ADHI KUMARA GURU,CHENNAI vs. DCIT, NCC-22(1), CHENNAI
Facts
The assessee claimed exemption under section 54F for AY 2014-15. The assessment was reopened twice. The first reopening was to examine the section 54F claim, and the second was based on the same material, leading to a change of opinion.
Held
The Tribunal held that reopening of assessment cannot be based on a change of opinion. Since the AO had already applied his mind and consciously decided on the issue in the previous proceedings, the second reopening was considered a review and thus invalid.
Key Issues
Whether the second reopening of assessment was validly initiated or if it was based on a mere change of opinion, rendering it impermissible.
Sections Cited
147, 148, 54F, 143(3), 54B, 54C, 54D, 54G, 54GA, 54F(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: HON’BLE SHRI MANU KUMAR GIRI & HON’BLE SHRI AMITABH SHUKLA
आदेश / O R D E R PER MANU KUMAR GIRI, JM:
The present appeal has been preferred by the assessee against the order passed by the ld.CIT(A) on 03.12.2024, whereby the
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru reassessment order dated 13.12.2019, passed reassessment order dated 13.12.2019, passed u/s. 143(3) read with 143(3) read with section 147 of the Income Tax Act, 1961 section 147 of the Income Tax Act, 1961 [‘ACT’ in short] [‘ACT’ in short], for the Assessment Year 2014 Assessment Year 2014-15, was confirmed.
Briefly stated, the stated, the assessee is an individual who filed his Return is an individual who filed his Return of Income for the relevant assessment year on 19.02.2015. During of Income for the relevant assessment year on 19.02.2015. During of Income for the relevant assessment year on 19.02.2015. During the year under consideration, the the year under consideration, the assessee sold certain immovable sold certain immovable properties and derived Long Term Capital Gains amounting to properties and derived Long Term Capital Gains amounting to properties and derived Long Term Capital Gains amounting to Rs.82,46,084/-. The . The assessee had earlier claimed exemption in had earlier claimed exemption in respect of capital gains arising from the sale of vacant land on respect of capital gains arising from the sale of vacant land on respect of capital gains arising from the sale of vacant land on 14.09.2012 in his return for A.Y. 2013 14.09.2012 in his return for A.Y. 2013-14. As the newly acquired 14. As the newly acquired property was sold within a period of three years, the exemption property was sold within a period of three years, the exemption property was sold within a period of three years, the exemption earlier claimed amounting to r claimed amounting to Rs.20,08,500/- was offered to tax. was offered to tax. Consequently, the total Long Consequently, the total Long Term Capital Gains for the year Term Capital Gains for the year aggregated to Rs.1,02,54,584/ 1,02,54,584/-. Against this, the assessee assessee claimed exemption u/s. 54F of the Act in respect of the property proposed to 54F of the Act in respect of the property proposed to 54F of the Act in respect of the property proposed to be constructed. The computation of Long Term Capital Gains e constructed. The computation of Long Term Capital Gains e constructed. The computation of Long Term Capital Gains for AY 2014-15 has been placed at page 7 of the paper book. has been placed at page 7 of the paper book.
The return was selected for limited scrutiny The return was selected for limited scrutiny u/s. 143(2) of the Act, inter alia, to verify the issue of “large deduction claimed Act, inter alia, to verify the issue of “large deduction claimed Act, inter alia, to verify the issue of “large deduction claimed u/s.s 54B, 54C, 54D, 54G, and 54GA.” A scrutiny assessment order was 54B, 54C, 54D, 54G, and 54GA.” A scrutiny assessment order was 54B, 54C, 54D, 54G, and 54GA.” A scrutiny assessment order was subsequently passed on 28.11.2016, assessing the total income at subsequently passed on 28.11.2016, assessing the total income at subsequently passed on 28.11.2016, assessing the total income at Rs.61,77,060/- after disallowing the cost of improvement of after disallowing the cost of improvement of after disallowing the cost of improvement of Rs.15,00,000/- claimed by the claimed by the assessee while computing while computing ‘Short Term Capital Gains’.
Thereafter, the assessment was reopened for the first time 4. Thereafter, the assessment was reopened for the first time 4. Thereafter, the assessment was reopened for the first time through issuance of a notice through issuance of a notice u/s. 148 of the Act dated 27.03.2018. 148 of the Act dated 27.03.2018.
