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Facts
The assessee, an individual, filed a return as a non-resident for AY 2016-17. The original assessment under Section 143(3) was completed. Subsequently, the case was reopened under Section 148 by the AO, asserting that the assessee's stay in India exceeded 182 days, thus making them a resident, and income was chargeable to tax. The CIT(A) upheld the re-assessment.
Held
The Tribunal held that the issue of residential status and the number of days of stay in India were already examined by the AO during the original assessment proceedings. Therefore, the initiation of re-assessment under Section 148 was based on a mere 'change of opinion' without any fresh tangible material, which is not permissible as per the Supreme Court's pronouncement in CIT v. Kelvinator of India Ltd. The Tribunal quashed the re-assessment proceedings.
Key Issues
Whether reassessment under Section 148, based on facts already scrutinized during the original assessment, constitutes a mere change of opinion, and the correct determination of residential status as per Section 6(1)(a) of the Income Tax Act.
Sections Cited
143(3), 148, 142(1), 6(1)(a), 147
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH:COCHIN
Before: SHRI INTURI RAMA RAO & SHRI PRAKASH CHAND YADAV
Date of Hearing : 27.05.2025 Date of Pronouncement : 30.06.2025 O R D E R PERPRAKASH CHAND YADAV, JUDICIAL MEMBER:
Present appeal of the assessee is arising from the order of ld. CIT(A) dated 13.3.2025 having DIN & Order No.ITBA/NFAC/S /250/2024-25/1074468977(1) and relates to the AY 2016-17.
Brief facts of the case as coming out from the orders of authorities below are that the assessee is an individual filed its return of income for assessment year, exhibiting his status as non- resident and declaring an income of Rs.1,33,740/-. The return of income filed by the assessee was taken up for scrutiny and thereafter, an order of assessment u/s 143(3) of the Income Tax Act, 1961 (in short “The Act”) has been passed by the AO on 4.9.2018. Thereafter, the case of the assessee was reopened u/s Kizhakethil Prasad, Ernakulam Page 2 of 7 148 of the Act vide notice dated 24.3.2021. During the course of re-assessment proceedings, the AO concluded that the assessee was in India for 182 days in the relevant assessment years and hence cannot be taken as non-resident and therefore, the income earned by the assessee is chargeable to tax in India.
The order of AO has been affirmed by the ld. CIT(A) by observing that year 2016 was a leap year and hence to become a non-resident in that year stay of 185 days outside India is a condition precedent.
Aggrieved with the order of ld. CIT(A) assessee has come up in appeal before us and raised following grounds of appeal: i. The order of CIT(A) – NFAC confirming the re-assessment is against facts and law. ii. CIT(A)-NFAC failed to appreciate that the re-assessment was made on a re-appraisal of the same facts considered by the AO while completing the original assessment. The re-assessment being made on a change of opinion is not valid. iii. CIT(A)-NFAC failed to note that NFAC while completing the assessment had considered the day of approval and departure as stay in India and determined the number of days stay in India as 184 days as against 178 days claimed by the appellant. As per settled law, either the day of arrival or departure should be excluded for computing the number of days stay and hence the number of days stay in India would be only 181 days and the Residential status would be Non-resident. iv. CIT(A)-NFAC failed to note that the NFAC went wrong in considering the nine days trip to Malaysia as not for the purposes of employment and excluded the said days for computing the number of days stay in India, which is not according to law. v. Without prejudice to the grounds of appeal above, CIT(A)-NFAC failed to note the fact that NFAC while completing the re- assessment had considered the residential status of the appellant as Resident but Not Ordinarily Resident on the face of the assessment order but brought to tax the salary income earned outside India considering the appellant as a Resident. CIT(A)-NFAC failed to 5. Ground No.1 is general in nature and hence does not require any specific adjudication.
6. Ground Nos. 2 & 3 are related to the assumption of jurisdiction by the AO u/s 148 of the Act. Arguing these grounds counsel for the assessee argued that it is a case of change of opinion because in the original assessment proceedings, the AO has specifically enquired into the issue and has taken a view and therefore, re-appreciation of the same facts and reviewing the earlier view is tantamount to change of opinion and hence notice u/s 148 of the Act is bad in law. Counsel for the assessee relied upon the judgement of Hon’ble Supreme Court in the case of ACIT Vs. Marico Ltd. reported in 315 CTR (SC) 159 for the proposition that the issuance of notice u/s 148 of the Act on the basis of change of opinion is not tenable. Counsel for the assessee thereafter relied upon the judgement in the case of CIT Vs. Kelvinator reported in 320 ITR 561, wherein the Hon’ble Apex Court has held that the AO has no power to review.
