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Facts
The assessee claimed long-term capital gain on the sale of a building, which the Assessing Officer (AO) treated as short-term capital gain during reassessment proceedings initiated under section 148. The AO's order and the CIT(A)'s confirmation were challenged by the assessee.
Held
The Tribunal held that the reassessment proceedings were initiated on the basis of a mere change of opinion by the AO, without any new tangible material. The AO had already examined the issue of the property's acquisition date and treated the gain as long-term capital gain in the original assessment.
Key Issues
Whether the reassessment proceedings initiated under section 148 were valid, or based on a mere change of opinion without tangible material, and if the capital gain was rightly treated as short-term.
Sections Cited
148, 143(3), 147, 250, 54F, 234A, 234B, 234C, 234D
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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI VIKRAM SINGH YADAV, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI
BEFORE SHRI VIKRAM SINGH YADAV, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No.7105/Mum/2025 (Assessment Year: 2011-12)
Mr. Rohan Hemant Thakkar, Income Tax Officer 22(3)(2), A 804 Prayog Building Wing A Kautilya Bhavan, Opposite Galaxy Hotel Prabhat Colony Bandra Kurla Complex, Vs. Road No.2 Bandra East, Santacruz East, Mumbai – 400 051 Mumbai – 400 055 PAN:AGNPT4221D (Appellant) : (Respondent)
: Shri Hansraj Sanghvi, AR Assessee by Respondent by : Shri Annavaram Kosuri, Sr. AR
Date of Hearing : 27.01.2026 Date of Pronouncement : 17.04.2026
O R D E R Per Kavitha Rajagopal, JM:
This appeal has been filed by the assessee, challenging the order of the Learned
Commissioner of Income Tax (Appeals) [‘Ld. CIT(A)’ for short], National Faceless Appeal
Centre (“NFAC” for short) passed u/s. 250 of the Income Tax Act, 1961 (‘the Act'),
pertaining to the Assessment Year (‘A.Y.’ for short) 2011-12.
The assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case and in law the Hon’ble Commissioner of Income Tax - Appeals erred in confirming assessing capital gain of Rs.5662500/- on sale of capital assets as short term capital gain instead of as long term capital gain as claimed by the appellant. Provisions of the Act ought to have been properly construed and regard being had to facts of the case capital gain on sale of said capital assets should have been assessed as long term capital gain. Reasons assigned by him are
ITA No.7105/Mum/2025 Mr. Rohan Hemant Thakkar
wrong and insufficient to justify treating gain on sale of said assets as short term capital gain.
On the facts and in the circumstances of the case and in law the Hon’ble Commissioner of Income Tax - Appeals erred in confirming rejection of claim made under section 54F of the Act on the pretext that gain on sale of said assets is short term capital gain.
On the facts and in the circumstances of the case and in law the Hon’ble Commissioner of Income Tax – Appeals ought to have appreciated that proceeding of reassessment initiated by issuing notice under section 148 of the Act is contrary to the provisions of the Act, illegal, invalid and void ab-initio considering following facts: (a) Notice under section 148 of the Act is issued on the basis of mere change of opinion and in absence of any new tangible material in possession of Assessing Officer, (b) In the reason recorded the learned Assessing Officer himself admitted that notice under section 148 of the Act is issued on the basis of “ON VERIFICATION OF RECORD” (c) The reasons recorded are not valid one as same are undated (d) The learned Assessing Officer erred in recording in reason that there is failure on the part of appellant to disclose fully and truly all material facts necessary for assessment.
The Hon’ble Commissioner of Income tax – Appeals erred in confirming order made under section 143(3) rws 147 of the Act which is contrary to the provisions of the Act, illegal, invalid, bad-in-law, ultra vires, without allowing reasonable opportunity of the hearing, without appreciating facts, submission and evidences in their proper perspective, and without providing copies of material relied upon is liable to be annulled.
The Hon’ble Commissioner of Income Tax - Appeals erred in confirming charging of interest under section 234A. 234B and 234C and 234D of the Act 06 The appellant crave leave to add, amend, alter and / or vary any of the grounds of appeal before or at the time of hearing.”
Brief facts of the case are that the assessee is an individual and had filed his return
of income dated 29.07.2011 declaring total income at Rs.9,38,240/- and the same was
processed u/s. 143(1) of the Act. The Learned Assessing Officer (“Ld. AO” for short)
completed the assessment u/s 143(3) of the Act vide order dated 30.12.2013 accepting the
returned income of the assessee. The assessee’s case was subsequently reopened vide
notice u/s 148 of the Act dated 25.03.2015 for the reason that the assessee has declared
Long Term Capital Gain (“LTCG” for short) on sale of building which was to be treated
ITA No.7105/Mum/2025 Mr. Rohan Hemant Thakkar
as Short Term Capital Gain (“STCG” for short) amounting to Rs.55,50,325/-, thereby
income chargeable to tax has escaped assessment. In response to the said notice, the
assessee filed his return of income treating the original return as return of income filed in
response to notice u/s 148 of the Act. Thereafter, notices u/s 143(2) and 142(1) of the Act
were duly issued and served upon the assessee. The Ld. AO passed the assessment order
dated 25.01.2016 u/s 143(3) r.w.s. 147 of the Act determining the total income at
Rs.59,38,350/- after making an addition towards STCG amounting to Rs.56,62,500/- and
income from other sources amounting to Rs.3,75,849/-.
