Reassessment u/s 147 on Mere Change of Opinion Invalid: ITAT [Read Order]

In a recent judgement, the Raipur bench of the Income Tax Appellate Tribunal (ITAT)  held that reassessment cannot be done based on a mere change of opinion under section 147 of the Income Tax, 1961.

The assessee, Rahul Bajpai, purchased a property for ₹4,11,000, a value that is significantly lower than its fair market value (FMV) of ₹3.75 crore.

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By Section 56(2)(vii)(b) of the Income Tax Act, 1961, if the FMV exceeds the purchase consideration by more than ₹50,000, the difference is treated as income from other sources.

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The assessee did not report the difference of ₹3,70,89,000 as income. As a result, the Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Act.

A notice was issued by the AO under Section 148, questioning the escapement of income. In response, the assessee argued that the property was held as stock in trade, therefore, Section 56(2)(vii)(b) was not applicable.

The A.O. rejected this claim, noting that the assessee had not shown the property as stock in trade in his original return (2014-15), and the claim was made only in response to the notice.

Aggrieved by the A.O.’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], but the appeal was rejected. He then approached the tribunal led by Ravish Sood (Judicial Member) and Arun Khodpia (Accountant Member).

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The counsel for the petitioner, R.B. Doshi, argued that the reassessment was based on a mere change of opinion, making it unsustainable per CIT v. Kelvinator of India Ltd. (2010).

The counsel made it clear that the assessee had already informed the previous A.O. that the property's lower purchase value was due to it being disputed land, and the A.O. had accepted this explanation.

With no new material appearing after the initial review, the reassessment by the successor AO lacked legal validity.

It was further pointed out that the return of income, filed in response to the notice, remained unverified beyond the statutory limits. Based on this, counsel claimed that the subsequent notice issued by the AO could not be considered valid.

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Meanwhile, S.L. Anuragi, the department’s counsel, justified the addition made by AO under Section 56(2)(vii)(b) of the Act.

The counsel argued that since the issue raised by the AO was never examined, there is no change of opinion.

After hearing both sides, the bench rejected the assessee's claim of notice invalidity noting that the return, though e-verified by the Assessee, was still valid. Consequently, the A.O.'s notice was deemed duly issued, and the claim was dismissed.

But the Bench, referring to CIT v. Kelvinator of India Ltd. (2010), held that reassessment under Section 147 cannot be based on a mere change of opinion.

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The tribunal observed that the assessee had explained the reason for the reduced property price, which the previous AO had examined and accepted during the original assessment. Despite the absence of new material, the successor, AO, reopened the case, merely re-evaluating the same facts, making the reassessment unsustainable.

To Read the full text of the Order CLICK HERE

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