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru The reasons recorded for reopening the assessment are placed at The reasons recorded for reopening the assessment are placed at The reasons recorded for reopening the assessment are placed at page 15 of the paper book page 15 of the paper book (as provided by the letter dated (as provided by the letter dated 08.05.2918) and are reproduced hereunder: and are reproduced hereunder:
It is seen from the return of income filed for the assessment year 2014 It is seen from the return of income filed for the assessment year 2014 It is seen from the return of income filed for the assessment year 2014- 15, that there is a claim of exemption u/s.54F of the Income 15, that there is a claim of exemption u/s.54F of the Income 15, that there is a claim of exemption u/s.54F of the Income-tax Act, 1961 amounting to Rs.1,02,54,584/ 1961 amounting to Rs.1,02,54,584/- under the head 'Income from Long er the head 'Income from Long Term Capital Gain'. It is also seen that rental income under the head Term Capital Gain'. It is also seen that rental income under the head Term Capital Gain'. It is also seen that rental income under the head 'income from house property' in respect of 3 properties other than a self 'income from house property' in respect of 3 properties other than a self 'income from house property' in respect of 3 properties other than a self- occupied property is offered in occupied property is offered in the return of income. As per the conditions laid the return of income. As per the conditions laid down in section 54F of down in section 54F of the Act, the claim of exemption u/s.54F of the Act in respect of the the Act, the claim of exemption u/s.54F of the Act in respect of the the Act, the claim of exemption u/s.54F of the Act in respect of the property sold during the financial year 2013 property sold during the financial year 2013-14, is not proper, as the 14, is not proper, as the assessee owns more than one residential property on the date of transfer. assessee owns more than one residential property on the date of transfer. assessee owns more than one residential property on the date of transfer. As there is incorrect allowance of exemption to the extent of Rs. 102.54 ct allowance of exemption to the extent of Rs. 102.54 ct allowance of exemption to the extent of Rs. 102.54 lakh which has resulted in short levy or tax demand of Rs.23.24 lakh lakh which has resulted in short levy or tax demand of Rs.23.24 lakh lakh which has resulted in short levy or tax demand of Rs.23.24 lakh excluding interest, the same needs to be disallowed in relation to excluding interest, the same needs to be disallowed in relation to excluding interest, the same needs to be disallowed in relation to A.Y.2013-14.
A reassessment order was passed on 12.12.2018, w A reassessment order was passed on 12.12.2018, w A reassessment order was passed on 12.12.2018, wherein the total income was once again assessed at total income was once again assessed at Rs.61,77,060/ 61,77,060/-, being the same income as determined earlier under the scrutiny assessment same income as determined earlier under the scrutiny assessment same income as determined earlier under the scrutiny assessment order dated 28.11.2016. order dated 28.11.2016.
Subsequently, within a month, the assessment was reopened Subsequently, within a month, the assessment was reopened Subsequently, within a month, the assessment was reopened for the second time through for the second time through issuance of a notice u/s. 148 of the Act 148 of the Act dated 11.01.2019. The reasons recorded for this reopening are dated 11.01.2019. The reasons recorded for this reopening are dated 11.01.2019. The reasons recorded for this reopening are placed at page 25 of the paper book, and the observations of the placed at page 25 of the paper book, and the observations of the placed at page 25 of the paper book, and the observations of the AO in paragraph 5, as well as the basis for forming the “reasons to in paragraph 5, as well as the basis for forming the “reasons to in paragraph 5, as well as the basis for forming the “reasons to believe” in paragraph 6 thereof, are reproduced hereunder h 6 thereof, are reproduced hereunder h 6 thereof, are reproduced hereunder:
Enquiries made by the AO as sequel to information Enquiries made by the AO as sequel to information Enquiries made by the AO as sequel to information collected/received: E collected/received: Enquriries are not necessary since the iries are not necessary since the escapement could be established based on the materials available could be established based on the materials available could be established based on the materials available on record.
