2023 (5) TMI 1284 - HC - Income Tax

Validity of reopening of assessment - order issued u/s 148A(d) - immovable property sold and that capital gains earned had not been disclosed - petitioner pointed out that it had not sold any property and instead bought the property - HELD THAT - Assessee is right in contending that there was no application of mind by the AO while passing the impugned order u/s 148A(d) and is also right in contending that the aforementioned order is not aligned with the notice dated 19.05.2022 issued u/s 148A(b) of the Act. We are also surprised that the notice u/s 148A(b) was issued on 19.05.2022 wherein as observed above the allegation made is that the petitioner had sold the subject property despite information in that regard being supplied by the petitioner as far back as on 22.04.2021 against a notice issued u/s 133(6) of the Act. Petitioner had clearly indicated that it had purchased the property. The assertation was backed by relevant documents which for some reason the AO chose to ignore. We are of the view that if at all the AO deems it fit to carry out a fresh exercise it would be from the stage prior to the issuance of notice u/s 148A(b) of the Act. Clearly the AO has missed the most crucial part of the transaction that it was a purchase and not a sale transaction. Accordingly the impugned order dated 28.07.2022 passed under Section 148A(d) of the Act and the consequential notice of even date i.e. 28.07.2022 are set aside.

Summary

Issues involved:
The judgment involves issues related to Income Tax Act, 1961, specifically concerning an allegation of undisclosed capital gains on the sale of an immovable property for Assessment Year 2017-18.

Details of the Judgment:
The petitioner responded to the notice of undisclosed capital gains by stating that they had actually purchased the property and not sold it. They provided details of the transaction, including the purchase consideration of Rs. 8 crores and TDS deduction details. The petitioner had also responded to a previous notice under Section 133(6) of the Act.

The Assessing Officer (AO) initially believed the petitioner had sold the property, but after reviewing the response, concluded that income on the transaction had escaped assessment. The AO's order was challenged on the grounds that the petitioner had disclosed the purchase in their balance sheet, provided bank account details, and also availed a loan for the purchase.

The court found that the AO had not considered crucial facts presented by the petitioner, such as the details in the balance sheet and the loan availed for the purchase. The court noted that the AO's order was not aligned with the initial notice, which stated that the petitioner had sold the property despite evidence to the contrary provided earlier.

The court set aside the impugned order and directed the AO to revisit the conclusion, emphasizing that it was a purchase transaction and not a sale. The court instructed the AO to reassess the petitioner from the stage prior to the issuance of the initial notice under Section 148A(b) of the Act.

The writ petition was disposed of accordingly, and parties were instructed to act based on the digitally signed copy of the order.