2020 (2) TMI 733 - HC - Income Tax

Reopening of assessment u/s 147 - claim of the petitioner for Long-Term Capital Gains allowed under Section 54 - HELD THAT - While passing orders under Section 147 an AO is required to keep in mind the settled principles of law on the subject. If there is a change of opinion which prompted the issue of the notice under Section 148 the officer while passing order u/s 147 can not proceed further. Proviso to Section 147 makes it clear that no action shall be taken under it, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. While conducting proceedings, an Assessing Officer is bound by the proviso to Section 147 of the Income Tax Act, 1961. While exercising the powers vested with an officer at the time of re-assessment under Section 147 of the Income Tax Act, 1961 pursuant to issue notice under Section 148 of the Income Tax Act, 1961, the officer concerned has to not only keep in mind the express language of the proviso to Section 147 of the Income Tax Act, 1961 but also well settled principles of law. The respondent cannot have a re-look into the issue arising out of the claim of the petitioner for Long-Term Capital Gains which was allowed in the assessment order passed on 29.10.2011 as there was true and full disclosure of all material required for assessment by the petitioner for claiming deduction; Therefore, the proposal to re-determine the taxable income and the tax payable by the petitioner for the reasons stated in the impugned communication is unsustainable.; At the same time, while passing final order under Section 147 of the Income Tax Act, 1961, the respondent can examine any other aspect for escaped assessment of tax in the light of Explanation 3 to Section 147 of the Income Tax Act, 1961. While passing such order, the respondent shall not disturb the deduction allowed under Section 54 of the Income Tax Act, 1961 in the assessment order dated 29.10.2011. Since the dispute pertains to the assessment year 2009-10, the respondent is hereby directed to pass appropriate order within a period of thirty days from date of receipt of a copy of this order without disturbing the claim of the petitioner for Long-Term Capital Gains allowed under Section 54 of the Income Tax Act, 1961.

Summary

Issues involved:
Challenge to impugned communication regarding reopening of assessment under Income Tax Act, 1961.

Analysis:
1. The petitioner challenged a communication dated 10.11.2016 regarding the reopening of assessment under Section 148 read with Section 147 of the Income Tax Act, 1961. The respondent overruled the petitioner's objection against invoking machinery for reopening the assessment.
2. The petitioner had purchased a property in Mumbai in 2001, sold it in 2008, and declared income in the Assessment Year 2009-10. The respondent issued a notice under Section 148 in 2016, questioning the petitioner's claim of Long-Term Capital Gain under Section 54 of the Act.
3. The petitioner argued that the property was held for more than thirty-six months, making it eligible for Long-Term Capital Gain exemption under Section 54. The petitioner also cited relevant case laws, including the decision in G.K.N.Driveshafts (India) Ltd. vs. Income Tax Officer.
4. The respondent contended that the assessment could be reopened if criteria under Sections 149 to 153 of the Act were met. The respondent relied on a judgment in Seshasayee Paper Boards Ltd. vs. Union of India to support this position.
5. The court noted that for the assessment to be reopened under Section 147, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The court emphasized the importance of adhering to the provisions of the Income Tax Act and established legal principles.
6. The court directed that while the respondent could examine other aspects for escaped assessment under Explanation 3 to Section 147, the deduction allowed under Section 54 should not be disturbed. The respondent was instructed to pass an appropriate order within thirty days, maintaining the petitioner's claim for Long-Term Capital Gains.

This detailed analysis of the judgment addresses the issues involved, the arguments presented by both parties, the relevant legal principles, and the court's final directives in a comprehensive manner.