Findings of the AO: Findings of the AO: It is observed from the records that the It is observed from the records that the property situated at Old no.22. New no.694/1, Block property situated at Old no.22. New no.694/1, Block-RA. Puram on RA. Puram on which deduction u/s.54F was claimed during the A.Y.2013 which deduction u/s.54F was claimed during the A.Y.2013-14 was 14 was
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru sold on 19.06.2013. Further the property situated at old No. 167, sold on 19.06.2013. Further the property situated at old No. 167, sold on 19.06.2013. Further the property situated at old No. 167, New No.28, Old Perung New No.28, Old Perungalathur, S.No.443/3, Plot No.485 on which alathur, S.No.443/3, Plot No.485 on which capital gains come accrued during the year was also sold on capital gains come accrued during the year was also sold on capital gains come accrued during the year was also sold on 19.06.2013. Since the two properties were sold on the same date, it 19.06.2013. Since the two properties were sold on the same date, it 19.06.2013. Since the two properties were sold on the same date, it not be ascertained which property was sold earlier and which was not be ascertained which property was sold earlier and which was not be ascertained which property was sold earlier and which was sold later. Further, the assessee cannot claim deductions u/s 54F the assessee cannot claim deductions u/s 54F the assessee cannot claim deductions u/s 54F second time on the deemed capital gains accrued u/s.54F(3) on second time on the deemed capital gains accrued u/s.54F(3) on second time on the deemed capital gains accrued u/s.54F(3) on account of selling the property on which deduction u/s.54F was account of selling the property on which deduction u/s.54F was account of selling the property on which deduction u/s.54F was claimed earlier. It is also observed from the records that the assessee offered short It is also observed from the records that the assessee offered short It is also observed from the records that the assessee offered short term capital gains on account of selling the property purchased in term capital gains on account of selling the property purchased in term capital gains on account of selling the property purchased in order to claim deduction u/s.54F for the A.Y.2013 order to claim deduction u/s.54F for the A.Y.2013-14. From the 14. From the perusal of the computation of STCG, it is observed that the perusal of the computation of STCG, it is observed that the perusal of the computation of STCG, it is observed that the assessee claimed cost of improvement of Rs.15,00,000/ assessee claimed cost of improvement of Rs.15,00,000/-. However, However, no evidence, whatsoever, is furnished to substantiate the said o evidence, whatsoever, is furnished to substantiate the said o evidence, whatsoever, is furnished to substantiate the said improvement. 6. Basis of forming reasons to believe and details of escapement of Basis of forming reasons to believe and details of escapement of Basis of forming reasons to believe and details of escapement of income: The details with regards to sale consideration of the capital income: The details with regards to sale consideration of the capital income: The details with regards to sale consideration of the capital gains on which deduction u/s 54F was claimed in the A.Y.2013 gains on which deduction u/s 54F was claimed in the A.Y.2013 gains on which deduction u/s 54F was claimed in the A.Y.2013-14 and offered during the year under consideration (for the and offered during the year under consideration (for the A.Y 2014 A.Y 2014- 15) are not furnished by the assessee. As such the deduction 15) are not furnished by the assessee. As such the deduction 15) are not furnished by the assessee. As such the deduction claimed uls 54F on the total amount of Rs. 1,02,54,584/ claimed uls 54F on the total amount of Rs. 1,02,54,584/- was not was not correct. Further, the capital gains ac correct. Further, the capital gains accrues to the assessee for the rues to the assessee for the year under consideration on 19.06.2013 on the date on year under consideration on 19.06.2013 on the date on which the which the property was sold. But on that day, he owns one more property on property was sold. But on that day, he owns one more property on property was sold. But on that day, he owns one more property on which deduction u/s 54F claimed for the A.Y.2013 which deduction u/s 54F claimed for the A.Y.2013-14. Surprisingly, 14. Surprisingly, this property was also sold on the same date i. was also sold on the same date i.e. on 19.06.2013. on 19.06.2013. Since it is not known which property was sold ea Since it is not known which property was sold earlier and which was er and which was sold later, it may concluded that the assessee owns more than one may concluded that the assessee owns more than one may concluded that the assessee owns more than one residential property as on 19.06.2013. As such, the assessee is not residential property as on 19.06.2013. As such, the assessee is not residential property as on 19.06.2013. As such, the assessee is not eligible for claiming deduction u/s.54F. Besides, the income offered eligible for claiming deduction u/s.54F. Besides, the income offered eligible for claiming deduction u/s.54F. Besides, the income offered under capital gains includes dee under capital gains includes deemed income u/s.54F(3) arisen on income u/s.54F(3) arisen on account of selling the property on which deduction uls.54F was account of selling the property on which deduction uls.54F was account of selling the property on which deduction uls.54F was claimed for the A.Y.3 claimed for the A.Y.3-14. The deemed capital gains income is not 14. The deemed capital gains income is not eligible for deduction u/s.54F again. eligible for deduction u/s.54F again. The cost of improvement of Rs.15,00,000/ The cost of improvement of Rs.15,00,000/- claimed by the claimed by the assessee against STCG offered was not substantia ainst STCG offered was not substantiated. Therefore, I ted. Therefore, I have reason to believe that income chargeable to tax has escaped have reason to believe that income chargeable to tax has escaped have reason to believe that income chargeable to tax has escaped assessment.
