2022 (6) TMI 792 - AT - Income Tax

Reopening of assessment u/s 147 - Notice issued before the expiry of 4 years from the end of the relevant assessment year - HELD THAT - It is neither in the reasons recorded for reopening the assessment nor during the proceedings before us Revenue has pointed out as to what new or tangible material came to the knowledge of the Assessing Officer on the basis of which the impugned reassessment proceedings were initiated. From the perusal of reasons recorded for reopening the assessment it is evident that the only basis available with the Assessing Officer for initiating the impugned reassessment proceedings was verification/observation of the case records i.e. the information which was already considered and examined during the course of original scrutiny assessment proceedings. We find that even the factual narration in respect of the issues on which reassessment proceedings were initiated in the present case does not tally with the information as available on record and forming part of the paper book. Loss on sale of asset - As upon perusal of financials of the assessee which are forming part of the paper book it is amply evident that during the year under consideration assessee did not undertake any transaction in respect of its fixed assets and rather profit was earned on sale of motor cars. There is also no variation in the inventories /stock of flats. Levy tax on annual letting value of unsold property by treating the same as income from house property - As pertinent to note that Hon ble Delhi High Court s decision dated 31/10/2012 in Ansal Housing Finance and Leasing Co Ltd 2012 (11) TMI 323 - DELHI HIGH COURT on which reliance has been placed by the Assessing Officer to support the aforesaid levy was already available in public domain at the time of passing of the assessment order dated 26/11/2012 under section 143(3) No details of dividend earned and short term capital loss incurred are available on record also appears to be another pretext to initiate reassessment proceedings in the present case as during the original scrutiny assessment proceedings the Assessing Officer made disallowance of Rs. 34, 59, 553 under section 14A of the Act after perusing all the details filed by the assessee. Thus upon perusal of all these aspects we are of the considered view that the impugned reassessment proceedings were initiated only on the basis of re-appreciation of facts already available on record without any new or tangible material coming into existence and also to conduct roving and fishing enquiry in the case of the assessee for the year under consideration. No new information was received by the Assessing Officer at the time of initiation of reassessment proceedings and it was merely a fresh application of mind to the same set of facts as were available at the time of original scrutiny assessment proceedings. Thus in view of the above we are of the considered opinion that the reopening of assessment under section 147 of the Act in the present case is bad in law and therefore is set aside. Accordingly the impugned order passed by the learned CIT(A) inter-alia upholding the order passed under section 143(3) r.w.s. 147 of the Act is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deduction of Rs. 41,80,703/- in respect of income received from fund houses net of tax.
2. Jurisdiction to issue a notice under section 148(1) of the Income Tax Act, 1961.
3. Reassessment proceedings initiated under section 147 of the Act.

Detailed Analysis:

1. Deduction of Rs. 41,80,703/- in respect of income received from fund houses net of tax:
The assessee contended that the learned CIT(A) erred in not allowing the deduction of Rs. 41,80,703/- while arriving at the income chargeable to tax under section 115JB. The assessee argued that the income received from the fund houses is net of tax and should be treated as exempt income since the tax on the same has been paid by the fund houses as representative assessee on behalf of the assessee. However, the primary focus of the Tribunal's judgment was on the jurisdictional issue and the reassessment proceedings, and thus, the merits of this specific ground were not separately adjudicated.

2. Jurisdiction to issue a notice under section 148(1) of the Income Tax Act, 1961:
The assessee raised an additional ground challenging the jurisdiction of the Assessing Officer to issue a notice under section 148(1). The Tribunal admitted this additional ground, noting that it is a purely legal issue that can be decided based on the material available on record. The Tribunal referenced the Supreme Court's decision in NTPC Ltd. v. CIT to support the admission of this additional ground.

3. Reassessment proceedings initiated under section 147 of the Act:
The Tribunal examined the validity of the reassessment proceedings initiated by the Assessing Officer. The key points considered were:
- The reassessment proceedings were initiated just before the expiry of four years from the end of the relevant assessment year.
- The reasons recorded by the Assessing Officer included: addition of loss on sale of assets of Rs. 12,710; addition of notional income of Rs. 9,08,572 from unsold flats as income from house property; and non-furnishing of details of dividend earned and short term capital loss incurred.
- The Tribunal found that the reassessment proceedings were based on a reappraisal of the same set of facts already available on record at the time of the original scrutiny assessment. There was no new or tangible information/material for initiating the reassessment proceedings.

The Tribunal held that the reassessment proceedings were initiated based on a mere change of opinion, which is not permissible under the law. The Tribunal emphasized that for initiating proceedings under section 147, the Assessing Officer must have "reason to believe" that income chargeable to tax has escaped assessment, which cannot be the result of a change of opinion. The Tribunal cited the jurisdictional High Court's decision in Asian Paints Ltd. v/s DCIT, which held that reopening of assessment under section 147 merely due to a change of opinion is not allowed.

Conclusion:
The Tribunal concluded that the reassessment proceedings were invalid and set aside the impugned order passed by the learned CIT(A), which upheld the reassessment. Consequently, the additional grounds raised by the assessee challenging the jurisdiction of the Assessing Officer were allowed. Since the jurisdictional issue was decided in favor of the assessee, the grounds raised on merits did not require separate adjudication.

Result:
The appeal by the assessee was allowed. The order was pronounced in the open court on 14/06/2022.