2018 (8) TMI 1478 - HC - Income Tax

Reopening of assessment - failure to disclose the income from sale of two properties - reason to belief - Held that - During scrutiny assessment the Assessing Officer had raised queries, inter alia, with respect to such capital gain. In letter dated 24.7.2013, the Assessing Officer asked the assessee to clarify various sales and purchases of the properties which the assessee had undertaken during the relevant period. Additionally, the assessee also asked him to supply the purchase deed, sale deed, mode of payment alongwith supporting evidence. In particular, the Assessing Officer wanted information about the sale of the said two properties. Assessing Officer passed an order of the assessment in which he made no addition on this score. In other words, he accepted the assessee s computation of capital gain arising out of sale of these two lands. The assertion of the Assessing Officer in the reasons recorded that the assessee had not offered the gain arising out of sale of two lands in the return, is thus palpably wrong. - Decided against the revenue.

Summary

Issues:
Challenge to notice for reopening assessment for the assessment year 2011-12 based on alleged income escaping assessment.

Analysis:
The petitioner, an individual earning income from investments and agriculture, filed a return for the assessment year 2011-12 declaring total income. The Assessing Officer completed the assessment under Section 143(3) of the Income Tax Act, 1963, making minor additions. The notice to reopen the assessment was issued based on the belief that income had escaped assessment due to the sale of two properties by the petitioner. The Assessing Officer claimed that the petitioner did not show any income under the head capital gain for these sales, leading to the reopening notice under Section 147 of the IT Act.

Upon receiving the reasons for reopening, the petitioner objected to the notice, but the objections were rejected by the Assessing Officer. The High Court analyzed the situation and found that the basis for reopening the assessment was erroneous. The petitioner had declared long-term capital gain in the return and had provided necessary clarifications during the scrutiny assessment process. The Assessing Officer had raised queries regarding the sales of properties, and the petitioner had responded with details of the sales, which were accepted without any additions made to the capital gains.

The High Court concluded that the Assessing Officer's assertion that the petitioner had not offered the gain from the property sales in the return was incorrect. The petitioner had disclosed the capital gain, which was duly examined during the scrutiny assessment. Therefore, the High Court set aside the impugned notice for reopening the assessment, allowing the petition in favor of the petitioner.