In the assessment order, the In the assessment order, the AO (AO) observed that the (AO) observed that the assessee had sold, on had sold, on 19.06.2013, the property in respect of which 19.06.2013, the property in respect of which deduction u/s.54F had been claimed in A.Y.2013 54F had been claimed in A.Y.2013-14. It was further 14. It was further noted that the property giving rise to capital gains during the year noted that the property giving rise to capital gains during the year noted that the property giving rise to capital gains during the year
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru under consideration was also sold on the same date, i.e., under consideration was also sold on the same date, i.e., under consideration was also sold on the same date, i.e., 19.06.2013. Since the AO was unable to determine whether the 19.06.2013. Since the AO was unable to determine whether the 19.06.2013. Since the AO was unable to determine whether the assessee had sold or purchased the property first on that date, he had sold or purchased the property first on that date, he had sold or purchased the property first on that date, he concluded that the assessee assessee owned more than one residential house owned more than one residential house on 19.06.2013 and was therefore not eligible to claim deduction 9.06.2013 and was therefore not eligible to claim deduction 9.06.2013 and was therefore not eligible to claim deduction u/s.54F of the Act. The AO further held that deduction 54F of the Act. The AO further held that deduction 54F of the Act. The AO further held that deduction u/s.54F could not be claimed in respect of a property for which such deduction had not be claimed in respect of a property for which such deduction had not be claimed in respect of a property for which such deduction had already been claimed in an earlier year. Accordingly, the already been claimed in an earlier year. Accordingly, the already been claimed in an earlier year. Accordingly, the AO proceeded to disallow the exemption of proceeded to disallow the exemption of Rs.1,02,54,584/ 1,02,54,584/- claimed u/s.54F of the Act.
In appeal, the assessee assessee, in addition to contesting the matter , in addition to contesting the matter on merits, raised a specific ground challenging the validity of the on merits, raised a specific ground challenging the validity of the on merits, raised a specific ground challenging the validity of the reopening of the assessment on t reopening of the assessment on the ground that it was based purely he ground that it was based purely on a change of opinion, which is impermissible in law. However, the on a change of opinion, which is impermissible in law. However, the on a change of opinion, which is impermissible in law. However, the ld.CIT(A) rejected this contention, holding that the original scrutiny CIT(A) rejected this contention, holding that the original scrutiny CIT(A) rejected this contention, holding that the original scrutiny assessment was a limited scrutiny and did not involve examination assessment was a limited scrutiny and did not involve examination assessment was a limited scrutiny and did not involve examination of the deduction claimed claimed u/s.54F of the Act. He further observed 54F of the Act. He further observed that it was not evident whether the first reassessment proceedings that it was not evident whether the first reassessment proceedings that it was not evident whether the first reassessment proceedings were initiated to examine the claim of deduction were initiated to examine the claim of deduction u/s. u/s.54F. On this basis, the ld.CIT(A) dismissed the ground and upheld the reopening CIT(A) dismissed the ground and upheld the reopening CIT(A) dismissed the ground and upheld the reopening of the assessment.
The assessee now submits that the reopening of the assessment now submits that the reopening of the assessment now submits that the reopening of the assessment is illegal, as it has been carried out solely on account of a change of is illegal, as it has been carried out solely on account of a change of is illegal, as it has been carried out solely on account of a change of opinion. It is contended that even during the original scrutiny opinion. It is contended that even during the original scrutiny opinion. It is contended that even during the original scrutiny assessment, various deductions claimed by assessment, various deductions claimed by the assessee assessee were examined. Although the case was selected for limited scrutiny, the examined. Although the case was selected for limited scrutiny, the examined. Although the case was selected for limited scrutiny, the AO made an addition of AO made an addition of Rs.15,00,000/- to the assessee assessee’s Short
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru Term Capital Gains by disallowing the cost of improvement, thereby Term Capital Gains by disallowing the cost of improvement, thereby Term Capital Gains by disallowing the cost of improvement, thereby demonstrating application of mind. Furthe demonstrating application of mind. Further, from the reasons r, from the reasons recorded for the first reopening, it is evident that the assessment recorded for the first reopening, it is evident that the assessment recorded for the first reopening, it is evident that the assessment was reopened specifically to examine the claim of deduction was reopened specifically to examine the claim of deduction was reopened specifically to examine the claim of deduction u/s.54F of the Act. The AO had expressly recorded that the deduction was of the Act. The AO had expressly recorded that the deduction was of the Act. The AO had expressly recorded that the deduction was not allowable on the ground that th not allowable on the ground that the assessee owned more than one owned more than one residential house on the date of transfer. This issue was duly residential house on the date of transfer. This issue was duly residential house on the date of transfer. This issue was duly examined during the first reassessment proceedings, which examined during the first reassessment proceedings, which examined during the first reassessment proceedings, which culminated without any addition, as the deduction culminated without any addition, as the deduction culminated without any addition, as the deduction u/s.54F was ultimately allowed. In effect, the reasses ultimately allowed. In effect, the reassessment proceedings were sment proceedings were dropped. This clearly establishes that the first reopening was dropped. This clearly establishes that the first reopening was dropped. This clearly establishes that the first reopening was initiated specifically to examine the claim initiated specifically to examine the claim u/s.54F, rendering the 54F, rendering the observations of the ld. ld.CIT(A) incorrect.
