Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, A BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI S.R.RAGHUNATHA
आदेश / O R D E R
PER ABY T. VARKEY, JM:
1. This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/NFAC, (hereinafter referred to as “the Ld.CIT(A)”), Delhi, dated 29.01.2025 for the Assessment Year (hereinafter referred to as "AY”) 2013-14.
At the outset, the Ld.AR of the assessee has brought to our notice that the original assessment in this case i.e. AY 2013-14 had been completed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act”) by passing assessment order dated 29.03.2016; and thereafter, the AO has re-opened the assessment u/s.148 of the Act by issuing notice on 30.03.2019, which was an event undisputedly after four years from the end of the assessment year and therefore, according to the Ld.AR, the AO had to satisfy the additional condition precedent before validly reopening the assessment i.e. the assessee failed to disclose fully and truly all the material facts necessary for assessment year as provided for under first proviso to section 147 of the Act, which condition precedent, in the instant case, according to the Ld.AR, the AO has not satisfied. Therefore, according to him, the impugned action of the AO to reopen the assessment for AY 2013-14 is bad in law. Since the assessee has raised a legal issue, we are inclined to first examine the legal issue and hence, take note of the relevant facts pertaining to it.
Brief facts are that the assessee is an individual who had filed his return of income (RoI) for AY 2013-14 on 30.09.2013 declaring an income of Rs.6,35,81,370/- during the relevant Financial Year 2012-13. The assessee is noted to have sold land & building at Guindy Industrial Estate vide Sale Deed No.2220/2013 dated 06.03.2013 for a consideration of Rs.10.30 Crs. And out of this total consideration, the assessee had shown the consideration for land at Rs.9,80,10,000/- and accordingly shown Long Term Capital Gains (LTCG) from the sale of immovable property at Rs.6,41,04,000/-, which was accepted by the AO and passed the assessment order u/s.143(3) of the Act on 29.03.2016 determining the income at Rs.6,36,31,766/-.
4. Thereafter, the AO while going through the records pertaining to the assessment of the assessee for AY 2013-14 noted (supra) that the assessee had offered LTCG of Rs.6,41,04,000/- on sale of land & building at Guindy Industrial Estate; and also noted from the Sale Deed dated 06.03.2013, the value adopted for land measuring 19602 sq. ft. at Rs.9,80,10,000/- which according to him was below the guideline value; and as per the guideline value, the AO was of the view that it ought to have been Rs.11,76,12,000/- whereas the assessee has shown sale consideration of land at Rs.9,80,10,000/-. Hence, according to the AO, there was an escapement of Rs.1,96,02,000/- [Rs.11,76,12,000/- minus Rs.9,80,10,000/-]. Therefore, he recorded his reasons for re-opening of assessment and issued notice for re-opening u/s.148 of the Act on 30.03.2019. Pursuant to which the assessee filed his ITR on 26.04.2019
:: 4 :: reiterating the original ITR filed u/s.139(1) of the Act and also requested for a copy of the reasons recorded vide letter dated 04.04.2019 & 04.10.2019. But assessee was given a copy of reasons only on 14.11.2019 [i.e. five (5) days before the assessment order was passed on 19.11.2019]. A copy of the reasons recorded is found placed at Page Nos.23 to 26 of the Paper Book which reads as under:
Reasons for reopening of the assessment in the case of Sri Annamalai Jayapalan, Chennai - 600 041 for the Asst. Year 2013- 14 u/s.147 of the Act.
1. Brief details of the Assessee:
As per the Return of Income filed by the assessee, the assessee company is engaged in the business of Export of Readymade Garments. The assessee has filed the Return of Income for the A.Y. 2013-14 on 30.09.2013.
2. Brief details of Information collected/received by A.Ο.
The assessee company filed its return of income for the assessment year 2013-14 on 30.09.2013 admitting income of Rs.6,35,81,370/-. The assessed Income determined during scrutiny assessment was Rs.6,36,31,766/-.
3. Analysis of Information collected/received.
It has been verified from the records available in this office.
Enquiries made by the AO as sequel to information collected/received.
From the records available in this office.
