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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Shri P.M. Jagtap & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-5, Vadodara in Appeal no. CIT(A)- 5/10517/2016-17 vide order dated 05/03/2019 passed for the assessment year 2011-12.
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The assessee has taken the following grounds of appeal:-
“On Reopening 1) The CIT(A) has erred both in Law and in fact in upholding the Assessment Order passed u/s. 143 (3) r.w.s. 147 of the Act.
Since no income has escaped assessment or under assessed Sec. 147 does not apply and the Reopening of Assessment is bad in Law and Void.
2) Your Appellant submits that Reasons Recorded for Reopening the assessment shows beyond doubt that all facts were on record and since no new fact has come to the knowledge the Assessing Officer and it is a clear case of change of opinion making the Reassessment invalid.
3) Your Appellant also submits that the order that u/s. 148 is bad in law and void since the order of Assessing Officer sought to be Reopened has merged with the order of CIT(A) and it does not existence and therefore the vary basis of Notice of Reopening and Reassessment thereafter is vitiated and against principle of natural justice.
On Merits 1) On facts of the case your Appellant submits that the Bombay Flat was 87,520/-occasionally occupied put to use by the Appellant or his relatives and friends as and when they went to Bombay for Social or Business reasons and therefore deeming provisions and estimating the income as Rent of Rs. 1,56,970/- is against principle law and natural justice.
2) Without prejudice to above your Appellant submits that the figure of Notional Rent estimated by Assessing Officer and confirmed by CIT(A) is on evidence collected at the back of your Appellant and its reliance in Asst. Order without giving a copy of said letter of Society and without giving a chance to your Appellant of examining the Hon. Secretary of Society referred relied by the Assessing Officer
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is against principle of natural justice and cannot be relied for purposing of making addition. 3) In Presuming without admitting that any addition as Notional Rent Income is called for then it should be as per Municipal Bill estimating the Gross Annual Value of the flat and after deduction of common expenses, taxes etc. the net income be added. It is therefore submitted that relief claimed above be allowed and the order of the CIT(A) be modified accordingly. Your Appellant reserves right to add, alter, amend to withdraw any or all Grounds of Appeal. Tax effect Rs. 87,520/-” 3. The brief facts of this case are that the assessee filed his return of income on 19-12-2011 declaring total income at � 3,74,708/-. Original assessment under section 143(3) of the Act was finalised on 24-03-2014 assessing the total income at � 94,26,058/- which includes agricultural income of � 86,500 /-. In appeal, Ld. CIT(Appeals) gave substantial relief to the assessee and pursuant to appeal effect order, the revised income was determined at � 4,04,166/- and agricultural income of � 86,500/-. Thereafter, the case of the assessee was re-opened under section 147 of the Act for the reason that on verification of records it is observed that the assessee was residing at Vadodara and he was owning a property at Mumbai which was lying vacant. The assessee had earned capital gains on sale of the above property on 21-12-2010 (Milton apartments), however in the return of income, the assessee had not declared any rent from the aforementioned property. During the reassessment proceedings, the assessee submitted that during the period, the property was self-occupied since the assessee was staying in the flat during the period since he was finalising the deal for sale of property. The assessee also produced certain bills which he paid to the
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society towards maintenance charges in support of this contention. The AO, however, rejected the assessee’s contentions and computed the rental income from house property at � 1,56,800/- and added the same to the income of the assessee. In appeal, Ld. CIT(Appeals) dismissed the assessee’s appeal with the following observations:
“5. I have considered the order of the AO and the written submission of the appellant. 5.1 The appellant has contested on five grounds. The effective ground is reopening of assessment is bad in law and addition of Rs. 1,56,8007- under the head House Property. I have gone through the submission made before AO, assessment order and reason of reopening i.e. escapement of deemed income on house / flat at Mumbai. The appellant states that flat was self occupied during 01.04.2010 to 21.12.2010. In support, he has produced bills paid to the Milton Co-operative Society. I find that appellant has not denied rent receipt for prior F.Y. i.e. before 01.04.2009 -31.03.2010. Further, appellant has also not denied his residence at Vadodara. Appellant has vehemently argued that he was staying at flat to negotiate selling price at a higher rate. This argument is quite stressed. No human being would live in a flat to enhance sale price that also for the period of nine months i.e. 01.04.2010 -21.12.2010. 5.2 Appellant has mentioned his Vadodara address in all bank account record, Sale deed, Assessment proceedings correspondence, Appeal memo and even ITR history suggests Vadodara address. Appellant is partner in two firms namely Avni Developers and Mehta Builders both having business premise at Vadodara. The appellant has not denied his ownership / self occupancy of house property at Vadodara and as per section 22 the appellant can claim only one property as self occupied. Further, rental income from house property at different places at Vadodara has been shown in ITR. In other words, appellant is fully engaged in business activity at Vadodara. Therefore, living at Mumbai and remaining absent from business
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place for a stretch of 8 months is unbelievable. Hence, appellants theory that he was staying at Mumbai is quite spacious.
5.3 Needless to say, I.T. Act empowers AO to charge notional income from house property. "When AO is empowered to do presume deemed income and the Act provides such mechanism then further evidence to tax the deemed rental income is not much needed.
5.4 Considering the facts above, AO has rightly taxed the deemed income for house property thereby arresting the escapement of revenue from tax net for 8 months during F.Y. 2010-11. Since, escapement of income is certain and the said income has not been disclosed in ITR hence reopening was valid in the eyes of law. Addition of Rs. 1,56,800/- under the head House Property is hereby upheld. All the grounds are disposed off accordingly.”
