2021 (3) TMI 1330 - HC - Income Tax

Reopening of assessment u/s 147 - whether the revenue is justified in reopening the assessment for the year under consideration? - claim of cost of acquisition cost of improvement and deduction claimed u/s 54 of the Act is subject matter of present case - HELD THAT - A plain reading of reasons recorded show that the c. Assessee in both the cases being the co-owners of the property situated at Navsari which had been sold of on 27.06.2011 by way of registered sale deed and the consideration was 64, 00, 000/-. Both the assessee being co-owners of the property had shown the amount of sale consideration received in their respective part in their return of income and copy thereof has been placed on record. The record indicates that the assessee had replied the query letter dated 13.02.2017 stating inter-alia that they have offered the long term capital gain for taxation after claiming deduction as per their share in the immovable property. Vide letter dated 12.03.2019 revenue had called for details with regard to claim of cost of acquisition cost of improvement and claim u/s 54 of the Act and in pursuance of said letter both the assessee had furnished necessary details vide letter dated 20.03.2019. It is the case of the revenue that on 19.03.2019 the reasons for reopening of the assessment had been recorded whereas the reply along with details had been received to their office on 22.03.2019. Under such circumstances the day when reasons for reopening were recorded no any details as called for were supplied by both the assessee. We are of the view that the stand of the revenue with regard to non-filing of the necessary particulars are factually incorrect. It appears from the record that after the impugned notices issued under Section 148 of the Act and before filing of the objections against the reasons recorded both the assessee had furnished necessary details/documents in support of their claim of cost of acquisition cost of improvement and deduction claimed under Section 54 of the Act. Therefore the assessee nowhere failed to disclose the necessary facts with regard to their assessment. It is an admitted fact that both the assessee have filed their return of income for the year under consideration whereby they had declared the amount received from the sale transactions and the claim with respect to cost of acquisition cost of improvement and investment made in National Highway Authority for which they have claimed deduction under Section 54 of the Act. It is pertinent to note that while passing the order of disposing of objections against the reasons recorded the authority failed to consider the necessary disclosures made in the return of income and the details / documents furnished by the assessee in pursuant of the query letter issued by the Assessing Officer. We are of the view that while recording the reasons for reassessment the Assessing Officer failed to consider the necessary details which were on the record and without application of mind the Assessing Officer has recorded the reasons in mechanical manner. Thus the reasons lack validity and Assessing Officer had proceeded on erroneous premise. There is no basis or jurisdiction for the respondent to form a belief that income of assessee chargeable to tax for the year under consideration has excaped assessment within the meaning of Section 147 of the Act. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Justification for reopening the income tax assessment under Section 147 of the Act.
3. Alleged failure of the assessee to disclose necessary facts and furnish supporting documents.
4. Whether the reopening of assessment was based on a mere change of opinion by the Assessing Officer.
5. Compliance with legal precedents and the settled proposition of law regarding reopening of assessments.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The writ applicants challenged the notice dated 20.02.2019 issued under Section 148 of the Income Tax Act, seeking to reopen the income tax assessment for the Assessment Year (AY) 2012-13. The notice was issued on the grounds that the assessees failed to file their return of income and did not furnish supporting proofs for claims of cost of improvement and deductions under Section 54 of the Act. The court scrutinized the reasons recorded for reopening and found that the necessary details were already provided by the assessees, thus deeming the notice invalid.

2. Justification for Reopening the Income Tax Assessment Under Section 147 of the Act:
The court examined whether the revenue was justified in reopening the assessment. The Assessing Officer (AO) had reasoned that there was an escapement of income due to the lack of documentary proof for the cost of improvement and deduction claims. However, the court found that the assessees had indeed furnished the required details and documents before the reasons for reopening were recorded. Therefore, the reopening lacked a valid basis.

3. Alleged Failure of the Assessee to Disclose Necessary Facts and Furnish Supporting Documents:
The AO claimed that the assessees did not provide necessary details regarding the cost of acquisition, improvement, and deductions under Section 54. However, the court noted that the assessees had submitted these details in response to the revenue's queries. The court concluded that the AO's assertion was factually incorrect, as the necessary disclosures were made by the assessees.

4. Whether the Reopening of Assessment Was Based on a Mere Change of Opinion by the Assessing Officer:
The court addressed the contention that the reopening was a result of a mere change of opinion by the AO. The assessees had complied with the AO's queries and provided detailed replies and documents. The AO did not raise further queries after the initial compliance, indicating satisfaction at that time. The court found that the reopening was based on the same set of facts without any tangible new material, thus constituting a change of opinion, which is impermissible in law.

5. Compliance with Legal Precedents and the Settled Proposition of Law Regarding Reopening of Assessments:
The court referred to various legal precedents cited by the assessees' counsel, which emphasized that reopening of assessments based on a change of opinion or without independent inquiry is not permissible. The court held that the AO's action was mechanical and lacked application of mind, violating the settled legal principles.

Conclusion:
The court concluded that the reopening of the assessment for AY 2012-13 was without jurisdiction and lacked a valid basis. The impugned notices were quashed and set aside, and the writ applications were allowed. The court emphasized that the AO failed to consider the necessary details already on record and proceeded on an erroneous premise.