2006 (8) TMI 146 - HC - Income Tax

Notice u/s 148 whether the reopening of the assessment for the AY 1992-93 is justified or not. Admittedly in the assessment order for the assessment year 1993-94 the Assessing Officer has held that the sale of shares as per the agreement dated January 3 1992 took place on January 3 1992 itself and the capital gains in respect thereof are leviable in the assessment year 1992-93. Admittedly the issue regarding the capital gains arising from the sale of shares pursuant to the agreement dated January 3 1992 was neither raised nor discussed in the assessment order for the AY 1992-93. It is well established in law that the assessments can be reopened on the basis of the information contained in the assessment for subsequent years. Therefore reopening the assessment based on the assessment order for the AY 1993-94 wherein it is held that the relationship of 100 per cent. holding subsidiary company was acquired with the only intention of evading the capital gains tax cannot be faulted - fact that the assessment order for the assessment year 1993-94 is pending before the appellate authority is wholly irrelevant for the purpose of reopening the assessment petition of assessee is dismissed

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment year 1992-93 based on information from assessment year 1993-94.

Analysis:
The petition challenges a notice issued under section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the year 1992-93. The petitioner, a public limited company engaged in investments, had filed its return for 1992-93 and received an intimation under section 143(1) in March 1993. The reasons for reopening the assessment for 1992-93 were based on the assessment order for 1993-94, which indicated that the actual transfer of shares took place in the relevant period for 1992-93, thus making capital gains taxable in that year. The petitioner argued that the transaction in question was concluded in 1993-94, and therefore, reopening the assessment for 1992-93 was unjustified. The key issue was whether the reopening of the assessment for 1992-93 was justified, considering the information from the assessment for 1993-94.

The court noted that assessments can be reopened based on information from subsequent years. The Assessing Officer in the 1993-94 order had determined that the sale of shares occurred in 1992-93, making the capital gains taxable in that year. Since this issue was not raised in the 1992-93 assessment, the reopening based on the 1993-94 order was deemed valid. The court emphasized that the petitioner could still present evidence to show that the capital gains tax liability arose in 1993-94, not 1992-93. The pendency of the 1993-94 assessment order before the appellate authority was deemed irrelevant for the reopening of the 1992-93 assessment. The court dismissed the petition, allowing the Assessing Officer to make a decision on the merits after hearing the petitioner. The interim relief granted earlier was vacated, and all contentions of both parties were left open.