Findings of the A.O.
i) The assessee offered capital gain of Rs.6,41,04,000/- on the sale of land and building at Ekkaduthangal, Further, it is seen from the sale deed dated 6th March, 2013 the value adopted for land measuring 19,602/-sq ft. was at Rs.9,80,10,000/- as against the guideline value of Rs.11,76,12,000/- (i.e. @ Rs.6000 per sq. ft.) that resulted in short computation of LTCG
:: 5 :: amounting to Rs.1,96,02,000/-. There would be an additional tax demand of Rs.54,91,696/- including interest leviable u/s 234B. ii) The purchase deed dated 17.08.2001 states the purchase cost of the property as below:
Land value Rs. 1,16,23,986/- Building value Rs. 11,76.014/- Rs. 1,28,00,000/- Stamp duty Rs. 16,53,000/- Total Value Rs. 1,44,53,000/-
In the computation statement for long term capital gain, the assessee had adopted the above value of Rs.1,44,53,000/- and the indexed cost of acquisition was arrived at Rs.2,89,06,000/- (1,44,53,000/-* 852/426).
However, in the purchase deed, the age of building was shown as 23 years. In the sale deed dated 6.3.2013, the age of building be 11 years. Obviously, the building purchased in the year 2002 and hence, the age of such building as on the date of sale in the year 2013 is shown as 11 years. Since the building purchased in the year 2001 was not in existence at the time of sale, the cost of acquisition should not include the value of such building and Indexed cost of acquisition is required to be reworked as under:
Land value Rs. 1,16,23,986/- Stamp duty (proportionate) Rs. 15,01,129/- Total value (in FY 2001-02) Rs. 1,31,25,115/-
Indexed cost of acquisition =13125115 * 852/426 - Rs.2,67,50,230/-
As against the correct indexed cost of acquisition on land of Rs.2,62,50,230/-, the assessee had adopted a sum of Rs.2,89,06,000/-. The excess sum of Rs.26,55,770/- is required to be added to the long term capital gains and taxed.
Basis of forming reason to believe and details of escapement of Income:
i) The assessee offered capital gain of Rs. 64,14,000/- on the sale of land and building at Ekkaduthangal. Further, it is seen from the sale deed dated 6th March, 2013 the value adopted for land measuring 19,602/- sq. ft. was at Rs.9,80,10,000/- as against the guideline value of Rs.11,76,12,000/- (le. @ Rs.6000 per sq. ft.) that resulted in short computation of LTCG amounting to Rs.1,96,02,000/-. There would be an additional tax demand of Rs.54,91,696/- including interest leviable u/s 234B. ii) The purchase deed dated 17.08.2001 states the purchase cost of the property as below:
:: 6 ::
Land value Rs. 1,16,23,986/- Building value Rs. 11,76.014/- Rs. 1,28,00,000/- Stamp duty Rs. 16,53,000/- Total Value Rs. 1,44,53,000/-
In the computation statement for long term capital gain, the assessee had adopted the above value of Rs.1,44,53,000/- and the indexed cost of acquisition was arrived at Rs. 2,89,06,000/- (1,44,53,000/- * 852/426)
However, in the purchase deed, the age of building was shown as 23 years. In the sale deed dated 6.3.2013, the age of building be 11 years. Obviously, the building purchased in the year 2002 and hence, the age of such building as on the date of sale in the year 2013 is shown as 11 years. Since the building purchased in the year 2001 was not in existence at the time of sale, the cost of acquisition should not include the value of such building and Indexed cost of acquisition is required to be reworked as under:
Land value Rs. 1,16,23,986/- Stamp duty (proportionate) Rs. 15,01,129/- Total value (in FY 2001-02) Rs. 1,31,25,115/-
Indexed cost of acquisition =13125115 * 852/426 - Rs.2,67,50,230/-
As against the correct indexed cost of acquisition on land of Rs.2,62,50,230/-, the assessee had adopted a sum of Rs.2,89,06,000/-. The excess sum of Rs.26,55,770/- is required to be added to the long term capital gains and taxed.
Hence, I have reason to believe that income amounting to Rs.81,47,466/- (Rs. 54,91,696/- and Rs.26,55,770/-) has escaped assessment.
Escapement of Income chargeable to tax in relation to any assets located outside India.
Not Applicable
Applicability of the provisions of Sec. 147/151 to the facts of the case:
In this present case the assessment was completed u/s.143(3) assessing a total income of Rs.6,36,31,766/- the requirement to initiate proceeding u/s.147 is reason to believe which has been recorded above (refer paragraph 6). in view of the above, the provisions of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.