The assessee further submits that the reasons recorded for the further submits that the reasons recorded for the further submits that the reasons recorded for the second reopening also pertain to examination of the same claim of second reopening also pertain to examination of the same claim of second reopening also pertain to examination of the same claim of deduction u/s.54F, based on the very same material that was 54F, based on the very same material that was 54F, based on the very same material that was already available with the AO during the earlier assessment and already available with the AO during the earlier assessment and already available with the AO during the earlier assessment and reassessment proceedings. In fact, in the reasons recorded for the oceedings. In fact, in the reasons recorded for the oceedings. In fact, in the reasons recorded for the second reopening, the AO himself acknowledged that the relevant second reopening, the AO himself acknowledged that the relevant second reopening, the AO himself acknowledged that the relevant material was already on record. It is thus contended that no new material was already on record. It is thus contended that no new material was already on record. It is thus contended that no new tangible material had come into the possession of the AO prior to tangible material had come into the possession of the AO prior to tangible material had come into the possession of the AO prior to initiating the second reopening. g the second reopening. Reliance is placed on the judgment Reliance is placed on the judgment of the Hon’ble Supreme Court in of the Hon’ble Supreme Court in Commissioner of Income Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC), to submit that [2010] 320 ITR 561 (SC), to submit that the second reopening, being based on a mere change of opinion, the second reopening, being based on a mere change of opinion, the second reopening, being based on a mere change of opinion, is unsustainable in law and liable to be quashed. The AO had already unsustainable in law and liable to be quashed. The AO had already unsustainable in law and liable to be quashed. The AO had already applied his mind to the material on record during the earlier two applied his mind to the material on record during the earlier two applied his mind to the material on record during the earlier two proceedings and had consciously allowed the deduction claimed proceedings and had consciously allowed the deduction claimed proceedings and had consciously allowed the deduction claimed
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru u/s.54F of the Act. Having examined the issue and formed an 54F of the Act. Having examined the issue and formed an 54F of the Act. Having examined the issue and formed an opinion that the deduction was allowable, the AO passed the first opinion that the deduction was allowable, the AO passed the first opinion that the deduction was allowable, the AO passed the first reassessment order granting the deduction in full. Since the AO has reassessment order granting the deduction in full. Since the AO has reassessment order granting the deduction in full. Since the AO has no power to review his own order, the present reassessment, which no power to review his own order, the present reassessment, which no power to review his own order, the present reassessment, which amounts to a review of the earlier reassessment order, amounts to a review of the earlier reassessment order, amounts to a review of the earlier reassessment order, is without jurisdiction and deserves to be set aside. jurisdiction and deserves to be set aside.
