2018 (3) TMI 1997 - HC - Income Tax

Reopening of assessment u/s 147 - transactions of sale and purchase of certain agriculture lands - land was purchased and petitioner had 50% share in the land and his investment was which was not reflected in the petitioner's books of account or profit and loss account, thus unexplained investment to be taxed u/s 69 - HELD THAT - Revenue cannot get away from the fact that the entire transaction was scrutinized by the Assessing Officer from very same angle of possible applicability of section 69 of the Act. When the Assessing Officer called upon the petitioner to explain this aspect, the petitioner had conveyed that the land was actually purchased by the firm in which, he is a partner and this detail was reflected in the firm's accounts as work in progress in the balance sheet. Upon being satisfied by such an explanation, the Assessing Officer made no addition in the order of assessment. It is true that he neither gave any reason for this action nor even referred to this transaction in the order of assessment. This however would not be of any importance, as long as the Assessing Officer noticed the transaction, raised queries and elicited response from the assessee during the original assessment. Assessee had sold certain agriculture land at Village Kosmada at a declared sale consideration which was lesser than the stamp duty valuation, the difference was taxable in the hands of the petitioner as his capital gain in terms of section 50C - As seen that during the original assessment proceedings, Assessing Officer was acutely conscious of the fact that the petitioner had sold certain agriculture land situated in the village Kosmada at the sale consideration shown in the registered document was less than the valuation adopted by the Stamp Valuation Authority for registering the sale deed and that the possibility of application of section 50C of the Act would arise. He therefore, asked the petitioner to explain these aspects. The petitioner's explanation was that he had no reason. Any amount in addition to what was actually stated in the sale deed, he was not aware about the stamp valuation procedure and lastly, he contended that he would invoke the provisions of section 50C(2) of the Act. Under such provision, an assessee disputing the stamp valuation of any sale deed could call upon the Assessing Officer to make reference to the DVO to ascertain the value of the capital asset. Be that as it may, the Assessing Officer did not make any additions in the order of assessment. Thus, silently accepting the assessee's representation it was thereafter not open for him to rake up the same issue through the process of reopening of assessment. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice for reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Applicability of Section 69 regarding unexplained investments.
3. Applicability of Section 50C regarding the valuation of capital gains.

Issue-wise Detailed Analysis:

1. Validity of the Notice for Reopening the Assessment:
The petitioner challenged the notice dated 26.09.2016 issued by the respondent-Assessing Officer for reopening the assessment for the year 2011-12. The petitioner argued that the reopening notice was issued beyond four years from the end of the relevant assessment year and contended that there was no failure on their part to disclose all material facts fully and truly. The court examined whether the reopening was based on a change of opinion since the original assessment had already scrutinized the relevant transactions.

2. Applicability of Section 69 Regarding Unexplained Investments:
The first ground for reopening related to the petitioner’s purchase of agricultural land in Village Parab, Kamrej Taluka. The Assessing Officer noted that the petitioner’s share of the purchase value (Rs. 54.95 lakhs) was not reflected in the balance sheet or profit and loss account, treating it as unexplained investment under Section 69. During the original assessment, the Assessing Officer had raised queries regarding this transaction, and the petitioner had explained that the land was purchased by a firm in which he was a partner, and the investment was shown in the firm’s accounts. The Assessing Officer did not make any addition based on this explanation. The court held that since the Assessing Officer scrutinized this transaction during the original assessment and chose not to make any additions, reopening on this ground would be based on a change of opinion.

3. Applicability of Section 50C Regarding the Valuation of Capital Gains:
The second ground for reopening pertained to the petitioner’s sale of agricultural land in Village Kosmada, where the sale price was lower than the stamp duty valuation. The Assessing Officer wanted to tax the difference as capital gains under Section 50C. During the original assessment, the Assessing Officer had raised queries about this issue, and the petitioner had explained that the sale was made at the prevailing market value and that they were not aware of the jantri value used for stamp duty purposes. The petitioner also indicated that they would invoke Section 50C(2) if necessary. The Assessing Officer did not make any additions in the final assessment order. The court held that since the Assessing Officer had already scrutinized this issue and accepted the petitioner’s explanation, reopening on this ground would also be based on a change of opinion.

Conclusion:
The court concluded that the Assessing Officer had already scrutinized both grounds during the original assessment and had formed an opinion, even though no explicit reasons were provided in the final assessment order. Therefore, reopening the assessment on these grounds would amount to a change of opinion, which is not permissible. The petition was allowed, and the impugned notice for reopening the assessment was set aside.