5. The objections raised by the assessee against reopening of assessment was brushed aside by the AO. And the assessee is noted to have submitted again all the documents pertaining to sale of property and the AO passed re-assessment order u/s.143(3)/147 dated 19.11.2019 wherein he further reduced cost of acquisition claimed by the assessee against the sale consideration of the property being the cost of building of Rs.11,76,014/-as the same was not in existence at the time of the sale of property. Hence, the index cost of acquisition was, therefore, worked out by the AO at Rs.2,62,50,230/- as against Rs.2,89,06,000/- as claimed by the assessee. Thereby, excess sum of Rs.26,55,770/- was reduced from the index cost of acquisition claimed by the assessee. By doing such computation, the Long-term capital gain (LTCG) in the hands of the assessee got increased by Rs.2,22,57,770/- (Rs.1,96,02,000/- plus Rs.26,55,770/-). Aggrieved by the reassessment order passed by the AO, the assessee preferred an appeal before the Ld. CIT(A). On appeal, the Ld. CIT(A)/NFAC dismissed the legal issue as well as grounds of appeal raised against the reassessment on merits by the assessee.
6. Assailing the action of the Ld.CIT(A), the Ld. AR submitted that the Ld. CIT(A) didn’t appreciate the contentions raised objecting to reopening of the regular/original assessment under Section 147 of the Act. He submitted that in the present case the original assessment was passed after scrutiny u/s.143(3) of the Act, and the proceedings u/s.147 of the Act were initiated after the expiry of four years from the end of the relevant assessment year. The Ld.AR therefore argued that for valid initiation of proceedings u/s.147 it was necessary for the AO to show that while recording the reasons u/s 148, he was prima facie satisfied that the escapement of the income chargeable to tax for the relevant assessment year was as a result of the failure on the part of the assessee to disclose truly and fully, all material facts necessary for assessment. He submitted that from the recorded reasons itself such satisfaction should have been discernible. Drawing attention to the reasons recorded (supra) and copy of which is found placed at Page Nos.20 to 27 of the Paper Book, the Ld.AR submitted that nowhere it was even prima facie apparent that in AO’s opinion escapement of income had resulted because of assessee’s failure to disclose truly & fully all material facts for its assessment. The Ld.AR therefore submitted that the twin conditions embedded in section 147 and proviso to it were not fulfilled. The Ld.AR submitted that initiation of reassessment would have been permissible only if the AO was having in his possession fresh and tangible material which came in his possession subsequent to passing of the order u/s 143(3) and its relation with formation of belief should have been spelt out in the reasons recorded to justify reopening. According to Ld. AR the AO had miserably failed to demonstrate the foregoing in the recorded reasons which vitiated the usurpation of jurisdiction by the AO. The Ld.AR further submitted that in the course of original proceedings u/s 143(3), the assessee was directed to furnish the details of LTCG during the relevant year. And in compliance the particulars as requisitioned including the sale deed No.2220/2018 dated 06.03.2013 were furnished which thereafter were examined by the AO not only with reference to the assessee’s books of account, balance- sheet, income & expenditure, computation of income but also by enquiry from the assessee by issuing notice u/s.142(1) of the Act. The Ld.AR therefore submitted that there was no failure on the part of the assessee to disclose true and full material facts prior to completion of order u/s 143(3). In the circumstances therefore the reopening of assessment after four years was claimed to be impermissible.
7. Further according to Ld AR, the AO has re-opened the assessment without application of mind, which fact is evident from reading of para 01 & 02 of the reasons recorded which reveals that AO erred in wrong assumption of fact that assessee was a company whereas assessee is an individual; and in Para No.5, it is noted that assessee has offered capital gains of Rs.64,14,000/- [whereas correct figure is Rs.6,41,04,000/-].
Therefore, according to the Ld.AR, there is per-se non-application of mind by the AO while recording reasons; and it is evident that AO only on the basis of records found in the assessment folder has reopened the assessment meaning there was no fresh tangible material in the hands of the AO to justify reopening the assessment; and also failed to satisfy the proviso to section 147 of the Act, which is sine qua non before reopening the assessment after four years from the end of the relevant assessment year, which fact the AO admits at Para No.3 & 4 of the reasons recorded (supra) that the information has been collected/received/verified from the records available in the Office and not from any outside source; and by admitting so, the AO has not satisfied that the assessee failed to disclose fully and truly all material facts necessary for assessment during the original assessment.
