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Facts
The assessee filed their return for AY 2014-15, which was initially assessed at Rs.5,94,710/-. Subsequently, a notice under Section 148 was issued, leading to a reassessment order calculating Long-Term Capital Gains at Rs.24,01,836/-. The assessee appealed this reassessment.
Held
The Tribunal held that the reopening of assessment under Section 147 was bad in law. The reasons for reopening were based on material already available on record during the original assessment, constituting a review rather than a valid reassessment. Therefore, the reassessment proceedings were quashed.
Key Issues
Whether the reopening of assessment under Section 147 was valid when based on existing material, constituting a review? Whether the reassessment was vitiated by a mere change of opinion without tangible new material?
Sections Cited
147, 148, 250, 143(3), 143(1), 143(2)
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Income Tax Appellate Tribunal, ‘A’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed by the assessee is directed against the order of the Addl/JCIT(A) order dated 04.08.2025 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2014-15.
The Ld.AR has argued the following issues namely (i) reopening of assessment is bad in law since the AO has no
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2014-15, the return of income was filed on 02.08 2024 declaring total income of Rs.5,94,710/-. The assessment was completed u/s.143(3) of the Act on 22.09.2016 by accepting the returned income. Subsequently, notice u/s.148 of the Act was issued on 18.03.2019 in order to examine whether Long-Term Capital Gains declared in the return of income has been correctly calculated. The AO completed the assessment u/s 143(3) r.w.s 147 of the Act vide order dated 12.12.2019. The AO recalculated the Long-Term Capital Gains at Rs.24.01,836/- instead of loss declared in the return of Income of Rs. 22,14,019/-.
Aggrieved by the assessment order, assessee filed appeal before the First Appellate Authority (FAA). Before the FAA, assessee had raised grounds with reference to reopening of assessment is bad in law and also on merits. The FAA did not
Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The assessee has filed two sets of paper-book enclosing therein the return of income filed for the relevant assessment year, return of income filed pursuant to the notice issued u/s.148 of the Act, the notices, replies submitted during the course of original proceedings, reassessment proceedings and the case laws relied on.
The LD.AR submitted that the reopening of assessment is bad in law since the AO does not have fresh tangible material in his possession for issuance of notice u/s.148 of the Act after the completion of original assessment proceedings. The Ld.AR by referring to the reasons recorded for reopening the assessment submitted that it is clear no tangible new material has come to the possession of AO for issuance of notice u/s 148 of the Act. In support of his contention, the Ld.AR relied on the judgments of the Hon'ble Jurisdictional High Court the case of ACIT vs Indian Syntans Investments Pvt Ltd., reported in 176 taxmann.com 22 & TANMAC India vs. DCIT reported in 78 taxmann.com 155 and the 4 -: order of the Chennai Bench of the Tribunal in the case of The Gate of Hope Charitable Trust vs. TO in & 2206/CHNY/2024 (Order dated 05.03.2025). It was further contented that reopening of assessment is only a mere change of opinion and relied on the judgment or the Hon’ble Apex Court in the case of CIT vs. Kelvinator of India reported in 320 TTR 561 (SC). As regards the issue on merits, the Ld.AR reiterated the submissions made before the FAA.
The Ld.DR on the other hand submitted that it is clear from the original assessment order, the AO has not examined the issue in depth and it has merely accepted the returned income without any verification. It is submitted by the Ld. DR. that merely by furnishing the details in the return of income filed does not mean the AO as formed an opinion as regard the calculation of Long- Term Capital Gains. It was submitted by the Ld.DR no opinion was taken by the AO in the original assessment order and hence, there cannot be a change of opinion.
I have heard rival submissions and perused the material available on record. The original return of income was filed on 02.08.2014. In the said return of income assessee had disclosed 5 -: Long-Term Capital Gain/loss (refer page 5 of paper-book I). The notice issued u/s 148 of the Act was issued on 18.03.2019. In response to the notice, assessee filed return of income disclosed the income disclosed in the original return filed and had sought for the reasons recorded vide his letter dated 21.11.2019. The reasons recorded for reopening the assessment was, furnished by the AO vide his letter dated 05.12.2019. The reasons recorded for reopening the assessment reads as under- "It is seen from the records that the assessee has sold Commercial property at Adambakkam, Chennai in which the assessee has holding 1/7th share in property. While arriving at Capital Gain, the assessee has adopted full value of purchase for indexed cost of the property instead of 1/7th value of purchase for the purpose of working the indexed cost.”
