Validity of Reassessment due to Change of opinion in Absence of any new material

Since neither from reasons nor from any other material on record, it could be gathered that there was any failure on the part of the assessee to disclose truly and fully all-material facts, reopening of assessee’s assessment on ground that she had not disclosed capital gain in her return of income filed, could not be held justified.

Assessee’s assessment was reopened on ground that she had not disclosed the capital gain in her return of income filed. Thus, there was undisclosed capital gain on sale of the immovable property. Held: The entire issue was examined by AO in the original scrutiny assessment. Any attempt on his part now to reexamine the issue would amount to change of opinion. Further, neither from the reasons nor from any other material on record, it could be gathered that there was any failure on the part of assessee to disclose truly and fully all material facts. Hence, reopening of assessment was wholly impermissible in law.

Decision: In assessee’s favour.

IN THE GUJARAT HIGH COURT

AKIL KURESHI & B.N. KARIA, JJ.

Kalpana Chimanlal Shah v. ITO

R/Special Civil Application No. 5670 of 2018

9 May, 2018

Petitioner by: S.N. Divatia, Advocate

Respondent by: Mauna M. Bhatt, Advocate

Akil Kureshi, J.

Petitioner has challenged notice dated 6-10-2018 issued by the respondent-assessing officer for reopening the petitioner’s assessment for assessment year 2011-12.

Brief facts are as under :–

Petitioner is an individual. Her source of income is income from salary. For assessment year 2011-12, the petitioner had filed return of income declaring gross total income at Rs. 2,52,334. In such return, the petitioner had disclosed sale of one immovable property in which she was one of the co-owners. After taking indexed cost of acquisition, the petitioner had shown capital loss of Rs. 23,819. Such return was revised by the petitioner, reducing the declared loss to Rs. 17,868. This was on the basis that in the original return, the petitioner had computed capital gain considering her one sixth share in the property. In the revised return, she corrected it to her share being one eighth, hence, the revised return.

The return filed by the petitioner was taken in scrutiny by the assessing officer during which he raised multiple queries; including with respect to various disclosures of negative capital gain. In a letter dated 6-12-2012, the assessing officer inter alia asked for a copy of purchase deed and sale deed of the property in question with calculation of long-term/short-term capital gain; if any. In response to such letter, the petitioner under letter dated 30-10-2012, supplied necessary copies of the documents. She additionally stated as under :–

“[d] Return of income was filed in your Ward on 30-2-2012 vide receipt no. 1341300163 in which 1/6th profit on share of property is disclosed. Copy of valuation report obtained from approved valuer is also enclosed to prove value of the property as on 1-4-1981.”

Under such letter, thus, the petitioner supplied copies of documents demanded by the assessing officer and also provided further information in relation to computation of capital gain. She also placed on record, the valuation report obtained from approved valuer of the value of property as on 1-4-1981.

It was after such detailed scrutiny, the assessing officer passed an order of assessment on 31-12-2012 in which he did not disturb the petitioner’s declaration of the capital gain. To reopen such assessment, the assessing officer issued impugned notice. In order to do so, he had recorded the following reasons :–

“1. As per the information received from the office of the Income Tax Officer, Ward 2[2](3), Ahmedabad vide its letter dated 9-6-2015 alongwith copy of DVO report vide letter No. 6[7]/AVOIII/20314/810 dated 31-1-2014, received by this Office on 11-6-2015. As per the information, during the course of assessment proceedings in the case of Shri Maitri Sujal Shah [PAN: AAFQPS 3672F] for the year under consideration, the assessee along with seven others have sold an immovable property located, bearing TP Scheme No. 3, Final Plot No. 54 at Plot No. 8A, Shalibhadra Society, Near Navrangpura Railway Crossing, Usmanpura, Ahmedabad. On the basis of FMV determined by the Registered Valuer the LTCG worked out as per AVO’s valuation report at Rs. 39,58,381 out of which the shares of the assessee @ of 12.50% comes to Rs. 4,94,798 is undisclosed capital gain. Thus, the amount of Rs. 4,94,798 will be treated as undisclosed capital gain.

2. As the assessee has filed her return of income declaring total income at Rs. 1,65,450, i.e., income from salary and income from other sources for the year under consideration. As per the assessee he has not disclosed the capital gain in her return of income field thus there is undisclosed capital gain of Rs. 4,94,798 on sale of the above property for assessment year 2011-12.

3. In view of the above facts and on the basis of information available with this office, I have reason to believe that income chargeable to tax to the extent of Rs. 4,94,798 for the assessment year 2013-14 has escaped the assessment within the meaning of explanation 2(a) of section 147 of the Income Tax Act, 1961. I am, therefore, satisfied that the assessee has not fully and truly disclosed his income for the assessment year under reference, and this is a fit case for reopening the assessment under the provisions of section 147 of the Income Tax Act, 1961.”

The petitioner raised objections to the notice of reopening. When such objections were rejected, she filed the present petition.

Having heard learned advocates for the parties and having perused the documents on record, what we gather is that the return of the petitioner for assessment year 2011-12 was taken in scrutiny. The assessing officer examined the petitioner’s declaration of sale of immovable property and resultant loss, which she claimed. The assessing officer called for the purchase and sale deeds as also supporting evidence for computation of the capital gain. The assessee produced such documents and the approved valuer’s report assessing the value of property as on 1-4-1981. The assessing officer being satisfied with such material, made no additions in the order of assessment. The impugned notice was issued beyond the period of four years from the end of relevant assessment year. Such notice must be quashed on the ground of change of opinion as well as no failure on the part of the assessee to disclose truly and fully all material facts. As noted, the entire issue was examined by the assessing officer in the original scrutiny assessment. Any attempt on his part now to reexamine the issue would amount to change of opinion. Further, neither from the reasons nor from any other material on record, we could gather that there is any failure on the part of the assessee to disclose truly and fully all material facts. The petitioner had disclosed the sale of land; her share in the property and also presented her computation of capital gain arising out of such transaction. If the assessing officer was of the opinion that such computation was not correct, he could have disputed the same in the manner prescribed under the law. While framing the assessment, he neither disputed computation nor the report of approved valuer presented by the petitioner. He now desires to reopen the assessment on the ground that in case of a co-sharer of the same property, as the assessing officer had disputed the value and referred the question to DVO and on the basis of valuation so presented, he computed the capital gain. The present respondent, i.e., the assessing officer of the petitioner now wishes to adopt such figures in case of the petitioner and desires to project one eighth of the value so adopted, as her receipts from the sale of property and for he wishes to reopen the assessment, which is wholly impermissible.

In the result, petition is allowed. Impugned notice dated 6-10-2017 issued by the respondent-assessing officer is hereby quashed and set aside.

Petition stands disposed of accordingly.