8. The Ld.AR therefore submitted that besides there being no tangible material available with the AO, the reopening of assessment was bad in law and therefore proceedings u/s.147 suffered from incurable infirmity.
In the light of the aforesaid submissions, the Ld. AR submitted that the reopening of the assessment was legally impermissible and, therefore he urged for allowing the legal issue against re-opening.
Per contra, the Ld.Addl. CIT, DR submitted that there indeed was failure on the part of the assessee to submit full and true information at the time of original assessment and hence the Ld. CIT(A) rightly held that the initiation of reassessment by the AO was in order and correct in law.
The Ld.DR submitted that the AO in the first round didn’t look into the contents of Sale Deed which reveals that the assessee did not make full and true disclosure of material facts before the AO during the course of assessment proceedings under Section 143(3). Hence, the Ld.DR doesn’t want us to interfere with the action of reopening of the assessment.
Before we advert to deal with the legal issue, let us understand the settled position of law on the issue at hand. To begin with, it should be kept in mind that the concept of assessment is governed by the time- barring Rule, and the assessee acquires a right as to the finality of proceedings. Queitus of the completed assessment is the Fundamental Rule and exception to this rule is Re-opening of assessment by AO under section 147 or exercise of Revisional jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament in its wisdom has provided safeguards for exercise of the reopening of assessment jurisdiction to AO; and revisional jurisdiction of CIT by providing condition precedent which is sine qua non for assumption/usurpation of jurisdiction. In the case of reopening of assessment, section 147 provides that where the Assessing Officer has reason to believe escapement of income [is the jurisdictional fact & law] he shall record his reasons for doing so and assess or reassess the income which has escaped assessment; and for exercising revisional jurisdiction u/s. 263 the CIT has to find the assessment order of the AO to be erroneous as well as prejudicial to the revenue. Unless the condition precedent is satisfied, the AO or the CIT can’t exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted “for reason to believe escapement of income” to ‘for reasons to be recorded by him in writing, is of the opinion’’ which gave unbridled subjective satisfaction to the AO was later substituted back to ‘reason to believe escapement of income’’, by the Direct Tax Laws (Amendment)
Act, 1989. The Hon’ble Apex Court as well as the Hon’ble jurisdictional High Court as well as other Hon’ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdictional fact & law (mixed question of fact and law) the reason to believe escapement of income (supra).
As noted, the AO, who is a quasi-judicial authority is empowered to reopen the assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax, which he has to record before issuing notice u/s 148 of the Act. In this regard, it must be borne in mind that reasons to believe postulates foundation based on information, and belief based on reason. After a foundation based on information, is made, there still must be some reason, which should warrant the holding of a belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon’ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) held that the expression “reason to believe” occurring in sec. 147 “is stronger” than the expression “if satisfied” and such requirement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147 of the Act.
At this stage, authorities must understand the fine distinction between “reason to suspect” & ‘reason to believe”. Adverse information against an assessee may trigger “reason to suspect,” then the AO is duty bound to make reasonable enquiry to collect material which would make him form a belief that there is an escapement of income. And on satisfaction of such an event, then proceed to reopen the assessment and not before that event, because reason to believe is the jurisdiction requirement u/s 147 of the Act, and not the reason to suspect escapement of income. This subtle distinction should be borne in mind while adjudicating the legal issue raised by assessee.
And further, the reason to believe escapement of income should be that of AO, and not that of any other authority, because then it will be against one of the basic feature of the Constitution of India ie, the Rule of Law, wherein the Parliament has empowered this reopening jurisdiction only to that of Assessing Officer and that is why if the reason to believe escapement of income is not that of AO, the assumption of jurisdiction to re-open, is vitiated; and resultantly bad in law, because assumption of jurisdiction to reopen will be on the basis of borrowed satisfaction.
