2019 (4) TMI 1123 - HC - Income Tax

Validity of reassessment proceedings u/s 147 - borrowed satisfaction of the audit party - original assessment u/s 143(3) - whether the sale of an immovable property by the respondent assessee had resulted into short term or long term capital gain? - HELD THAT - We find that, both the CIT(A), as well as, the Tribunal have held that the re-opening notice is without jurisdiction. As assessee had furnished all information in respect of the issue of capital gains by letters during assessment proceedings. Therefore, AO had applied his mind to the facts and the law while passing the order of regular assessment. The decision in the case of Beena K. Jain 1993 (11) TMI 7 - BOMBAY HIGH COURT being relied upon by the appellant in support of the reopening notice was available at the time when the regular assessment order dated 12th September, 1996 under Section 143 of the Act was passed. Therefore, it would not be fair to presume that the Assessing Officer was ignorant of the decision rendered by this Court. Moreover, as the impugned order of the Tribunal itself records that the reasons recorded in support of the impugned notice was merely on the basis of borrowed satisfaction of the audit party. This also makes the impugned notice bad. - no substantial question of law - decided in favour of assessee.

Summary

Issues:
Validity of reassessment proceedings and determination of short term or long term capital gain.

Validity of Reassessment Proceedings:
The appeal filed by the Revenue questioned the validity of reassessment proceedings initiated in 1998 for the Assessment Year 1994-95. The Tribunal had earlier ruled that the reassessment was invalid, citing it as a mere change of opinion. The Revenue pointed to a previous decision involving the brother of the present assessee, where the court dismissed the Revenue's appeal, emphasizing that the re-opening notice lacked jurisdiction. The Tribunal noted that during the original assessment in 1996, the assessee had provided all relevant information regarding capital gains, indicating that the Assessing Officer had already considered these details. The Tribunal concluded that the reasons for the re-opening notice were based on borrowed satisfaction from an audit objection, rendering the notice invalid. The Court agreed with the Tribunal's findings, stating that the Assessing Officer was aware of relevant legal decisions at the time of the original assessment, and the re-opening notice lacked merit.

Determination of Short or Long Term Capital Gain:
The second issue pertained to whether the sale of an immovable property by the respondent assessee resulted in short term or long term capital gain. The Court's decision on the validity of the reassessment proceedings overshadowed this issue, rendering it academic. The Court emphasized that the merits of the addition could only be examined if the re-opening notice was deemed valid. Ultimately, the appeal was dismissed based on the invalidity of the reassessment proceedings, without delving into the specifics of the capital gain determination.

In conclusion, the High Court of Bombay dismissed the appeal filed by the Revenue, primarily focusing on the lack of jurisdiction in the reassessment proceedings initiated in 1998. The Court highlighted the importance of the original assessment process in considering the validity of re-opening notices and emphasized the need for proper application of mind by the Assessing Officer. The decision regarding the nature of capital gains from the sale of the immovable property was deemed secondary to the overarching issue of reassessment validity.