2015 (5) TMI 4 - HC - Income Tax

Reopening of assessment - indexed cost of property not claimed - Held that - In the present case, it is required to be noted that during the original assessment proceedings, the assessee did claim the indexed cost of property at ₹ 93,98,488/- may be without filing any revised return of income and by submitting only revised computation of income. However, the same came to be considered by the Assessing Officer and while computing the long term capital gain, the Assessing Officer considered the indexed cost of property of Rs.Rs.93,98,488/- as claimed by the assessee. Therefore, as such, it cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment, for that assessment year. May be the method adopted by the assessee was not correct. He ought to have submitted the revised return of income. However, by that itself, cannot confer the jurisdiction on the Assessing Officer to initiate the reassessment proceedings and/or reopen the assessment in exercise of powers under section 147 of the Act beyond the period of four years unless and until the assessee did not truly and fully disclosed the material fact, which was necessary for the purpose of assessment. Under the circumstances, in the present case, the condition precedent for initiation of the proceedings beyond the period of four years under section 147 of the Act are not satisfied at all. Under the circumstances, the initiation of reassessment proceedings/reopening the assessment for AY 2008-2009, which has been initiated beyond the period of four years, is wholly without jurisdiction and authority under the law and therefore, this is a fit case to quash and set aside the impugned notice of reopening the assessment. - Decided in favour of assessee.

Summary

Issues:
Reopening of assessment under section 147 of the Income Tax Act for AY 2008-2009 beyond the four-year period.

Analysis:
1. The petitioner filed the original return of income for AY 2008-2009, declaring a total loss. The case was selected for scrutiny, and a questionnaire was issued. The Assessing Officer found discrepancies in the valuation of an immovable property, leading to a notice under Section 50C. The assessment was finalized, and the capital gain was computed. Subsequently, after four years, the Assessing Officer initiated proceedings under section 147, citing an escapement of income due to understated property value.

2. The petitioner objected to the reopening, arguing full disclosure during the original assessment. The Assessing Officer rejected the objections and proceeded with reassessment. The petitioner contended that the reopening was illegal and lacked jurisdiction as all material facts were disclosed in the original assessment. The petitioner sought relief under Article 226 of the Constitution of India.

3. The respondent argued that the indexed cost of property was claimed without filing a revised return, and the Assessing Officer should have considered the original cost. Relying on a Supreme Court decision, the respondent maintained that a revised return was necessary for claiming revised income computation. The respondent supported the reopening based on alleged income escapement.

4. The Court noted that for reassessment under section 147, there must be an escapement of income due to failure to disclose material facts. Despite the petitioner's method of disclosure, the Assessing Officer accepted the revised computation during the original assessment. The Court found that the conditions for reopening beyond four years were not met, rendering the reopening jurisdictionally incorrect. The impugned notice was quashed and set aside, ruling in favor of the petitioner.

5. The judgment concluded by granting the petitioner's plea, quashing the notice under section 148 for AY 2008-2009. The Court held the reopening of assessment as beyond the jurisdiction and authority of the law, thus allowing the petition with no costs imposed.