And, if the AO intends to re-open the assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then as per first proviso to section 147 of the Act, an additional safeguard or condition that escapement of income was due to fault of the assessee, in not fully and truly disclosing the material facts at the time of original assessment needs to be satisfied. In this context, it is gainful to refer to the Hon’ble Supreme Court decision endorsing the Full Bench decision of the Hon’ble Delhi High Court in CIT vs. Kelvinator of India Ltd. [320 ITR 561] wherein inter-alia, it was held that Assessing Officer has no power to review; and emphasized that AO in absence of “tangible material” should not resort to reopening. The Hon’ble Supreme Court held that merely on “change of opinion” the AO should not re-open the assessment because he doesn’t enjoy the power to review his own order.
Thus, as noted before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record “reason to believe” that the income chargeable to tax for that assessment year has escaped assessment. And, if the AO intends to re-open an assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then an additional condition needs to be satisfied viz escapement of income was due to fault of the assessee, in not fully and truly disclosing all the material facts necessary at the time of original assessment. If the conditions stipulated by statute are not satisfied at the first place, then it cannot be said that AO has validly assumed jurisdiction u/s.147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his “reasons recorded”] had reasons warrant holding a belief that income chargeable to tax has escaped assessment. At this stage, it is also important to bear in mind that the reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed, while adjudicating the legal issue of AO’s usurpation of jurisdiction u/s. 147 of the Act. The Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd. vs. R.B. Wadkar [(2004) 268 ITR 332], has, inter alia, observed that "………. It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him.
He has to speak through the reasons."Their Lordships added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence….". Therefore, the reasons are to be examined only as they were recorded by the AO before the issue of the notice.
From the aforesaid understanding of law governing the issue at hand, we have to examine the reasons recorded by AO to reopen which has been already set out above, and test whether the condition precedent necessary to usurp the re-opening jurisdiction as required u/s. 147 of the Act is satisfied or not? And in the present case, since four years have elapsed from the end of the relevant AY and original assessment has been completed u/s. 143(3) of the Act, it needs to be examined as to whether the addition condition precedent as laid down in first proviso to section 147 of the Act is also satisfied or not ? For doing that we have to examine on a standalone basis the reasons recorded by the AO to reopen the assessment (refer Page Nos.4-6 supra). The AO in the reasons recorded, first of all notes that assessee is a company, whereas assessee is noted to be an individual. Be that as it may, the AO notes that assessee is engaged in the business of export of readymade garments and had filed return for AY 2013-14 on 30.09.2013; and in the second Paragraph states that assessee has admitted in his return Rs.6,35,81,370/- which was later assessed after scrutiny at Rs.6,36,31,766/- and it is noted that Para No.2 is under the sub-heading “details of information collected/received by the AO”, wherein the AO has not referred to any other details the information other then the fact of returned income and assessment income u/s.143(3) of the Act as on 31.09.2013, which facts are undisputedly from the assessment records only. This crucial fact is corroborated by the AO himself which is discernable from perusal of Para Nos.3, wherein, the AO admits under the sub-heading ‘analysis of information collected/received,’ he states that he has verified from records available in his Office; & at Para No.4 that enquiries have been made as a sequel of information from the records available in his Office. Thereafter, the AO at Para No.5 notes that the assessee had offered capital gains of Rs.64,14,000/- [the correct amount is Rs.6,41,04,000/-] on sale of land and building at Ekkaduthangal and he noted from the Sale Deed dated 06.03.2013, the value adopted for land measuring 19.602 sq.ft. was at Rs.9,80,10,000/- as against the guideline value of Rs.11,76,12,000/- [i.e. @ Rs.6,000/- per sq.ft.] which resulted in short computation of LTCG amounting to Rs.1,96,02,000/- and would generate additional tax payment of Rs.54,91,696/- including interest leviable u/s.234B of the Act.
Thereafter, he noted from the Purchase Deed dated 17.08.2001, the purchase cost of the property which is reproduced and noted from the computation/statement for LTCG that the assessee had adopted the value of Rs.1,44,53,000/- and the indexed cost of acquisition was arrived at Rs.2,89,06,000/-. Further, the AO noted from the Purchase Deed that the age of the building was shown as 23 years whereas in the Sale Deed dated 06.03.2013, the age of the building was shown to be 11 years and thus, he inferred that the building was purchased in the year 2001 and hence was not existence at the time of sale. The cost of acquisition according to the AO should not include the value of such building and indexed cost of acquisition is required to be computed i.e. land value at Rs.1,16,23,986/- and stamp duty proportionately Rs.15,01,129/-. Thus, total value becomes Rs.1,31,25,115/- and the indexed cost of acquisition would be Rs.2,62,50,230/- as against the figure adopted by the assessee at Rs.2,89,06,000/- which is excess [i.e. Rs.2,89,06,000/- minus Rs.2,62,50,230/-] is Rs.26,55,770/- is required to be added to the LTCG.