The learned Departmental Representative ( The learned Departmental Representative (ld. DR), on the d. DR), on the other hand, supported the order of the other hand, supported the order of the ld.CIT(A) and submitted that CIT(A) and submitted that the reopening of the assessment was valid. She contended that the reopening of the assessment was valid. She contended that the reopening of the assessment was valid. She contended that although various deductions were examined during the limited various deductions were examined during the limited various deductions were examined during the limited scrutiny assessment, the deduction claimed scrutiny assessment, the deduction claimed u/s.54F of the Act was 54F of the Act was not among them, and therefore no opinion was formed by the AO on not among them, and therefore no opinion was formed by the AO on not among them, and therefore no opinion was formed by the AO on this issue at that stage. Further, during the first reassessment this issue at that stage. Further, during the first reassessment this issue at that stage. Further, during the first reassessment proceedings, the AO examined the claim ings, the AO examined the claim u/s.54F only from the 54F only from the limited perspective of whether the limited perspective of whether the assessee owned more than one owned more than one residential house on the date of transfer. According to her, the residential house on the date of transfer. According to her, the residential house on the date of transfer. According to her, the examination was confined solely to this aspect. examination was confined solely to this aspect. Referring to the Referring to the reasons recorded for the second reopening, the Ld. DR submitted recorded for the second reopening, the Ld. DR submitted recorded for the second reopening, the Ld. DR submitted that the AO reopened the assessment on the ground that the that the AO reopened the assessment on the ground that the that the AO reopened the assessment on the ground that the assessee had claimed deduction had claimed deduction u/s.54F in respect of capital gains 54F in respect of capital gains arising from a property for which deduction u arising from a property for which deduction u/s.54F had already 54F had already been claimed in A.Y.2013 ed in A.Y.2013-14. It was contended that the AO 14. It was contended that the AO reopened the assessment for the second time on the premise that reopened the assessment for the second time on the premise that reopened the assessment for the second time on the premise that deduction u/s.54F was not allowable on deemed income and 54F was not allowable on deemed income and 54F was not allowable on deemed income and therefore required disallowance. She accordingly argued that the therefore required disallowance. She accordingly argued that the therefore required disallowance. She accordingly argued that the reopening was valid an reopening was valid and did not amount to a change of opinion with d did not amount to a change of opinion with respect to the deduction claimed respect to the deduction claimed u/s.54F of the Act.
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru 12. After carefully considering the facts on record, the reasons After carefully considering the facts on record, the reasons After carefully considering the facts on record, the reasons recorded for reopening, the orders of the lower authorities, the rival recorded for reopening, the orders of the lower authorities, the rival recorded for reopening, the orders of the lower authorities, the rival submissions, paper books books and case law citations, we find that it is an undisputed fact that the assessee’s case for A.Y. 2014 an undisputed fact that the assessee’s case for A.Y. 2014 an undisputed fact that the assessee’s case for A.Y. 2014-15 was originally subjected to scrutiny assessment originally subjected to scrutiny assessment u/s. 143(3) of the Act. 143(3) of the Act. Subsequently, the assessment was reopened for the first time by Subsequently, the assessment was reopened for the first time by Subsequently, the assessment was reopened for the first time by issuance of notice u/s. u/s. 148 dated 27.03.2018, specifically to 148 dated 27.03.2018, specifically to examine the allowability of exemption claimed examine the allowability of exemption claimed u/s. 54F of the Act on 54F of the Act on the ground that the assessee allegedly owned more than one the ground that the assessee allegedly owned more than one the ground that the assessee allegedly owned more than one residential house on the date of transfer. This issue was thus residential house on the date of transfer. This issue was thus residential house on the date of transfer. This issue was thus squarely before the AO AO during the first reassessment proceedings. during the first reassessment proceedings. The first reassessment culminated in an order dated 12.12.2018, The first reassessment culminated in an order dated 12.12.2018, The first reassessment culminated in an order dated 12.12.2018, wherein the AO, after examining the material available on record, , after examining the material available on record, , after examining the material available on record, chose not to make any addition or disallowance in respect of the chose not to make any addition or disallowance in respect of the chose not to make any addition or disallowance in respect of the claim u/s. 54F and assessed the income at the same figure as 54F and assessed the income at the same figure as 54F and assessed the income at the same figure as determined in the original scrutiny assessment. This clearly determined in the original scrutiny assessment. This clearly determined in the original scrutiny assessment. This clearly indicates that the AO had applied his mind to the issue of deduction had applied his mind to the issue of deduction u/s. 54F and had consciously accepted the assessee’s claim. 54F and had consciously accepted the assessee’s claim. 