2022 (3) TMI 1044 - HC - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - purchase of immovable property - HELD THAT - AO re-opened the assessment on the ground that the petitioner had purchased immovable property; the fact which is contrary to the record, inasmuch as, it was not a case of purchase of immovable property by the petitioner; rather the petitioner along with co-sharers sold their ancestral land. This fact is further corroborated with the averments made wherein the revenue had admitted that due to typographical error/oversight the sale of land has been typed as purchase of land. This is not permissible in the eye of law. It is well settled principles with regard to reassessment. A reassessment proceeding is to be adjudged on the basis of reason to believe disclosed to the Assessee and the said reasons cannot be supplemented by the revenue as the reasons have to speak for themselves. The law is now no more res-integra that the reasons are required to be read as they were recorded by the assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded by the AO cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. Admittedly, in the instant case the AO has referred that the Assessee had purchased immovable property valued on 9.3.2017; whereas the fact is divergent. As such, the notice issued for initiation of reassessment proceeding does not have any legs to stand in the eye of law. This Court is conscious about the fact that from Schedule A of the sale deed dated 22.03.2017 (Annexure-2 to the writ petition) it appears that the nature of the land sold by the petitioner and cosharers was a residential land and not agricultural land as claimed by the petitioner in its computation of income and also in the instant writ petition. This fact is also admitted by the petitioner, inasmuch as, the petitioner himself in para-10 of its rejoinder affidavit had submitted that it can be case of the revenue that the petitioner wrongly claimed exemption but it cannot be any case of non-disclosure of any true or material facts by the Assessee. The revenue can initiate a fresh proceeding on the basis of the materials available on record for claiming wrong exemption by the petitioner. WP allowed.

Summary

Issues:
Quashing of reassessment order for AY 2017-18 based on objection rejection.

Analysis:
The petitioner filed a writ application seeking to quash the order rejecting objections to the reassessment notice for AY 2017-18. The Assessing Officer (AO) had reasons to re-open the case based on alleged non-disclosure of property purchase and vehicle sale. The petitioner contended that the reasons for reopening were incorrect as he had not purchased any property but sold ancestral land. The AO's reasons were found to be erroneous as they referred to a purchase instead of a sale. The Court emphasized that reasons for reassessment must be clear and cannot be supplemented later.

The respondents argued that the petitioner falsely claimed exemption for the sale of residential land as agricultural land in the income tax return. They contended that the petitioner's conduct of misrepresentation disentitled him to relief. The respondents also highlighted that the petitioner undervalued the property in the return, leading to an escape of income from taxation. They emphasized that the petitioner should be taxed based on the government rate for stamp duty, not the declared value.

The Court observed discrepancies in the AO's reasons for reassessment, noting that the petitioner sold residential land, not purchased property. It reiterated that reasons for reassessment must be based on facts and cannot be rectified later. While acknowledging the petitioner's incorrect claim of exemption, the Court quashed the reassessment notice and proceedings. However, it allowed the revenue to initiate a fresh proceeding for the wrongful exemption claim in accordance with the law.

In conclusion, the Court granted the writ application, quashing the reassessment notice and order. It emphasized the importance of accurate reasons for reassessment and disallowed post-facto supplementation of reasons. The Court upheld the principle that reassessment proceedings must be based on the original reasons disclosed to the taxpayer and cannot be altered or supplemented later.