2018 (2) TMI 1536 - HC - Income Tax

Reopening of assessment - cost of improvement not reflected in the accounts of the assessee - Held that - As is apparent from the petitioner's response to the Assessing Officer dated 15.12.2014, pertained to the sale of the property in question. We may recall, the petitioner had sold agricultural land situated at village Hathijan during the said year. In his written communication dated 15.12.2014, the petitioner pointed out to the Assessing Officer that he had purchased the said land for cost of ₹ 81,000/under a registered sale deed and sold the same for ₹ 2.15 crores during the current year. Since the purchaser is not an agriculturist, he had made an agreement and the sale deed would be executed after conversion of the land into non-agricultural use. It was only after such examination of the sale of the land and related issues, the Assessing Officer passed the order of assessment making no disallowance. Entire issue was thus minutely examined by him. On this count, Assessing Officer cannot be allowed to reopen the assessment - the reasons lack validity and there was a degree of lack of application of mind on the part of the Assessing Officer when he conveyed that the cost of improvement of ₹ 5.09 lakhs was not reflected in the assessee's books of accounts. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening assessment for the assessment year 2012-13.

Analysis:
The petitioner, an individual, filed a return of income for the assessment year 2012-13, disclosing total income of ?1.22 crores, including long term capital gain from the sale of immovable property. The Assessing Officer conducted scrutiny and passed an order of assessment under section 143(3) without changing the capital gain declaration. Subsequently, the Assessing Officer issued a notice to reopen the assessment, citing under-assessment due to the petitioner's claim of improvement cost for the property. The petitioner objected to the notice, arguing that the issue was already scrutinized, and the reasons for reopening were incorrect. The department contended that proper reasons were recorded, and the notice was issued within the prescribed period.

During the original assessment, the Assessing Officer raised queries about the property sale, to which the petitioner responded with details of the purchase and improvement cost incurred in the financial year 1987-88. The petitioner provided evidence of the improvement cost in the personal balance sheet, which was duly reflected in the return filed. The Assessing Officer made no disallowance after examining the issue minutely. The High Court observed that the reasons for reopening lacked validity, as the improvement cost was indeed reflected in the petitioner's books and return. The petitioner had also submitted a valuer's report estimating the construction cost. Consequently, the High Court allowed the petition, setting aside the impugned notice and disposing of the case.