2021 (9) TMI 246 - HC - Income Tax

Reopening of assessment u/s 147 - capital gain not offered to tax - sale transaction that took place in the previous year, i.e., 2009-10 relating to Assessment Year 2010-11, when the Power Agent has executed the sale deed - whether there was a transfer of the immovable property during the previous year relevant to AY 2004-05 or did the transfer take place at the behest of the appellant/assessee in the Assessment Year 2010-11? - HELD THAT - Assessee has filed his return of income for the Assessment Year 2004-05 and has offered the sale consideration for capital gains and deposits were made in the Bank Account. All these aspects were called for by the Assessing Officer by issuing intimation and after considering the documents produced by the assessee, summons were issued to the partner of the firm, who had purchased the property, their Books of Accounts were perused and the AO having been fully satisfied that the transfer has taken place in terms of Section 2(47) of the Act in the Assessment Year 2004-05, had passed the scrutiny Assessment Order under Section 143(3). Admittedly, the Assessing Officer did not have any new or tangible material to show that the assessee failed to fully and truly disclose all particulars and the assessment warrants reopening - assessee has been put to sheer harassment on account of notice under Section 148 of the Act, dated 31.03.2017. Had the Assessing Officer perused the letter of the Assessing Officer dated 26.07.2005, wherein, the details were sought for with regard to the deposit of capital gains, the information furnished by the assessee through his Chartered Accountant on 08.08.2005, the certificate issued by the Indian Bank, North Usman Road Branch, Chennai, dated 07.08.2005, and the order of assessment under Section 143(3) dated 30.10.2008, the present reopening would not have been made and could not have been made. Therefore, we are convinced that the reopening is a clear case of change of opinion and therefore, not valid in law.

Summary

Issues:
Challenge to reopening of assessment under Section 148 of the Income Tax Act, 1961.

Detailed Analysis:
The writ petitioner challenged the proceedings of the Assessing Officer, initiated under Section 148 of the Income Tax Act, 1961, and sought to quash the consequential proceedings as being without jurisdiction and illegal. The petitioner, an individual, had filed a return of income for AY 2010-11, declaring total income. The Assessing Officer questioned the non-offering of capital gains to tax from the sale of a property during the Financial Year 2009-10. The assessment was completed under Section 143(3) of the Act. However, the assessment was sought to be reopened in 2017 based solely on the sale transaction, leading to the petitioner's objections on the grounds of change of opinion. The Assessing Officer's reasons for reopening were found to be a verbatim copy of audit objections, raising concerns of lack of fresh material for reassessment.

The Single Bench opined that the Income Tax authorities could reopen proceedings to examine transaction genuineness and legality. The Division Bench focused on determining the validity of the reassessment and whether it constituted a change of opinion. The critical issue was whether the property transfer occurred in AY 2004-05 or in AY 2010-11. The definition of transfer under Section 2(47) of the Act was crucial. It was established that all elements of transfer were satisfied in 2003 itself, and the petitioner had disclosed and paid taxes on capital gains in previous assessments. The reassessment lacked new material and was deemed a clear case of change of opinion, causing unwarranted harassment to the petitioner.

Consequently, the Division Bench allowed the Writ Appeal, setting aside the order and quashing the impugned proceedings. The reassessment was deemed invalid, and the petitioner's objections were upheld, leading to the closure of the connected miscellaneous petition.