On reading of the above reasons recorded, it is clear that the reopening has been initiated on examination of material which was already available on record during the course of assessment proceedings (assessment order was completed u/s. 143(3) of the Act on 22.09.2016). The Hon'ble Madras High Court in the case of TANMAC India (supra) had held that in order to issue notice u/s 148 of the Act, there should be fresh tangible material subsequent to completion of original assessment, which points to escapement of income. The Hon'ble High Court was considering the case pertaining to assessment year 1998-99, wherein the return was 6 -: processed and intimation was issued u/s. 143(1) of the Act. Thereafter a notice ws.148 of the Act was issued within 4 years from the date of end of the assessment year on 09.12.2002. The Hon'ble High Court held that the notice issued u/s.148 of the Act is bad in law and consequent reassessment, since there was no new or tangible material which was come to the knowledge of the AO pursuant to the original proceedings for assessment. The relevant finding of the Hon'ble High Court reads as follows:- 10. Let us now see the sequence of events that have transpired in this case. The assessee filed a return of Income pursuant to which an intimation dated 1.12. 1998 under section 143(1) (a) of the Aer was issued. The provisions of section 143/2) require that if the assessing officer considered it necessary or expedient to ensure that the assessee has not understated income, claimed excessive loss or underpaid tax in any manner the assessment is to be subject to further scrutiny, а поticе under section 143(2) is liable to be issued and the assessment completed on or before 31.3.2001. This was not done in the present vase Subsequently, a notice under section 148 has been issued on 9.12.2002 under section 148 of the Income Tax Act taking advantage of the now extended limitation of four years to re-assess income on the basis of the same materials that were available with the authority as part of the record.
11. The phrase 'reason to believe in section 147 relates to such other new or tangible material as may have come to the knowledge of the assessing officer pursuant to the original proceedings for assessment. The Supreme Court in CIT v. Kelvinator of India [2010] 320 ITR 561/187 Taxman 312 states thus in the context of the belief that should form the basis for a re-assessment:
1. '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 in reassess. But reassessment has to be based on fulfillment of certain pre- 7 -: conditions and if the concept of change of opinion' is removed, as contended on behalf of the Department, 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 me Assessing Officer. Hence atter 1st April, 1989 the Assessing Officer hay power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment Reasons must have a link with the formation of the belief’ 12 If the assessing officer, after issuing intimation us. section 143(1) does not to Issue a notice u/s. 143(2) the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the Inference being that the Return of Income filed in order. li this opinion that cannot be arbitrarily changed by the assessing officer, to re-assess income on the basis of stale material, already on record. If we thus keep in the mind the above fundamental requirement of section 147. it would be apparent that the exercise undertaken by the Revenue in this case is not one of re-assessment. but of review. The reasons make it abundantly clear that the re-assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the assessing officer since 2.11.1998 and which ought to have been prompted him to issue a notice under section 143(2) of the Act to conduct the proceedings under scrutiny. What is sought to be done by the re-assessment ought to have been achieved by scrutiny assessment proceedings Having missed the bus earlier, the Department cannot be permitted to avail of the extended time limit in the absence of any new or tangible material, when the time for scrutiny assessment has elapsed on 31.3.2001, prior to issue of notice u/s.
The notice under section 148 dated 9.12.2002 is thus an arbitrary exercise of power and a review of proceedings impermissible in law
A similar view has been held by another division bench of the Hon’ble Jurisdictional High Court in the case of Indian Syntans Investments Pvt. Ltd., (supra). The relevant finding of the Hon’ble Jurisdictional High Court reads as follows:
8 -: “11. The settled proposition therefore is that change of opinion is an in-ball test to check abuse of power by the Assessing Officer. In the garb of reopening the assessment, review would take place.
Therefore, it is clear, a reassessment made within four years or beyond four years has to be based on tangible material de hors that is available un record that has come to the notice of the Assessing Offices Recourse o proceedings for reassessment is available only if the Department comes into possession of materials, apart from that already available as part of its records or if primary particulars reveal discrepancies that are not explained as resolved by the accompanying documentation. This is subject, therefore, to the assessee having placed on record all materials necessary for the appreciation of issues arising for assessment including financials and annexures along with its return of income at the first instance.
13. Even the Hon'ble Delhi High Court in CIT v. Orient Craft Ltd. [2013] 29 raxmann.com 392/215 Taximan 28/354 ITR 536 (Delhi) has held that reopening of assessment made under Section 143(1) of the Act is without jurisdiction, in the absence of any tangible material available with the Assessing Officer to form the requisite belief regarding escapement of income. The Court held that in the absence of any tangible material. there will be a review in the guise of reopening 14. In the present case, the reasons disclose that the Assessing Officer reached the belief that there was escapement of Income, on going through the return of income filed by assessee after it was accepted under Section 143(1) of the Act, without scrutiny and nothing more. Therefore, this is nothing but a review of the earlier proceedings. There is no whisper in the reasons recorded, of any tangible material which came to the possession of Assessing Officer subsequent to the issue of the intimation. It reflects arbitrary exercise of the power conferred under Section 147 of the Act.”
In the instant case, it is clear that from the reasons recorded the AO is only seeking to review his earlier order completed u/s.143(3) of the Act. The reasons make it abundantly clear that reassessment is sought to be initiated on the basis of return of 9 -: income and enclosure which were already available with the AO during the course of original assessment proceeding. Therefore, in absence of new or tangible material, the notice issued u/s.148 of the Act on 18.03.2019 is bad in law. Hence, the consequent reassessment completed is quashed.
12. Since, I have quashed the reassessment proceedings on legal ground, the grounds raised on merits is not adjudicated and is left open. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly- allowed.