2021 (7) TMI 71 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - Notice after the end of 4 years from the end of the relevant assessment year - capital gain on sale of land - nature of land sold - HELD THAT - Reassessment proceeding initiated is not mere change of opinion , but based upon additional facts which were not at all taken into consideration by the assessing authority. Initiation of the reassessment proceedings was started by issuance of notice under Section 148 Those proceedings are yet to be concluded, as no assessment order has been passed. Yet in this case, only objection filed by the petitioner has been decided. The petitioner will have effective and efficacious remedy against the said assessment order. Reassessment proceeding has been initiated on the basis of material having direct bearing over the case of the assessee which is based on the reason to believe which was recorded by the assessing authority - there is no merit in the contention of the learned counsel for the petitioner that sanction under Section 151 was granted by the competent authority in a mechanical manner. The only requirement for initiating the proceedings under Section 147 beyond the period of 4 years is that the subjective satisfaction of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner on the reasons recorded by the Assessing Officer explaining the circumstances under which according to the Assessing Officer it was a fit case for issuance of notice under Section 148 of the Act. Entire recording of reasons to believe formed by the Assessing Officer were produced before the sanctioning authority and after going through the entire reasons recorded by the Assessing Officer the sanction was granted by him. Therefore, all the conditions prescribed under Section 151 of the Act were followed in stricto sensu. We find that re-opening of the assessment proceeding was conducted on the basis of legally valid sanction accorded by the authority under provisions of Section 151 of the Act. In regard to the argument that the present case falls within the ambit of change of opinion and, therefore, the reassessment proceeding initiated is not maintainable, it has already been considered that the Questionnaire issued prior to completion of assessment proceeding under Section 143(3) of the Act does not indicate anything as regards the inquiry conducted by the Assessing Officer in accordance with the provisions of Section 50C of the Act as well as undervaluation of LTCG In the entire Questionnaire, nowhere this query was made that why the petitioner has shown capital gain on the said land in the ITR when she herself was of the view that the impugned land was and agricultural land and does not fall within the purview of Section 2(14) of the Act and hence, not liable for capital gain. This act of the petitioner per se is contrary in nature and, therefore, based on tangible material the Assessing Officer has initiated the reassessment proceedings, and if the same is examined on the touchstone of reason to believe for issuance of notice under Section 148 of the Act recorded by the Assessing Officer. Thus re-assessment proceeding has been initiated on the basis of the material which has given rise to reason to believe as well as escapement of assessment has been quantified by the Assessing Officer. - Decided against assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 148 of the Income Tax Act, 1961.
2. Alleged "change of opinion" by the Assessing Officer.
3. Compliance with Section 151 of the Income Tax Act regarding approval for reassessment.
4. Applicability of Section 50C of the Income Tax Act to the transaction in question.

Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 148:
The petitioner sought quashment of the reassessment proceedings for the Assessment Year 2014-15 initiated by the notice dated 20-12-2019 under Section 148 of the Income Tax Act, 1961. The petitioner contended that there was no tangible material to justify the reassessment and that the original assessment had already scrutinized the transaction in question. The court found that the respondents had valid reasons to believe that income chargeable to tax had escaped assessment, justifying the initiation of reassessment proceedings.

2. Alleged "Change of Opinion" by the Assessing Officer:
The petitioner argued that the reassessment was merely a "change of opinion" and thus impermissible. The court noted that the reassessment was based on new facts and additional material not considered in the original assessment. The court held that the reassessment proceedings were not a mere change of opinion but were based on tangible material indicating escapement of income.

3. Compliance with Section 151 Regarding Approval for Reassessment:
The petitioner claimed that the approval for reassessment under Section 151 was given mechanically. The court reviewed the proforma and reasons recorded by the Assessing Officer and found that the approval was granted after due consideration and application of mind. The court held that all conditions prescribed under Section 151 were followed in stricto sensu, making the sanction legally valid.

4. Applicability of Section 50C:
The petitioner argued that the provisions of Section 50C, which pertains to the valuation of capital assets, were not applicable since the land in question was rural agricultural land and not a capital asset. The court observed that the petitioner had shown the transaction as capital gain in the Income Tax Return (ITR). The court held that the reassessment was justified as the undervaluation of Long-Term Capital Gain (LTCG) necessitated the reassessment proceedings.

Conclusion:
The court dismissed the writ petition, finding no merit in the arguments presented by the petitioner. The reassessment proceedings were deemed valid, not a mere change of opinion, and compliant with the legal requirements under Sections 147, 148, and 151 of the Income Tax Act. The objections raised by the petitioner were found to be without basis, and the reassessment was based on tangible material indicating escapement of income. The court upheld the legality of the reassessment proceedings and the order rejecting the petitioner's objections.

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