TaxTMI 
TaxTMI 
2017 (10) TMI 1529
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....h the assessing officer. Since the assessing officer has not applied the provisions of Section 50C while making the original order of assessment. Now the Assessing officer has changed his opinion and tried to apply Section 50C. Thus there is no escapement warranting reassessment on any fresh material information but only change of opinion. 3. The Commissioner of Income Tax Appeals erred treating the profit as short term capital gains while it was arising out of an adventure in the nature of trade. 4. The Commissioner of Income Tax Appeals has erred in confirming the order of the Assessing Officer who has not met the grounds and the evidences shown by the appellant but summarily rejected the points and treating the profit as short term capital gains. 5. For the foregoing grounds and for the grounds that may be raised at the time of hearing the appellant humbly prays the Hon'ble Income Tax Appellate Tribunal that the entire order be quashed as not maintainable or pass appropriate orders deem fit and thus render justice. 3. The assessee has raised the following additional grounds for adjudication. 1. The above appellant has filed appeal before th....
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....on improvement of the property like levelling, sand filling and road laying etc. On account of the assessee's failure to produce any evidence in respect of these expenses during the original assessment proceedings, the AO disallowed improvement cost amounting to Rs. 23,29,000/-and completed assessment u/s 143(3) on 05.12.2011. Thereafter, the AO found on verification of the sale document that the value of this property for Stamp purpose as fixed by the DRO was Rs. 735 lakhs and half of this value amounting to Rs. 367.50 lakhs should have been adopted as sale consideration under deeming provisions of section 50C for computing capital gains instead of consideration mentioned in the document which was less than that value. Hence, the AO was of the opinion that capital gains have been understated and to that extent income has escaped assessment and reopened the assessment by issuing notice u/s 148. After issue of notice, the appellant filed a return on 02.06.2014 terming it as a revised return where in profit on sale of the said land was shown under the head "Business Income" while the same profit, as mentioned above, was declared as Capital Gains in the original return. So far as repl....
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.....148 was served on the assessee within four years of end of relevant to assessment year, there was no tangible fresh material so as to reopen the concluded assessment. He submitted that at the time of original assessment , the AO considered all the material evidences with regard to capital gains and accepted the explanation of the assessee, therefore mere change of opinion, reopening of assessment is bad in law. Further, the ld.A.R submitted that reopening of assessment u/s.147 of the Act, there should be some outside material, which could be said to have come to the knowledge of the AO after the original assessment order was passed. It was, therefore, found that it is a case of mere change of opinion. Accordingly, mere non-discussion of applicability of provisions 50C would not amount to presume that the AO has not applied his mind while accepting the income declared by the assessee. Since the AO did not have any tangible material in his possession except the sale deed, which was already produced before the AO at the stage of the original assessment proceedings, therefore reopening of assessment is only mere change of opinion, which is not permissible. In view of the judgement of ....
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....tion, 159 ITR 956 held that no case u/s 148 is made out when the facts were known all along with to the revenue while making the original assessment. Hon'ble Supreme Court in the case of Associated Stone Industry Ltd., 224 ITR 560 held that the assessee shall have to disclose only the primary facts. Considering the above legal propositions decided in the above cases, it is clear that AO is not justified in reopening the assessment on mere change of opinion. It is admitted fact that there is no material available with the AO to form his opinion that income has escaped assessment. All material evidences were available at the stage of original assessment proceedings and the AO merely following the provisions of section 50C, as was not considered in the original assessment proceedings, reopened the assessment order. The assessee has disclosed all the facts which were known all along to the Revenue. Section 50C is not final determination to prove that it is a case of escapement of income. The report of approved valuer may give estimated figure on the basis of facts of each case. Therefore, on mere applicability of section 50C would not disclose any escapement of income in the facts and ....
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....that there is negligence on the part of the assessee. What is necessary is to see whether any income of the assessee chargeable to tax escaped income. In this case, the AO came to a conclusion that there was reason to believe that the income otherwise chargeable to tax has escaped income since there was difference in the allotment of shares to the partners. Therefore, this Tribunal is of the considered opinion that the AO has rightly reopened the assessment. Since no opinion was expressed in the original assessment, it is not the question of change of opinion". 9. We have heard both the parties and perused the material on record. The main contention of the ld.A.R is that the assessment herein was originally completed u/s.143(3) of the Act, so that the assessment can be re-opened u/s.147 of the Act subject to fulfillment of conditions precedent, which include the condition that the AO must have "reason to believe" that income chargeable to tax is escaped assessment. It is true that the original assessment order was passed u/s.143(3) of the Act. The AO cannot disturb the finality of the original assessment passed u/s.143(3) of the Act at his whims and caprice; he must have reason ....
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....e proposal and bowing to them the original expression was restored. This aspect of the matter has been brought out by the Supreme Court in the case of CIT v. Kelvinator in 320 ITR 561 as follows:- "However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Depart ment, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the Assessing Officer . . . Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted ....