54F and had consciously accepted the assessee’s claim. The second reopening of the assessment, initiated within a short span by opening of the assessment, initiated within a short span by opening of the assessment, initiated within a short span by notice dated 11.01.2019, is based entirely on the very same set of notice dated 11.01.2019, is based entirely on the very same set of notice dated 11.01.2019, is based entirely on the very same set of facts and materials which were already available on record and facts and materials which were already available on record and facts and materials which were already available on record and which had been considered by the which had been considered by the AO during the original during the original assessment as well as the first reassessment proceedings. In fact, as well as the first reassessment proceedings. In fact, as well as the first reassessment proceedings. In fact, the reasons recorded for the second reopening themselves the reasons recorded for the second reopening themselves the reasons recorded for the second reopening themselves acknowledge that the escapement of income was sought to be acknowledge that the escapement of income was sought to be acknowledge that the escapement of income was sought to be inferred from the existing records and that no further enquiry was inferred from the existing records and that no further enquiry was inferred from the existing records and that no further enquiry was considered necessary. sary. The grounds cited for the second reopening, The grounds cited for the second reopening, namely, (i) that deduction namely, (i) that deduction u/s. 54F was allegedly claimed twice, and 54F was allegedly claimed twice, and
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru (ii) that deduction u/s. u/s. 54F was not allowable on deemed capital 54F was not allowable on deemed capital gains u/s. 54F(3), are only different facets of the same issue 54F(3), are only different facets of the same issue 54F(3), are only different facets of the same issue relating to the allowability of exemption to the allowability of exemption u/s. 54F. These aspects 54F. These aspects could very well have been, and in substance were, examined during could very well have been, and in substance were, examined during could very well have been, and in substance were, examined during the earlier reassessment proceedings. No new tangible material the earlier reassessment proceedings. No new tangible material the earlier reassessment proceedings. No new tangible material came into the possession of the came into the possession of the AO subsequent to the completion of subsequent to the completion of the first reassessment so as to justify initiation of fresh proceedings. first reassessment so as to justify initiation of fresh proceedings. first reassessment so as to justify initiation of fresh proceedings. The Hon’ble Supreme Court in the case of The Hon’ble Supreme Court in the case of Commissioner of Income Commissioner of Income- tax, Delhi vs. Kelvinator of India Ltd. [2010] 187 Taxman 312 tax, Delhi vs. Kelvinator of India Ltd. [2010] 187 Taxman 312 tax, Delhi vs. Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC)/[2010] 320 ITR 561 (SC)/[2010] 228 CTR 488 (SC)[18 (SC)/[2010] 320 ITR 561 (SC)/[2010] 228 CTR 488 (SC)[18 (SC)/[2010] 320 ITR 561 (SC)/[2010] 228 CTR 488 (SC)[18-01- 2010] held as under:
On going through the changes, quoted above, made to section 4. On going through the changes, quoted above, made to section 4. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987 , re- opening could be done under above two conditions opening could be done under above two conditions opening could be done under above two conditions and fulfilment of the said conditions al and fulfilment of the said conditions alone conferred jurisdiction on one conferred jurisdiction on the Assessing Officer to make a back assessment, but in section the Assessing Officer to make a back assessment, but in section the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1 147 of the Act [with effect from 1-4-1989], they are given a go 1989], they are given a go-by and only one condition has remained, viz., that where the and only one condition has remained, viz., that where the and only one condition has remained, viz., that where the Assessing Officer has reason to belie Assessing Officer has reason to believe that income has escaped ve that income has escaped assessment, confers jurisdiction to re assessment, confers jurisdiction to re-open the assessment. open the assessment. Therefore, post 1- -4-1989 , power to reopen is much wider. 1989 , power to reopen is much wider. However, one needs to give a schematic interpretation to the However, one needs to give a schematic interpretation to the However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are af words "reason to believe" failing which, we are afraid, section 147 raid, section 147 would give arbitrary powers to the Assessing Officer to re would give arbitrary powers to the Assessing Officer to re would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which assessments on the basis of "mere change of opinion", which assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the cannot be per se reason to reopen. We must also keep in mind the cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and conceptual difference between power to review and power to re power to re- assess. The Assessing Officer has no power to review; he has the assess. The Assessing Officer has no power to review; he has the assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment power to reassess. But reassessment has to be based on fulfilment power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is condition and if the concept of "change of opinion" is condition and if the concept of "change of opinion" is removed, as contended on behalf of the Dep removed, as contended on behalf of the Department, then, in the artment, then, in the garb of re-opening the assessment, review would take place. One opening the assessment, review would take place. One opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in must treat the concept of "change of opinion" as an in-built test to built test to check abuse of power by the Assessing Officer. Hence, after 1 check abuse of power by the Assessing Officer. Hence, after 1 check abuse of power by the Assessing Officer. Hence, after 1-4- 1989 , Assessing Officer has power to 1989 , Assessing Officer has power to reopen, provided there is reopen, provided there is "tangible material" to come to the conclusion that there is "tangible material" to come to the conclusion that there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live escapement of income from assessment. Reasons must have a live escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from link with the formation of the belief. Our view gets support from link with the formation of the belief. Our view gets support from the changes made to section 147 of the A the changes made to section 147 of the Act, as quoted ct, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 ,
