2013 (4) TMI 444 - HC - Income Tax

Reassessment - escaped income - petitioner contention proceedings is time barred - reason for reopening is that the petitioner after converting the leasehold land into freehold sold the property within three years resulting into short term capital gain and has not disclosed the income under the head capital gains in the return filed - Held that - The only point urged and pressed before us is whether in absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped the assessment is Rs. one lakh or more having not been mentioned the reassessment notice given after four years of the close of the assessment order is valid or not. Thus sufficient force in the argument of the petitioner that the initiation of the reassessment proceedings relevant to the Assessment Year 2000-2001 after more than four years is clearly barred by time. In the result, all the three writ petitions succeed and are allowed.

Issues:
1. Validity of reassessment notice under section 148 of the Income Tax Act for the assessment year 2000-2001.
2. Interpretation of section 149 (1) (b) of the Income Tax Act regarding the time limit for issuing notice.
3. Requirement of income chargeable to tax which has escaped assessment to amount to or likely to amount to Rs.1 Lakh or more for the extended period of limitation under section 149 (1) (b).

Detailed Analysis:
1. The judgment by the Allahabad High Court addressed the validity of a reassessment notice under section 148 of the Income Tax Act for the assessment year 2000-2001. The petitioners had filed returns for the relevant year, and a dispute arose regarding the reassessment notice issued under section 148. The petitioners challenged the initiation of reassessment proceedings on various grounds, leading to the petition before the court.

2. The main issue revolved around the interpretation of section 149 (1) (b) of the Income Tax Act, which sets the time limit for issuing a notice under section 148. The section specifies that a notice cannot be issued after four years from the end of the relevant assessment year unless certain conditions are met, including the income chargeable to tax which has escaped assessment amounting to or likely to amount to Rs.1 Lakh or more for that year. The petitioners argued that the notice issued in this case was beyond the normal four-year period and that there was no material to show that the income which had allegedly escaped assessment exceeded the specified amount.

3. The court delved into the requirement under section 149 (1) (b) regarding the income chargeable to tax which has escaped assessment to be Rs.1 Lakh or more for the extended period of limitation. The court examined the reasons recorded by the Income Tax Officer for reopening the assessment, which indicated that the income chargeable to tax under the head Short Term Capital Gains was believed to have escaped assessment. However, the court noted that the reasons did not specify the amount of income that had escaped assessment, raising doubts about the validity of the reassessment notice issued beyond the normal four-year period.

4. The court scrutinized the arguments presented by both parties and emphasized the importance of the Assessing Officer clearly stating in the reasons recorded that the income chargeable to tax which has escaped assessment amounts to Rs.1 Lakh or more for the extended period of limitation to be applicable. The court found merit in the petitioner's argument that the reassessment proceedings initiated after more than four years from the relevant assessment year were time-barred based on the reasons recorded by the Assessing Officer.

5. Ultimately, the court ruled in favor of the petitioners, quashing the impugned notices dated 23rd of March, 2007 related to the reassessment for the assessment year 2000-2001. The judgment highlighted the necessity for the Assessing Officer to provide clear reasons indicating the income amount that has escaped assessment to trigger the extended period of limitation under section 149 (1) (b) of the Income Tax Act.

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