2016 (9) TMI 1037 - HC - Income Tax

Reopening of assessment - netting of interest for deduction under section 80P(2)(d) - Held that - The petitioner had filed full details of such interest income along with the return itself along with the interest expenses. If the Assessing Officer was of the view that the same was not in order, he could have disallowed part of the claim. At any rate, this cannot be a ground for reopening the assessment beyond a period of four years since it cannot be stated that the petitioner had not disclosed true and full facts. Escapement of income as per the provisions of section 50C - Held that - The contention of the petitioner that the Assessing Officer was aware about such difference in two valuations based on the letter dated 28.11.2007 cannot be accepted. The said letter was written not by the Assessing Officer but by the investigation wing of the department which was till then, on prima facie information available, was inquiring further in this respect. It was in this background the Assistant Director of Incometax (Inv), Surat, conveyed to the petitioner that the value of the property mentioned in the sale deed is lower than the value adopted by the stamp valuation authority. The petitioner was therefore, asked to explain whether capital gain was computed on the basis of section 50C of the Act. If yes, the petitioner would submit evidence, if no, the petitioner to show cause why adverse inference should not be drawn. This letter was received by the petitioner on 4.12.2007. On 6.12.2007, it appears that the purchaser of the land had in respect to a similar letter from investigation wing contended that the Government approved valuer had assessed rate of land at ₹ 275/per square meter at which the land was sold. It was further pointed out that stamp valuation authority had earlier adopted market value of ₹ 1.42 crores but after objection reduced it to ₹ 71.07 lacs which would show that no proper parameters had been adopted. As noted, the petitioner had also replied separately to the said authority under letter dated 2.1.2008. The stand of the petitioner in such reply was rather vague and general. The petitioner did not deny the higher valuation adopted by the stamp duty authority or application of section 50C of the Act but merely generally and vaguely opposed any proposal for action. . In reply to this, the petitioner again made similar averments without drawing any further light on why the petitioner had not disclosed such development or offered capital gain on the basis of such higher computation. In our opinion, the petitioner thus failed to discharge duty of true and full disclosure. On the first ground, therefore, the notice for reopening is valid.

Summary

Issues Involved:
1. Validity of notice for reopening assessment beyond four years.
2. Alleged suppression of long-term capital gain under Section 50C of the Income Tax Act.
3. Deduction under Section 80P(2)(d) without netting interest expenses.

Issue-Wise Detailed Analysis:

1. Validity of Notice for Reopening Assessment Beyond Four Years:
The petitioner challenged the reopening of the assessment for the year 2005-2006, arguing that the notice was issued beyond the period of four years and that all necessary facts were disclosed during the original assessment. The court examined whether the petitioner had made true and full disclosures during the original assessment proceedings. The court concluded that the duty to disclose true and full facts extends beyond the filing of returns and continues throughout the assessment process. The court found that the petitioner failed to disclose the revised valuation by the stamp duty authority during the assessment proceedings, which justified the reopening of the assessment beyond four years.

2. Alleged Suppression of Long-Term Capital Gain Under Section 50C:
The court scrutinized the reasons for reopening, particularly the alleged suppression of long-term capital gain. The petitioner had sold land for ?42,00,000 but the stamp duty authority valued it at ?71,07,000. The court noted that the petitioner did not disclose this higher valuation during the original assessment proceedings. The court referred to Section 50C of the Income Tax Act, which deems the value assessed by the stamp duty authority as the full value of consideration for the purpose of capital gains. Since the petitioner did not contest this valuation before the Assessing Officer, the court held that the petitioner was guilty of non-disclosure of true and full facts, validating the reopening of the assessment.

3. Deduction Under Section 80P(2)(d) Without Netting Interest Expenses:
The court addressed the second ground for reopening, which was the deduction claimed under Section 80P(2)(d) without netting interest expenses. The petitioner had provided full details of interest income and expenses in the return. The court held that if the Assessing Officer believed the deduction was not in order, it could have been disallowed during the original assessment. Since the petitioner had disclosed all relevant facts, this ground could not justify reopening the assessment beyond four years.

Conclusion:
The court dismissed the petition, ruling that the notice for reopening the assessment was valid on the ground of alleged suppression of long-term capital gain under Section 50C. The court found that the petitioner failed to disclose the higher valuation by the stamp duty authority, thus justifying the reopening beyond four years. The court, however, found that the ground related to the deduction under Section 80P(2)(d) was not valid for reopening as the petitioner had disclosed all relevant facts. The petition was dismissed, and the interim relief was vacated, allowing the petitioner to contest the correct capital gain to be taxed under Section 50C.