Aggrieved, the assessee was in appeal before the first appellate authority, who vide
order dated 10.09.2025 upheld the addition made by the Ld. AO and also dismissed the
legal grounds challenging the reopening raised by the assessee.
Aggrieved, the assessee is in appeal before us, challenging the order of the Ld.
CIT(A) on the abovementioned grounds.
The Learned Authorized Representative (“Ld. AR” for short) for the assessee
commenced his arguments challenging the reopening proceeding on the ground that the
Ld. AO erred in reopening the assessment without any new tangible material on record for
the reason that the assessee has furnished complete details of the sale transactions before
the Ld. AO during the original assessment proceeding, which were duly considered by the
Ld. AO and thereafter accepted the returned income of the assessee. The Ld. AR contended
that it is a case of change of opinion and not reason to believe and the same tantamounts to
violation of the settled principles of law which makes it clear that the reassessment
ITA No.7105/Mum/2025 Mr. Rohan Hemant Thakkar
proceeding can be initiated only when the Ld. AO was brought to the knowledge of relevant
material to apply his mind as to the fact that income has escaped assessment in the hands
of the assessee and only when there are reasons to believe the same, the AO can initiate the
reassessment proceeding and the same cannot be merely on change of opinion. The Ld.
AR relied on a catena of decisions in support of his contention.
The Learned Departmental Representative (“Ld. D.R.” for short), on the other hand,
controverted the said fact and stated that in case of reopening of assessment within four
years from the end of relevant assessment year, the Ld. AO has got wider power to reassess
the income of the assessee, even in the absence of tangible material. The Ld. DR further
contended that in the original assessment the Ld. AO has failed to consider the date of
transaction and has erred in holding the same to be LTCG instead of STCG and the failure
to do so is sufficient for initiating the reassessment proceeding on “reason to believe” that
“income has escaped assessment”. The Ld. DR relied on the order of the Ld. CIT(A).
We have heard the rival submissions and perused the materials available on record.
Before getting into the merits of the case, we deem it fit to adjudicate the legal ground
raised by the assessee challenging the reassessment proceeding on the ground that it is mere
change of opinion rather than reasonable belief based on tangible material. On perusal of
the reasons for reopening, it is evident that the Ld. AO has reopened the assessee’s case
where the assessee has sold a commercial property for a consideration of Rs.75,00,000/-
on 09.04.2010 which according to the Ld. AO was purchased only on 16.09.2008 for a
consideration of Rs.18,37,500/-. Further, it is specified that though the assessee had
ITA No.7105/Mum/2025 Mr. Rohan Hemant Thakkar
booked the said commercial premises by making initial payment of Rs.1,75,000/- by
cheque payment vide an agreement dated 15.10.2006, the registration of the said property
was effected only on 16.09.2008, thereby treating the sale consideration as STCG instead
of LTCG. On considering the submission of the Ld. AR that this issue was already
examined by the Ld. AO during the original assessment order dated 30.12.2013 u/s 143(3)
of the Act where the Ld. AO has categorically mentioned that the assessee had duly
explained that the property was acquired by way of an agreement dated 15.10.2006, basis
which the Ld. AO proceeded to treat the gain on sale of the property to be LTCG instead
of STCG and further allowed the exemption claimed by the assessee u/s 54F of the Act
where the assessee had invested the consideration received for purchase of a new
immovable property.
The Ld. AR had extensively argued that the reassessment was on the basis of change
of opinion and not where there was reason to believe that income has escaped assessment,
for which the Ld. AR placed reliance on the decision of the Hon’ble Apex Court in the case
of Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 187 Taxman
312 (SC) which has held that prior to the amendment brought about in section 147 of the
Act by Direct Tax Laws (Amendment) Act, 1987, the power of AO to assess/reassess was
restricted to satisfaction of twin conditions whereas post amendment w.e.f. 01.04.1989
though wider powers were given to the AO the same cannot be exercised for reviewing but
are to be restricted only for reassessment, that too on the basis of “tangible material” in
order to come to the conclusion that the AO had reason to believe that income has escaped
assessment. It further reiterated that Amending Act, 1989 was amended again to
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reintroduce the expression “has reason to believe” which was earlier omitted from section
147 for substituting the words “for reasons to be recorded by him in writing, is of the
opinion” in order to avoid arbitrary powers of the AO to review rather than to reassess.
The proposition that reassessment cannot be on the basis of “mere change of opinion” was
reiterated in the said decision. There are plethora of decisions prior and post the decision
of Hon’ble Apex Court in the case of Kelvinator of India Ltd. (supra) which has taken a
consistent view on the said proposition. The present case in hand is nothing but a change
of opinion by the Ld. AO on materials which were already on record and there being no
failure on the part of the assessee in disclosing fully and truly all material facts necessary
for the assessment. In view of the matter, we deem it fit to hold that the impugned notice
u/s 148 and the consequent assessment order dated 25.01.2016 are unsustainable for the
reason that they do not satisfy the conditions for assuming the jurisdiction u/s 147 of the
Act and are accordingly set aside. We hereby allow ground No.3 raised by the assessee.
As we have already quashed the assessment order, the other grounds raised by the assessee
requires no further adjudication and are hereby rendered academic in nature.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 17.04.2026
Sd/- Sd/- (VIKRAM SINGH YADAV) (KAVITHA RAJAGOPAL) ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated: 17.04.2026 * Kishore, Sr. P.S.
ITA No.7105/Mum/2025 Mr. Rohan Hemant Thakkar
Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Mumbai 5. Guard File BY ORDER,
(Dy./Asstt.Registrar) ITAT, Mumbai