notices under sections 148 and 148A invalidated for being same facts; section 43CA addition deleted as variance under 5%

ITAT PUNE - AT held the reassessment notices issued under sections 148/148A were invalid as they rested on the same documents and facts already examined ... Reopening of assessment u/s 147 - reasons to believe - HELD THAT:- In this case, admittedly, the Assessing Officer had issued notice u/s. 148A based on the documents submitted by the Assessee during the original assessment proceedings. During the original assessment proceedings, the ITO, Ward-6(3), Pune had verified all these documents and passed the assessment order accepting the returned income. Therefore, issuing notice u/s. 148 and 148A based on the same facts, documents is nothing but change of opinion. The Assessing Officer has not brought on record any new fact before issuing notice u/s. 148A of the Act. In these facts and circumstances of the case, we agree with the submission of ld.AR that change of opinion is not permitted. As relying on First Source Solutions ltd [2021 (9) TMI 248 - BOMBAY HIGH COURT] and Mira Bhavin Mehta [2024 (2) TMI 844 - BOMBAY HIGH COURT] notice u/s. 148 is bad in law. Addition u/s. 43CA - difference between the Stamp Duty Value and agreement value as mentioned by AO - HELD THAT:- Difference is less than 5%. As decided in V. K. Developers [2022 (8) TMI 758 - ITAT PUNE] only difference between section 43CA and section 50C is that the former is applicable in case of transfer of assets other than capital assets whereas the latter provision comes into play in case of transfer of a capital asset in the specified circumstances, respectively. Faced with the situation, we accept the assessee’s instant sole substantive grievance to delete the impugned section 43CA addition We hold that the margin of 5% variation is applicable for A.Y.2016-17 also. Accordingly, we direct the AO to delete addition. Accordingly, Ground No.1 raised by the Assessee is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the reopening of assessment under sections 147/148 of the Income Tax Act was valid where the Assessing Officer relied on documents and facts already placed on record and considered in the original assessment (allegation of change of opinion). 2. Whether addition under section 43CA is maintainable where the difference between stamp duty/market value and agreement value for transferred flats is less than 5%, and whether the 5% tolerance applies to the assessment year under consideration. 3. Consequential determination of other grounds (sanction under section 151 read with 148A(d)/148, threshold under section 149(1)(b), time-bar of notice under section 148, completion under section 144, requirement of faceless issuance under section 148A/151A) where primary issues dispose the appeal. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of reopening under sections 147/148 where facts were previously before AO (change of opinion) Legal framework: Reopening under section 147/148 permits reassessment where the Assessing Officer has reason to believe income chargeable to tax has escaped assessment; for notices beyond four years the proviso requires failure to disclose fully and truly all material facts; within four years reopening still requires existence of some fresh or undisclosed material justifying belief. Precedent treatment: The Court/Tribunal relied on authoritative high court decisions holding that reopening based on the same material considered during original assessment, without any new fact or undisclosed information, amounts to change of opinion and is impermissible. These authorities were followed (treating them as binding on the question of jurisdiction to reopen where no new material exists). Interpretation and reasoning: The Assessing Officer issued notice under section 148A/148 on the basis that two flats were sold below market/stamp duty value. The documents and values invoked by the AO were identical to those furnished and examined during the original limited scrutiny assessment completed under section 143(3). The AO did not point to any newly discovered document, suppression or concealment; the facts allegedly showing escape of income were squarely within materials placed before the AO earlier and expressly considered while accepting the return. Reopening on those very materials therefore reflects a mere change of opinion by the AO, not the discovery of any new fact warranting reassessment. Guided by higher court authority, such reopening is jurisdictionally invalid. Ratio vs. Obiter: Ratio - Reopening is invalid where it is based only on material that was earlier disclosed and considered in the original assessment and no new material or non-disclosure is shown; change of opinion does not justify exercise of section 147/148 powers. (This was treated as the decisive legal ratio for dismissal of the reopening.) Obiter - General observations about the scope of section 147/148 and the proviso for four-year cases as illustrative of the legal framework. Conclusion: The notice under section 148 (and related actions under section 148A) was held bad in law for being a change of opinion; ground alleging reopening beyond permissible scope is allowed as to the validity of reopening. Issue 2 - Applicability of section 43CA addition where variance is below 5% and retrospective application of 5% tolerance Legal framework: Section 43CA treats consideration received for transfer of certain assets as deemed full value where transaction value is less than stamp duty/market value; legislative and judicial developments have introduced tolerance margins (notably a 5% margin) in related provisions (e.g., section 50C) and tribunals have read a similar tolerance into application of section 43CA. Precedent treatment: The Tribunal followed prior coordinate bench decisions and other authority which recognized a 5% tolerance margin for differences between agreement value and stamp duty/market value when invoking section 43CA, and accepted that this tolerance is to be applied retrospectively for the assessment year in question as a matter of curative or clarificatory application. Interpretation and reasoning: The factual matrix showed differences of 3.93% and 4.72% for two flats, aggregating to a small absolute sum but, importantly, each variance fell below the 5% threshold. Applying the tolerance as recognized in earlier Tribunal decisions, the purported addition under section 43CA lacks justification because the discrepancies are within the permissible margin. The Tribunal treated consistent earlier decisions as binding by way of judicial discipline and as appropriately persuasive in light of legislative intent reflected in tolerance allowances for comparable provisions. Ratio vs. Obiter: Ratio - Where the variance between agreement value and stamp duty/market value for transferred property is less than 5%, addition under section 43CA is not sustainable; the 5% tolerance applies to the assessment year under consideration. Obiter - Remarks on the similarity between sections 43CA and 50C and legislative developments leading to tolerance margins, cited for context. Conclusion: Addition of Rs. 2,18,495 under section 43CA was deleted as the differences were within the 5% tolerance; ground challenging the section 43CA addition is allowed. Issue 3 - Treatment of remaining grounds (sanction, threshold under section 149(1)(b), time-bar, completion under section 144, faceless issuance under section 148A/151A) after disposal of primary issues Legal framework: Valid initiation and completion of reassessment proceedings may turn on prerequisites such as sanction, satisfaction under section 149, limitation under section 148, adherence to procedure for summary assessment under section 144, and requirement of proper issuance/passing of notices/orders by the competent (faceless) authority where statutory scheme prescribes. Precedent treatment: The Tribunal did not adjudicate these grounds on merits because its conclusions on the validity of reopening and on the section 43CA addition rendered detailed consideration unnecessary for final relief; the practice of leaving dependent or consequential grounds undecided when primary issues dispose the matter was followed. Interpretation and reasoning: Having held the reopening invalid (Issue 1) and deleted the section 43CA addition (Issue 2), the Tribunal observed that the other grounds become academic or are left open; no positive finding was recorded on sanction, section 149(1)(b) threshold, time-bar, completion under section 144, or faceless issuance requirements. Those grounds were therefore dismissed as unadjudicated in consequence of the primary disposal. Ratio vs. Obiter: Ratio - Where primary jurisdictional defect in reopening is established and principal substantive addition is deleted, related procedural grounds may be left unadjudicated as not necessary for final determination. Obiter - No substantive pronouncements on the merits of sanction, limitation, section 149 threshold, section 144 completion, or faceless issuance were made. Conclusion: Grounds relating to sanction, section 149(1)(b), time-bar, completion under section 144, and faceless issuance were not adjudicated on merits and were dismissed as left open; appeal was partly allowed by permitting deletion of the section 43CA addition and quashing the reopening.