Reassessment Proceedings Can't Be Initiated On Same Set Of Facts Available: ITAT

The assessee is in the business of real estate. The assessee e-filed its return of income, declaring a total loss. The assessee was engaged in the activity of development of one ongoing project and has unsold flats in two projects in which no flat was sold during the year. No construction activity during the year was undertaken as the entire area of Kandivali has been notified as a private forest by the Government of Maharashtra. The state government issued stop work notices and the matter is under consideration before the Supreme Court.

The Assessing Officer issued the notice under section 148 of the Income Tax Act, initiating the reassessment proceedings in the case of the assessee. In response to the notice, the assessee submitted that the return of income filed earlier be treated as a return filed in response to the notice issued under section 148 of the Act. The assessee requested a copy of the reasons recorded for reopening the assessment. The Assessing Officer provided a copy of the reasons recorded while reopening the assessment in the case of the assessee. The Assessing Officer also issued notices under section 142(1) of the Act and directed the assessee to produce the documents in support of its claim. The notices were responded to by the assessee.

The Assessing Officer passed the order under section 143 (3) read with section 147 of the Income Tax Act, computing the total income of the assessee under section 115 JB of the Act. On merits, the CIT (A) partly allowed the appeal filed by the assessee.

The assessee contended that the assessing officer's reassessment proceedings are based on the reappraisal of the same set of facts which were already available on record at the time of the original scrutiny assessment proceedings. There is no new or tangible information or material to initiate the reassessment proceedings. Thus, the reopening of the assessment was bad in law as it was based on the change of opinion of the Assessing Officer.

The ITAT observed that where the reasons recorded by the Assessing Officer disclose no more than a mere change of opinion, the reassessment proceedings and assessment order pursuant thereto are liable to be quashed.

"Existence of a valid "reason to believe" is a sine qua non for exercising the jurisdiction under Section 147 of the Act. The expression "reason to believe" implies the cumulative presence of the following four elements: some tangible material or materials to establish that income has escaped assessment; a nexus between such material and the belief of escapement of income from assessment as envisaged under Section 147," the ITAT said.

Case Title: Bombay Real Estate Development Co. P. Ltd. Versus ITO

Citation: ITA no.513/Mum./2021

Dated: 14/06/2022

Counsel For Appellant: Advocate K. Gopal a/w Neha Paranjpe

Counsel For Respondent: C.T. Mathews

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