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.... on the new words, a three-judge Bench of the Supreme Court, speaking through V. Ramaswami J., in S.Narayanappa v. CIT [1967] 63 ITR 219 (SC), opined as under (page 222) : "Again, the expression 'reason to believe' in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith: it cannot be merely a pretence. To put it different, it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings under section 34 of the Act is open to challenge in a court of law (see Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC))." 12. In Sheo Nath Singh v. AAC of I. T. [1971] 82 ITR 147 (SC) the Supreme Court (Hegde J.) observed as under (page 153) : "There can be no manner of doubt that the words 'reason to believe' suggest that the belief must be that of an honest and rea sonable person based upon reasonable g....
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.... "However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of 'change of opinion' is removed, as contended on behalf of the Depart ment, then, in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer." It was also observed that after April 1, 1989, the Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. This judgment has laid emphasis on two more aspects: that there can be no review of an assessment in the guise of reopening and that a bare review ....
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....ved by the assessee for the purpose of S.48. For this purpose, we place reliance in the case of CIT Vs. SMt.Shweta Buchar in (2010) 0192 Taxman 0067 (P&H). Further, in the case of CIT Vs. Chandni Buchar in (2010) 323 ITR 0510(P&H) held that in the absence of any admissible evidence, valuation done by stamp duty authorities could not be taken as actual sale consideration and the value shown in the sale deed had to be accepted. 18. In our opinion, when there was a cleavage of opinion to consider the valuation done by Stamp duty Authorities as an actual consideration and to determine the capital gains u/s.48 while framing the original assessment itself, how the AO could use the same documents, which were already on record to re-open the assessment, which was concluded u/s.143(3) of the Act. 19. The co-ordinate bench of Agra Tribunal in the case of INCOME TAX OFFICER Vs. Shri Haresh Chand Agarwal,HUF in ITA No.282/Agra/2013 for assessment year 2004-05 vide order dated 20.12.2013 has observed in similar circumstances as follows:- "Hon'ble Gujarat High Court in the case of Garden Silk Mills P. Ltd. reported in 237 ITR 688 held that:- "However wide the scope of tak....
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....C would not disclose any escapement of income in the facts and circumstances of the case. The AO at the original assessment stage considered all the documents and material produced before him and has accepted the value of property as was declared by the assessee. Therefore, on mere change of opinion, the AO was not justified in reopening the assessment." 20. Thus, in our view, on the basis of above said facts, it can be concluded that the present provisions of the section 147 of the Act does not enable the AO to exercise his jurisdiction for reopening the concluded assessment . There is no dispute to the fact that Sec.50C(1) is a deeming provision, which, mandates that if the Fair Market Value adopted by the SRO for stamp duty purpose is more than the sale consideration disclosed by the assessee, the Fair Market Value adopted by the SRO for stamp duty purpose should be deemed to sale consideration. Though, the assessee in terms of Sec.50C(2) can object to adopt such value, it cannot be denied that value u/s.50C(1), automatically it cannot be considered as understatement in sale value. In that view of the matter, it is not appropriate on the part of the AO to jump to a conclusion....
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....mount to disclosure within the meaning of the first proviso to sec.147 of the Act. We find that this situation has been considered by the full Bench of the Delhi High Court in its judgment in the case of CIT Vs. Kelvinator India Ltd.(256 ITR 1) and the full Bench observed thus, "The said submission is fallacious. An order of assessment can be passed either in terms of sub-s. (1) of s. 143 or sub-s. (3) of s. 143. When a regular order of assessment is passed in terms of the said sub-s. (3) of s. 143, a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of cl. (e) of s. 114 of the Indian Evidence Act, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 20.2 It is clear from the observations made above that the Full Bench of the Delhi High Cour....
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....e. Quiet apart from the fact that no such suggestion is recorded in the reasons, independently also there is no finding that the AO's stand in the reasons recorded , can in any manner be construed as suggesting that the income escapement on account of the assessee not disclosing the material facts. 21.2 In the case of Debashis Moulik Vs. ACIT in [2015] 370 ITR 660 (Cal) held that escapement of income could not be used to reopen an assessment on facts, information, documents which were before the AO or could have been easily found by him while making the assessment. 22. If we go through the above judgements, all the documents relating to the assessee on computation of capital gains for the subject assessment year were before the AO. There is no allegation by the AO that these documents which shows the SRO value was not at all before the AO, therefore, it cannot be said that there was "escapement of income" or that the reasons for believing that there was "escapement of income" were valid. The AO cannot say that yesterday he was ignorant, and he is wise today as all the materials are available before him, when he was framing original assessment u/s.143(3) of the Act. If he fail....
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....ideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) and we do not believe that the law has since taken a different course. Any observa tions in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) sug gesting the contrary do not, we say with respect, lay down the correct law." 23.2. The aforesaid view on the above proposition has been reiterated by the apex court in A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC) wherein the court held that change of opinion where opinion was formed earlier does not give the Assessing Officer jurisdiction to reopen an assessment. The apex court, inter alia, on the above issue held as under (page 298) : "Even making allowances for this limitation placed on the observations in Kalyanji Mavji [1976] 102 ITR 287 (SC) the position as summarised by the High Court in the following words represents, in our view the correct position in law (at page 629 of 102 ITR) 'The result of these decisions is that the statute does n....