2023 (4) TMI 1324 - HC - Income Tax

Reopening of assessment u/s 147 - investments made towards purchase of immovable property - respondent never provided a separate copy of reasons recorded and also the sanction letter duly approved by the Principal CIT for re-assessing the case of the petitioner-assessee - HELD THAT - With respect to the assessment order for the year 2015-16, the assessment proceedings have been completed now and no adverse order with respect to the investment made as per the sale deed has been passed. Since, the income tax for the year 2015-16 has also undergone the process of revision and the claim of petitioner with respect to the investment made on the cost of investment in the property has been accepted, no case is made out to re-open the assessment proceedings of the year 2014-15 on the same ground. Keeping in view the fact that for the income tax return for the year 2014-15, there was no concealment of income made by the assessee relating to investment in property at Panchsheel Park, New Delhi, the present writ petition is allowed.

Issues Involved:
1. Quashing of the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961.
2. Dismissal of objections filed to the reasons recorded under Section 148 of the Income Tax Act, 1961.
3. Validity of re-assessment proceedings initiated after a gap of four years.

Summary of Judgment:

Issue 1: Quashing of Notice Dated 31.03.2021
The petitioner-assessee sought quashing of the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961. The notice was issued for re-assessing the income for the assessment year 2014-15. The petitioner argued that the property in question was purchased in the assessment year 2015-16 and not in 2014-15. The petitioner had shown part payments as Capital Work In Progress (CWIP) in the balance sheet for 2014-15 and disclosed all relevant facts during the original assessment proceedings. The court found that the re-assessment proceedings were initiated based on information from the insight portal without independent inquiry. The court concluded that no case was made out to re-open the assessment for 2014-15 as the income tax return for 2015-16 had already undergone scrutiny and revision without any adverse order regarding the investment.

Issue 2: Dismissal of Objections Filed to Reasons Recorded
The petitioner filed objections to the reasons recorded for re-opening the case, which were dismissed by the respondent. The petitioner contended that the respondent ignored the fact that the property was actually purchased in the assessment year 2015-16 and not in 2014-15. The petitioner had provided all relevant documents during the original assessment, and the Assessing Officer (AO) did not raise any queries at that time. The court noted that the respondent did not provide a separate copy of the reasons recorded or the sanction letter for re-opening the case. The court found that the respondent's actions were based on borrowed satisfaction without conducting an independent inquiry, which is against settled law.

Issue 3: Validity of Re-assessment Proceedings Initiated After Four Years
The re-assessment notice was issued after a gap of four years based on information received from the insight portal. The court observed that the petitioner had disclosed all relevant facts during the original assessment, and there was no concealment of income. The court emphasized that the AO did not raise any queries during the original assessment proceedings, and the re-assessment was initiated based on borrowed satisfaction. The court concluded that the re-assessment proceedings were not justified as the income tax return for 2015-16 had already been scrutinized and accepted without any adverse findings regarding the investment.

Conclusion:
The court allowed the writ petition and set aside the impugned notice dated 31.03.2021 and the order dated 23.11.2021, thus quashing the re-assessment proceedings initiated for the assessment year 2014-15.

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