By AJAY R. SINGH Advocate
[Affirmed DCIT vs.
Shankardas B. Pahajani [dated 13/09/2004 ; AY 1994-95 , Mum. ITAT]
Section 147 : Reassessment
– Audit objection- Reopening on basis of same set of facts available at time of
original assessment – change of opinion – reassessment was held to be invalid
During the
course of assessment, detailed letters were filed by the assessee giving
complete details of the transactions relating to the purchase and sale of flats
in a building known as ‘Tanhee Heights’ resulting in capital gains. Thus, the
same was subject of consideration leading to assessment order u/s. 143(3) of
the Act. On 15th May, 1998 a notice u/s. 148 of the Act was issued by the A.O seeking to reopen the assessment for
AY: 1994-95. The assessee objected to the re-opening of Assessment but the same
was not accepted. This resulted in assessment order passed u/s. 143(3) r/w section 147 of the Act and made addition.
On appeal, the CIT (A), allowed the
assessee’s appeal, holding that re-opening notice dated 15th May,
1998 is without jurisdiction.
Being aggrieved, Revenue preferred
appeal before ITAT. The Tribunal held that the exercise of re-opening the
assessment is without jurisdiction. This on the ground that, the entire issue
of capital gains on which the reopening notice was issued was the subject
matter of consideration during the regular assessment proceedings u/s. 143(3)
of the Act. This is evident from the letters of the assessee disclosing all
facts during the regular assessment proceedings. Therefore, it held it to be a
case of change of opinion on the part of the A.O and therefore, absence of any
reason to believe that income chargeable to tax has escaped assessment.
The Tribunal concluded that there
was absence of application of mind by the A.O and the reopening notice was
issued on borrowed satisfaction i.e. on the basis of audit objection. Therefore
re-opening notice to be without jurisdiction.
The Revenue contended that the
reopening notice dated 15th May, 1998 has been issued on account of
a recent decision of the Bombay High Court in Commissioner of Income-Tax vs.
Smt. Beena K. Jain, [1996] 217 ITR 363 (rendered on 23rd November,
1993). Thus, it is submitted that the reopening notice is valid in law and
the appeal deserves to be admitted.
The High Court held that, the
assessee had furnished all information in respect of the issue of capital gains
by letters during assessment proceedings. Therefore, the A.O had applied his
mind to the facts and the law while passing the order of regular assessment.
The decision in the case of Beena K. Jain (supra) being relied
upon in support of the re-opening notice was available at the time when the regular
assessment order dated 12th September, 1996 u/s 143 of the Act was
passed. The reasons recorded in support of the impugned notice was merely on
the basis of borrowed satisfaction of the audit party. This also makes the
impugned notice bad. For the aforesaid reasons, the appeal was dismissed.
