Original assessment under Section 143(1) do not involve any scrutiny or formation of opinion: Reassessment cannot be considered as Change of Opinion – ITAT Ahmedabad

 

ITAT Ahmedabad in the case of Shri Sunny Tarunkumar Doshi vs. ITO, ITA No. 288/Ahd/2021 Date: February 14, 2025 has held that Original assessment under Section 143(1) do not involve any scrutiny or formation of opinion. In such a case, reassessment cannot be considered as Change of Opinion and so reassessment proceeding is valid and legal.

 Let us have a Short Overview of the case:

The assessee, engaged in commission work and chemical trading, filed his original return on 18.09.2014, declaring income of ₹1,91,250..The case was processed under Section 143(1), and no scrutiny was conducted.

The Revenue later found that the assessee had jointly purchased agricultural land at Village Ukhrala, Bhavnagar, through two registered sale deeds dated 08.07.2013 and 25.09.2013, for a total of ₹1,38,98,500 (assessee’s 50% share: ₹69,49,250).This land was not disclosed in the assessee’s Balance Sheet.

The AO, after obtaining due approval, reopened the assessment under Section 147 by issuing a Section 148 notice on 31.03.2019.

In reassessment, an addition of ₹69,49,250 was made under Section 56(2)(vii)(b) as purchase of property without consideration and Section 69A as unexplained investments.

CIT(A) Appeal:

The CIT(A) upheld the reassessment, rejecting the assessee’s appeal.

ITAT Proceedings:
Arguments by Assessee:
The assessee argued that no payment was made for the land, and both the co-purchaser and seller confirmed non-payment.

Since the original assessment was under Section 143(1), reopening was invalid as it constituted a change of opinion

ITAT Decision
1. Reopening of Assessment under Section 147 – Valid
No Change of Opinion (Kelvinator Principle Not Applicable)

ITAT rejected the assessee’s argument of change of opinion, stating that the original assessment was under Section 143(1), which involves no scrutiny or formation of opinion.

Since the issue of land purchase was never examined, reopening was based on new material.

Thus, Kelvinator’s ruling does not apply Jet Airways & Ranbaxy Principles (Reassessment Must Lead to Addition on Recorded Reason) – Not Applicable

The ITAT distinguished Jet Airways, Ranbaxy, and Mohmed Juned Dadani, stating that in this case, the AO made an addition on the same issue for which reassessment was initiated (undisclosed property under Section 56(2)(vii)(b))

These cases apply only when reassessment is used to make new additions unrelated to the recorded reason, which is not the situation here.

Department Justified in Reopening
ITAT noted that since the land purchase was not reported in the assessee’s income or Balance Sheet, the AO was correct in reopening the case.
The assessment under Section 143(1) does not involve verification, and all aspects should have been considered at that stage.

2. Addition under Section 56(2)(vii)(b) – Justified
No evidence of sale deed cancellation was provided.
Stamp duty was paid and not refunded, indicating the transaction remained valid.
Confirmation from the co-purchaser was insufficient; confirmation from the seller was also required.
Since the assessee acquired property without consideration, Section 56(2)(vii)(b) was applicable, and the AO rightly made the addition.

The Copy of the Appellate is as under:

1739518785-5G57Ks-1-TO