Ld. D.R. relied upon the orders of authorities below.
We have heard the rival submissions and perused the materials available on record. Before deciding whether it is a case of change of opinion or not, we would like to refer to the questionnaire issued by the AO during the course of original proceedings u/s 143(3) of the Act. The relevant portion of the questionnaire is extracted herein below:
Kizhakethil Prasad, Ernakulam Page 5 of 7 8.1 Thereafter, the AO has recorded following reasons: "In assessment, assessee was given the residential status of a non- resident and the claim of exempt income was allowed. The assessing officer vide notice u/s 142(1) dated 11.06.2018 has required the assessee to prove his residential status as Non-Resident as A.O had calculated 190 days of stay in India during the previous year. In response, the assessee claimed that he has a stay of only 181 days in India/ 184 days outside India as per Annexure along with letter dated 17.06.2018. The no. of days of 184 outside India was calculated by assessee treating the date of arrivals in India as outside India. To become a non-resident, one should have a stay of 185 outside India during the previous year since year 2016 being a leap year. Total days in the year come to 366 days. Thus, by his own calculation, he has a stay of 182 days in India, which makes him Resident in India. The claim of date of arrival in India as outside India by him also is not covered by Act or Rules. The day on which he enters India as well as the day on which he leaves India shall be taken into account as the stay of the individual in India as per Advance Rulings (AAR P No. 7 of 1995). So if the two days of arrival are also reckoned, no of days in India would be increased to 184. Further, assessee has also made a claim of further nine days of a foreign trip from 06.01.2016 to 15.01.2016 to be reckoned as stay outside India arid produced copies of passport pages to substantiate the claim. It is seen that this claim of assessee was accepted and his status was treated as Non-Resident.” 8.2 Perusal of the above questionnaire would show that the AO has duly examined the number of days stayed by the assessee during the relevant assessment year in India and has taken a view that the assessee was non-resident. Thereafter, the AO observed that so far as the stay of assessee for the period from 6.1.2016 to 15.1.2016 is concerned, the assessee has failed to provide any evidence to establish that these 9 days were also used by the assessee in relation to its employment. We observe that these observations of the AO are irrelevant in view of the provisions of section 6(1)(a) of the Act which are reproduced herein for the sake of reference:- “Resident in India. Section 6. For the purposes of this Act, -- (1) An individual is said to be resident in India in any previous year, if he – (a) Is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more;”
Kizhakethil Prasad, Ernakulam Page 6 of 7 8.3 Perusal of these provisions would show that the language of the section is very clear, which says that an individual is said to be a resident in India in any previous year, if he is in India for a period of 182 days or more. This section nowhere provides that the period of stay must be with respect to the employment of an individual. So far as the reliance of the AO on explanation (1)(a) of the Act is concerned, we are of the opinion that the non-consideration of this explanation in the original proceedings would amount error of judgement, which is not permissible under the provisions of section 148 of the Act. There are other provisions of the Income Tax Act, which can take care of those cases, where there is an error of judgement. We further wish to quote the observations of the Hon’ble Supreme Court in the case of Kelvinator reported in (supra), wherein Hon’ble Supreme Court has categorically held that “unless there is some tangible material with the AO, he cannot assume jurisdiction u/s 148 of the Act”. Relevant observation of the Hon’ble Supreme Court is reproduced hereunder: “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 re-open 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 re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of “change of opinion” is removed, as contended on behalf of the Department, then, in the garb of re- opening 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. Hence, after 1-4-1989, Assessing Officer has 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 live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted herein above.”
8.4 In the present case, there is no tangible material with the AO, which would empower him to assume jurisdiction u/s 148 of the Kizhakethil Prasad, Ernakulam Page 7 of 7 Act. It is a case where the AO has re-appraised the same facts, which he has considered while framing the assessment u/s 143(3) of the Act.
8.5 Therefore, in view of the above discussion and the law laid down by the Hon’ble Apex Court in the case of Kelvinator (supra), we hereby quash the proceedings u/s 148 of the Act since we have already quashed the assessment and there is no need to discuss the merits of the case.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 30th Jun, 2025