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2018 (6) TMI 1175 - AT - Income TaxValidity of reopening of assessment beyond 4 years - capital gains - reasons to believe - assumption of the fact - proof of filing of return - there is no mention that income amounting to ₹ 1 lac or more is believed to have escaped assessment - Held that - In the absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped assessment is one lac rupees or more, the notice issued u/s 148 of the Act beyond four years of the end of the relevant assessment year, is invalid. See MAHESH KUMAR GUPTA VERSUS COMMISSIONER OF INCOME TAX & ANOTHER 2013 (4) TMI 444 - ALLAHABAD HIGH COURT - Decided in favour of assessee.
Issues Involved:
1. Validity of the Notice Issued Under Section 148 of the IT Act. 2. Adequacy of Reasons Recorded for Reopening the Assessment. 3. Computation of Total Income and Disallowance of Cost of Acquisition. 4. Chargeability of Interest Under Sections 234A and 234B. Detailed Analysis: 1. Validity of the Notice Issued Under Section 148 of the IT Act: The assessee challenged the notice issued under Section 148, arguing that the reasons recorded for reopening the assessment did not quantify the amount of income that allegedly escaped assessment. The Tribunal observed that the reasons recorded by the Assessing Officer (AO) did not mention that the income escaping assessment was likely to amount to ?1 lakh or more, as required under Section 149(1)(b) of the Act. The Tribunal cited the Allahabad High Court's decision in 'Mahesh Kumar Gupta Vs. CIT' and 'Amar Nath Agarwal Vs. CIT,' which held that the absence of such quantification renders the notice invalid. Consequently, the Tribunal held that the notice and all proceedings pursuant thereto were null and void ab-initio. 2. Adequacy of Reasons Recorded for Reopening the Assessment: The Tribunal examined whether the reasons recorded by the AO showed a prima facie reasonable belief that income had escaped assessment. The reasons cited by the AO included information about the sale of a property and its valuation for stamp duty purposes. However, the Tribunal found that the AO's reasons were based on incorrect assumptions, such as the incorrect statement that the assessee had not filed a return of income. The Tribunal noted that the assessee had indeed filed a return, and this was communicated to the AO. The Tribunal concluded that the reasons recorded did not meet the legal requirements, as they were based on incorrect facts and lacked proper quantification of the alleged escaped income. 3. Computation of Total Income and Disallowance of Cost of Acquisition: The assessee contested the AO's computation of total income at ?19,64,890 as against ?7,39,730 declared by the assessee. The assessee argued that the AO unjustifiably disallowed the cost of acquisition and improvement, which was evidenced by the balance sheets filed with the Department. The Tribunal did not delve into this issue in detail, as it had already held the notice under Section 148 and the subsequent proceedings to be null and void. Therefore, the Tribunal did not adjudicate on the merits of the AO's computation of income and disallowance of costs. 4. Chargeability of Interest Under Sections 234A and 234B: The assessee also challenged the chargeability of interest under Sections 234A and 234B, arguing that the interest was either not chargeable or had been excessively and incorrectly charged. However, since the Tribunal annulled the notice under Section 148 and the subsequent proceedings, it did not address the issue of interest separately. The Tribunal's decision rendered the question of interest moot. Conclusion: The Tribunal allowed the assessee's appeal, holding that the notice issued under Section 148 and all subsequent proceedings were null and void ab-initio. The Tribunal based its decision on the lack of proper quantification of the alleged escaped income in the reasons recorded by the AO, as required by law. Consequently, the Tribunal did not adjudicate on the other issues raised by the assessee, as they were rendered irrelevant by the annulment of the notice and proceedings.
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