2019 (1) TMI 955 - HC - Income Tax

Validity of reopening of assessment - income chargeable to tax has escaped assessment - petitioner had sold the immovable property during financial year 2010-11 but had not shown the capital gain arising out of such transaction in the return of income - assessment reopened beyond a period of four years from the end of relevant assessment year - Held that - A perusal of the return of income filed by the petitioner shows that he has duly shown the long term capital gain arising out of the sale of property in question and has also given a detailed computation of income in the statement of Long Term Capital Gain. AO appears to have proceeded on a factually incorrect premise to the effect that the petitioner had not offered the long term capital gain for taxation. It is evident that the consideration received on account of sale of the immovable property as reflected in the reasons recorded is also incorrect inasmuch as the correct figure is ₹ 6,48,000/- and not ₹ 6,07,000/-. Besides, by the letter of verification dated 21.03.2018, the Assessing Officer had called upon the petitioner to furnish the details of sale of the property in question, in response to which, the petitioner had given a reply dated 26.03.2018 pointing out that transaction of sale building in Rang Mahaal which has been mentioned in the letter dated 21.03.2018 and the capital gain emerging therefrom, has been included in the income. The petitioner had also enclosed copies of the computation of income as well as the sale deed of the property in question. Despite the aforesaid position, in the reasons recorded, the Assessing Officer has stated that the assessee has not furnished any details in this regard despite letter having been issued to him. AOr has not applied his mind to the facts of the case and that the formation of belief on the part of the Assessing Officer that income chargeable to tax has escaped assessment is also based on an incorrect premise that the petitioner had not offered the capital gain arising from the sale of immoveable property in the return of income In this case, the assessment is sought to be reopened beyond a period of four years from the end of relevant assessment year. Therefore, unless there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment for the year under consideration, the assumption of jurisdiction under section 147 of the Act on the part of the Assessing Officer is without any authority of law. - Decided in favour of assessee.

Summary

Issues:
Validity of notice under section 148 of the Income Tax Act, 1961 for reassessment of total income for assessment year 2011-12.

Analysis:
1. The petitioner challenged the validity of the notice dated 31.03.2018 issued by the respondent under section 148 of the Income Tax Act, 1961, proposing to reassess the total income for assessment year 2011-12. The petitioner, engaged in construction activities, filed the return of income for the said year on 07.09.2011, and assessment was completed on 21.01.2014. The respondent sought to reopen the assessment based on the sale of a property in Rang Mahaal. The petitioner responded with necessary details, but the respondent still issued the impugned notice.

2. The petitioner contended that the reassessment notice was beyond the four-year limit from the end of the relevant assessment year. The Assessing Officer's reasons for reopening were factually incorrect, as they claimed the petitioner did not disclose capital gains when the return clearly included such details. The petitioner had also provided necessary details in response to the verification letter, contradicting the Assessing Officer's claim of non-disclosure.

3. The respondent argued that income had escaped assessment due to the petitioner's failure to disclose material facts. However, the court found that the Assessing Officer had not applied his mind to the case, leading to an incorrect belief that income had escaped assessment. The reassessment was based on incorrect premises, as the petitioner had disclosed the capital gains and provided details as requested, making the jurisdiction of the Assessing Officer invalid.

4. The court analyzed the reasons recorded for reopening the assessment and found discrepancies in the facts presented by the Assessing Officer. The petitioner had duly disclosed the capital gains and provided necessary details, rendering the reassessment notice invalid. As the petitioner had fulfilled the requirement of disclosing all material facts, the assumption of jurisdiction under section 147 of the Act was deemed unauthorized. Consequently, the court quashed and set aside the impugned notice dated 31.03.2018 for assessment year 2011-12, ruling in favor of the petitioner.