After giving such a finding, the AO discussed at Para No.6, the basis for forming the reasons to belief and details of escapement of income by repeating the aforesaid facts and concluded that the income amounting to Rs.81,47,466/- i.e. [Rs.54,91,696/- & Rs.26,55,770/-] has escaped assessment. And at Para No.8, the AO comes to conclusion that in view of clause (a) of explanation (2) to section 147 of the Act which is applicable to the facts of the case, he was of the view that the income chargeable to tax has escaped assessment.
On an analysis of the reasons recorded by the AO to justify the reopening of assessment, we find from the reasons cited infra that the AO erred in reopening scrutiny assessment made u/s.143(3) of the Act on 29.03.2016. The undisputed fact in this case is that in the present case, the original assessment for AY 2013-14 was passed after scrutiny u/s.143(3) of the Act on 29.03.2016 and the reopening proceedings u/s.147 of the Act were initiated after expiry of four (4) years from the end of the relevant assessment year since notice u/s.148 of the Act was satisfy the additional condition precedent given in the first proviso to section 147 of the Act which says that where assessment u/s.143(3) of the Act has been made for the relevant assessment year, then, the AO should not take any action u/s.147 of the Act after expiry of four (4) years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all the material facts necessary for that assessment year. Thus, as per Sec.147 of the Act, if the AO intends to reopen already scrutinized assessment u/s.143(3) of the Act which event is after expiry of four (4) years from the end of the relevant assessment year then the AO can do so, only if there was a failure on the part of the assessee to disclose fully and truly all the material facts necessary for that assessment year.
Keeping this position of law in mind, let us examine, whether the AO satisfies this essential condition. From a perusal of the reasons recorded by the AO [refer to Page No.4-6 supra] would reveal that there is no whisper about the failure on the part of the assessee to disclose fully and truly all the material facts necessary for that assessment year. Since it couldn’t be disputed by the Ld.DR representing the department that in this case, the first proviso of Sec.147 of the Act is attracted, hence, unless the AO satisfies this condition as stipulated therein [in the first proviso to section 147 of the Act], the AO couldn’t have validly reopened the assessment. On this score alone, reopening of assessment is held to be bad in law. Moreover, as noted the reasons recorded by the AO riddled with factual inaccuracies which shows the AO has not applied his mind while recording the reasons. At Para Nos.1 & 2 of the reasons recorded, the AO has erroneously assumed that the assessee was a company whereas the assessee is an individual and at Para No.5, he has noted that the assessee has offered income of Rs.64,14,000/- [whereas correct capital gains offered by the assessee was Rs.6,41,04,000/-].
Thus, we find that there is non-application of mind by the AO while recording the reasons before reopening the assessment. Further, we note that there was no tangible material in the possession of the AO other than the assessment records already available in the original assessment folder in his office. In the absence of the tangible material, the AO couldn’t have resorted the reopening as held by the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra). It is further noted that in the original assessment, the AO had already looked into the capital gains offered by the assessee [Refer Page No.36-37 of PB] and therefore, the action of the AO to reopen the assessment without any tangible material from an external sources shows that it was an act of review of his own action which is impermissible and can also be termed as a “mere change of opinion”; and it is settled position of law that the AO can’t reopen the assessment on ‘change of opinion’ and that the AO doesn’t enjoy the power to review his own order. Therefore, looking from the aforesaid angles also, we hold that reopening of assessment is bad in law.
For the reasons discussed in the foregoing, therefore, we find that the essential condition precedents to invoke the jurisdiction to reopen the assessment for AY 2013-14 is absent; and consequently the action of AO to reopen the assessment without complying with the requirement of law is held to be wholly without jurisdiction and therefore the issuance of notice u/s. 148 of the Act is ab-initio void and consequent actions of AO are quashed.
In the result, appeal filed by the assessee is allowed & Stay Application filed by the assessee is dismissed as infructuous.
Order pronounced on the 11th day of June, 2025, in Chennai.