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru Parliament not only deleted the words "reason to believe" but also Parliament not only deleted the words "reason to believe" but also Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on inserted the word "opinion" in section 147 of the Act. However, on inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies receipt of representations from the Companies against omission of against omission of the words "reason to believe", Parliament re the words "reason to believe", Parliament re-introduced the said introduced the said expression and deleted the word "opinion" on the ground that it expression and deleted the word "opinion" on the ground that it expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote would vest arbitrary powers in the Assessing Officer. We quote would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circula hereinbelow the relevant portion of Circular No. 549 , dated 31 r No. 549 , dated 31-10- 1989, which reads as follows : 1989, which reads as follows :
"7.2 Amendment made by the Amending Act, 1989, to reintroduce "7.2 Amendment made by the Amending Act, 1989, to reintroduce "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. the expression 'reason to believe' in section 147. —A number of A number of representations were received against the omission of the words representations were received against the omission of the words representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'reason to believe' from section 147 and their substitution by the 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the 'opinion' of the Assessing Officer. It was pointed out that the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained meaning of the expression, 'reason to believe' had been explained meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and in a number of court rulings in the past and was well settled and in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers t its omission from section 147 would give arbitrary powers t its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of Assessing Officer to reopen past assessments on mere change of Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989 , has again opinion. To allay these fears, the Amending Act, 1989 , has again opinion. To allay these fears, the Amending Act, 1989 , has again amended section 147 to reintroduce the expression 'has reason to amended section 147 to reintroduce the expression 'has reason to amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be record believe' in place of the words 'for reasons to be recorded by him in ed by him in writing, is of the opinion'. Other provisions of the new section 147, writing, is of the opinion'. Other provisions of the new section 147, writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." [Emphasis supplied] however, remain the same." [Emphasis supplied]
For the aforestated reasons, we see no merit in these civil 5. For the aforestated reasons, we see no merit in these civil 5. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order appeals filed by the Department, hence, dismissed with no order appeals filed by the Department, hence, dismissed with no order as to costs.
In view of the settled legal position laid down by the Hon’ble In view of the settled legal position laid down by the Hon’ble In view of the settled legal position laid down by the Hon’ble Supreme Court in CIT v. Kelvinator of India Ltd. CIT v. Kelvinator of India Ltd. (320 ITR 561), (320 ITR 561), reassessment proceedings cannot be initiated merely on account of reassessment proceedings cannot be initiated merely on account of reassessment proceedings cannot be initiated merely on account of a change of opinion. Once the a change of opinion. Once the AO has applied his mind to an issue his mind to an issue and taken a conscious decision, he has no power to review the same and taken a conscious decision, he has no power to review the same and taken a conscious decision, he has no power to review the same under the guise of reopening the assessment. under the guise of reopening the assessment. In the present case, In the present case, the second reopening clearly amounts to a review of the earlier the second reopening clearly amounts to a review of the earlier the second reopening clearly amounts to a review of the earlier reassessment order, which is impermis reassessment order, which is impermissible in law. The action of the sible in law. The action of the AO lacks jurisdiction and is therefore invalid. lacks jurisdiction and is therefore invalid. Consequently, the Consequently, the reassessment order dated 13.12.2019 passed reassessment order dated 13.12.2019 passed u/s. 143(3) read with 143(3) read with section 147 of the Act is hereby section 147 of the Act is hereby quashed. Since the reassessment . Since the reassessment
ITA No.120/ ITA No.120/Chny/2025 Adhi Kumara Guru itself is held to be invalid itself is held to be invalid, we do not deem it necessary to adjudicate do not deem it necessary to adjudicate the issues raised on merits. the issues raised on merits.
In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed. In the result, the appeal filed by the assessee is allowed.
Order pronounced on 05th January, 2026 at Chennai. Order pronounced on 05 January, 2026 at Chennai.
Sd/- Sd/ Sd/- (अिमताभ शु�ा) (मनु कुमार कुमार िग�र) (Amitabh Shukla) (Amitabh Shukla) (Manu Kumar Giri) (Manu Kumar Giri) �ाियक सद� / Judicial Member लेखा सद#य Judicial Member लेखा लेखा लेखा सद#य सद#य /Accountant Member सद#य /Accountant Member चे%नई/Chennai, &दनांक/Dated: Dated: 05th January, 2026. EDN, Sr. PS आदेश क� �ितिल(प अ)े(षत/Copy to: Copy to: 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकर आयु�/CIT, Chennai 4. िवभागीय �ितिनिध/DR 5. गाड$ फाईल/GF