The assessee is in appeal before us against the aforesaid order of the Ld. CIT(Appeals). The assessee contended before us that the original assessment order was passed on 24-3-2014, and while passing the original assessment order, all details in respect of the aforementioned property were placed before the assessing officer. The issue of capital gains on sale of the said property was duly considered by the assessing officer during the course of original assessment proceedings. During the course of original assessment, several notices and replies were exchanged between the assessee in the Department in connection with the sale of the aforementioned property, and after due consideration of the same, a huge addition of � 89,35,392/- was made by way of long-term capital gains by the AO. Therefore, since the AO had already given due consideration to all relevant material which was placed before him at the time of original assessment, and no new material had come into the possession of the Ld. Assessing Officer,
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he was precluded from taking recourse to 147 proceedings in order to tax notional rental income in respect of the above property, since this would amount to “change of opinion”, which is impermissible in law. The counsel for the assessee further submitted that the assessee has other properties situated in Vadodara on which he is declaring rental income. On facts, the aforementioned property was in self-occupation of the assessee since assessee had to make frequent travels to Mumbai on account of business travels. The counsel for the assessee submitted that the assessee has a choice of taking one property in self-occupied and in respect of other properties he had declared rental income of the same. The Counsel for the assessee further submitted that earlier for assessment year 2008-09, the assessee had declared rental income in respect of the aforementioned property. In response, the Ld. DR relied upon the observations made in the assessment order.
We have heard the rival contentions and perused the material on record. We note that during the course of original assessment proceedings, all facts in connection with the aforementioned property were placed before the AO for his consideration. In the original return of income, the assessee had not declared long-term capital gain in respect of the aforementioned property, however, during the course of assessment the AO made an addition of � 89,35,392/-as long-term capital gains in respect of the aforementioned property, which is in consideration before us. Accordingly, it is not a case where any new information has come in possession of the AO leading to the conclusion that there was escapement of income, so as to initiate reassessment proceedings. All information/details in connection with the aforementioned property, including non-receipt of rent from the above
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property were within the knowledge of the assessing officer at the time of original assessment. In the case of Income Tax Officer, Ward No.62 vs. Tech Span India (P.) Ltd. and another, (2018) 6 SCC 685 (Paras 14 to 18), Hon’ble Supreme Court held that the assessing officer does not have power of review under section 147 of the Act. While passing the order the Supreme Court observed as under:
Section 147 of the IT Act does not allow the re-assessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the factsthat were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re- assess and not the power to review.
5.1 Again, the Supreme Court in the case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 320 ITR 561(SC)held that assessing officer does not have power of review his order under section 147 of the Act. The Hon'ble Supreme Court made the following observations:
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 to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of “change of opinion” is removed, as contended on behalf of the
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Department, then, in the garb of re-opening the assessment, review would take place.
5.2 In the recent case of PCIT v. Fibres and Fabrics International (P.) Ltd[2022] 139 taxmann.com 562 (SC), the Hon'ble Supreme Court dismissed SLP against High Court order that where Assessing Officer reopened assessment on mere ground that expenditure incurred by assessee- company, engaged in business of manufacturing and export of garments, towards sales commission were huge, since said reason for reopening was based on same set of information which was available at time of original assessment proceedings, reopening of assessment based on a mere change of opinion was invalid and not permissible.
5.3 In the case of Dell India (P.) Ltd. v. JCIT [2021] 123 taxmann.com 468 (Karnataka), the High Court held that oversight, inadvertence or mistake of Assessing Officer or error discovered by him on reconsideration of same material is mere change of opinion and does not give him power to reopen a concluded assessment.
5.4 In the case of Jivraj Tea Co. v. DCIT [2017] 88 taxmann.com 539 (Gujarat)Hon'ble Gujarat High Court held that where issue with respect to purchases made from sister concerns and price paid to them was in fact gone into in detail by Assessing Officer during course of scrutiny assessment proceedings, subsequent reopening on very ground could be said to be a mere change of opinion by subsequent Assessing Officer which was not permissible.
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5.5 We observe that property in question which was situated at Milton Apartments Mumbai was rented upto assessment year 2008-09. For assessment 2008-09, the said property was rented for a sum of � 79,782/- and assessment order for AY 2008-09 u/s 143(3) of the Act was also passed including the above rented income. For the subsequent assessment years namely AY 2009-10 and AY 2010-11, no rental income was declared by the assessee in the return of income and order was passed under section 143(1) of the Act and the Department had accepted the assessee’s stand that there was no rental income earned by the assessee from the said property situated in Milton apartments. For the impugned assessment year AY 2011-12, no rental income was declared on the said property in the return of income, which was the same situation as was prevailing for the previous two years as well. During the impugned year, the property in question was sold by the assessee and the income from LTCG on sale of said property came for consideration before the AO. Details were called for by the AO during the course of assessment and an addition of � 89,35,392/- was made as LTCG on sale of the impugned property. Therefore, from the facts before us, it is evident that no new/fresh information or material came into the possession of the assessing officer necessitating him to initiate reassessment proceedings under section 147 of the Act. All the information on the basis of which reassessment proceedings have been initiated by AO was within his knowledge at the time of passing of original assessment order. Therefore, in our view, the assessing officer has initiated reassessment proceedings on reconsideration of the same facts which prevailed during the course of original assessment. No new facts/materials/information was discovered which led to the belief that income had escaped assessment, which was not
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in the knowledge of the assessing officer at the time of original assessment. Accordingly, we are of the considered view, that the re-assessment proceedings were on a mere “change of opinion” and the Ld. Assessing Officer is seeking a review of his earlier order vide the present reassessment proceedings. Therefore, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in confirming the additions made by the Ld. Assessing officer in the reassessment proceedings.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 29-07-2022
Sd/- Sd/- (P.M. JAGTAP) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 29/07/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद