2016 (6) TMI 1047 - HC - Income Tax

Reopening of assessment - reasons to believe - capital gain on sale of land - Held that - Few facts are not disputable. The petitioner sold land to Kamal Gohil under registered deed dated 4.2.2007 at a sale consideration of ₹ 98 lacs. The land was re-sold by Kamal Gohil barely three months later for a sale consideration of ₹ 7.09 crores. Thus, there was more than seven times jump in the value of the land in about three months. As per the department, such amount was withdrawn by Kamal Gohil from his bank account through Shroffs under different cheques. The department has prima facie information at its command to believe that Kamal Gohil was also used by Iscon group of companies for routing cash sale considerations to the original land owners-sellers reducing their capital gain tax liability and that Kamal Gohil is absconding. In our opinion, the reasons cannot be said to be not germane to the question of assessable capital gains in the hands of the petitioner for the sale of the land in question. The Supreme Court in the case of Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers Pvt.Ltd. reported in 2007 (5) TMI 197 - SUPREME Court in the context of reason to believe held that if the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. It is true that the question of capital gain came up for consideration before Assessing Officer. It is also true that the assessee had placed the materials with respect to sale of land before Assessing Officer during such assessment proceedings. However, the question of true value of the land not being reflected in the sale consideration and the transaction itself not reflecting the correct value received by the petitioner, obviously were not part of assessment proceedings. At that stage, the Assessing Officer cannot be said to have applied his mind to these aspects of the matter which emerged lateron. The sale of land by Kamal Gohil three months after his purchase from the petitioner at a value more than seven times of the purchase cost was also not before the Assessing Officer. - Decided against assessee

Issues Involved:
1. Validity of re-opening assessment under Section 147 of the Income Tax Act.
2. Examination of capital gain in original assessment proceedings.
3. Issuance of notice beyond four years.
4. Adequacy of reasons recorded for re-opening assessment.
5. Full and true disclosure by the assessee.

Issue-wise Detailed Analysis:

1. Validity of re-opening assessment under Section 147 of the Income Tax Act:
The petitioner challenged the notice dated 16.4.2015 issued by the Assessing Officer to re-open the assessment for the assessment year 2008-2009. The court examined whether the reasons recorded by the Assessing Officer were germane to the question of assessable capital gains. The court referred to the Supreme Court's decision in *Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers Pvt.Ltd.*, which held that if the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have "reason to believe" that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion.

2. Examination of capital gain in original assessment proceedings:
The petitioner contended that the issue of capital gain arising out of the sale of the land was examined by the Assessing Officer in the original assessment proceedings and that it was not open for him to re-visit this issue by re-opening the assessment. The court rejected this contention, noting that although the question of capital gain came up for consideration before the Assessing Officer, the true value of the land and the transaction itself not reflecting the correct value received by the petitioner were not part of the original assessment proceedings.

3. Issuance of notice beyond four years:
The petitioner argued that the notice for re-opening was issued beyond the period of four years after the end of the relevant assessment year and that there was no failure on the part of the petitioner to disclose truly and fully all facts necessary for the assessment. The court dismissed this contention, stating that if the facts stated in the reasons recorded by the Assessing Officer are accepted, there was a total lack on the part of the assessee to disclose true and full facts.

4. Adequacy of reasons recorded for re-opening assessment:
The petitioner argued that the reasons recorded by the Assessing Officer lacked validity and that there was no material to form a belief that there had been an escapement of assessment of income. The court found that the reasons recorded by the Assessing Officer provided a prima facie basis for re-opening the assessment. The court noted the significant difference in the sale consideration of the land within a short period and the involvement of Kamal Gohil, who was used by the Iscon group to route cash sale considerations to the original landowners, thereby reducing their capital gain tax liability.

5. Full and true disclosure by the assessee:
The court held that the petitioner failed to disclose fully and truly all material facts necessary for the assessment. The court referred to the case of *Yogendrakumar Gupta vs. Income-Tax Officer*, which held that if the Assessing Officer forms a reason to believe based on subsequent valid information that no full and true disclosure of facts was made by the assessee at the time of the original assessment, the notice of reassessment based on such belief needs no interference.

Conclusion:
The court dismissed the petition, upholding the validity of the re-opening of the assessment under Section 147 of the Income Tax Act. The court found that the reasons recorded by the Assessing Officer were adequate and that there was a lack of full and true disclosure by the petitioner.

← Previous Next →