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2022 (10) TMI 1243 - HC - Income TaxReopening of assessment - reason to believe - bogus sauda chitthi against the purchase of an immovable property situated at Surat wherein one person claimed to have paid an amount as advance to petitioner - as per reasons for reopening assessment assessee did not account an amount of advances nor did he show the same in his ROI for the year and therefore, there is escapement of income chargeable to tax - HELD THAT - From the record, it appears that the immovable property has not been sold by the petitioners and other co-owners to Shri Kiritkumar V. Makadiya by execution of sale deed and the immovable properties are registered in the name of the petitioners and also the possession of the properties is with the petitioner and other co-owners. Thus there is no income accrued on account of transfer of a capital asset either by way of sale deed or handing over possession pursuant to agreement to sell. It is well settled that the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment. In the present case, there is no escapement of any income chargeable to tax due to failure on part of the assessee to disclose truly and fully all material facts as all the relevant records were produced on record. In absence of any escapement of income chargeable to tax, it is not open for the department to reopen the case of the present assessee. Thus impugned notices u/s148 are not tenable in law and are accordingly quashed and set aside and consequently the orders disposing of the objections raised by the petitioners against the notice for reopening are also quashed and set aside. Assessee appeal allowed.
Issues Involved: Validity of reopening assessment under Section 148 of the Income Tax Act, 1961; Adequacy of reasons for reopening; Compliance with Section 151 of the Act; Application of mind by the Assessing Officer and sanctioning authority.
Detailed Analysis: 1. Validity of Reopening Assessment under Section 148 of the Income Tax Act, 1961: The petitioners challenged the notice dated 31.03.2021 issued under Section 148 of the Income Tax Act, 1961, proposing to reopen the assessment for the Assessment Year 2014-2015. The petitioners argued that the condition precedent for reopening proceedings under Section 147 of the Act is the escapement of income chargeable to tax. In the absence of such escapement, the reopening was not justified. 2. Adequacy of Reasons for Reopening: The reasons recorded for reopening were scrutinized. The Assessing Officer cited an agreement to sell immovable properties and an advance of Rs. 5,53,53,053/- received in cash, which was not accounted for by the assessee. The petitioners contended that no transfer of property had occurred as no sale deed was executed nor possession handed over, and thus, no income chargeable to tax had arisen. The reasons were deemed vague and lacking specific details such as the date of receipt of information, source of information, and description of properties. 3. Compliance with Section 151 of the Act: The petitioners argued that for reopening beyond four years, it is mandatory to obtain sanction from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. Such sanction should not be mechanical but should involve detailed satisfaction after perusing the material on record. The petitioners claimed that the sanction in this case was mechanical and lacked application of mind. 4. Application of Mind by the Assessing Officer and Sanctioning Authority: The petitioners asserted that the Assessing Officer must independently satisfy himself that income chargeable to tax had escaped assessment. They argued that the reopening was based on borrowed satisfaction from external information without independent application of mind by the Assessing Officer. The respondent countered that sufficient tangible material, such as a copy of the agreement for sale and an FIR, was available, and the amount received was not disclosed in the return of income. Judgment: The court found that the impugned notice under Section 148 was issued solely on the ground that the assessee did not account for Rs. 5,53,53,053/- in his return of income, leading to the conclusion of income escapement. However, it was established that no sale deed was executed, nor possession handed over, meaning no income accrued from the transfer of a capital asset. The court held that the Assessing Officer must have a reason to believe that income chargeable to tax had escaped assessment, which was not evident in this case. Therefore, the reopening of the assessment was not justified. Conclusion: The court quashed the impugned notices dated 31.03.2021 under Section 148 and the orders disposing of the objections raised by the petitioners. The rule was made absolute, and no costs were ordered.
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