2023 (5) TMI 483 - HC - Income Tax

Reopening of assessment u/s 147 - validity of notice u/s 148 - Capital gain on sale of land - assessee sold the land by lower rate than which was prevailing - HELD THAT - While going though the valuation report, rate of the said land was Rs.12,250/- per sq. mtr., (open land rate) and applying rate of land furnished by the Sub-Registrar-8, Rander, Surat the value of the land area of 9424.02 sq.mtr., comes to Rs.11,54,44,245/-. So the land in question is assumed to be open land and despite agriculture which relates to agricultural land and determination of stamp paid is accepted by the stamp valuation authority, there appears to be a fundamental error of fact by the authority as it reflects from the records. Respondent authority is trying to assume valuation beyond the value which has been prescribed by the stamp valuation authority and further the sale document is clearly indicating that pursuant to the compromise which has taken place, the sale has been made effective of 23% of the overall land for amount of Rs.5,13,61,000/-. Thus, it appears that once this issue has been gone into by the respondent authority, it would not be open for the respondent authority to re-open the issue relating to long term capital gain. Whether re-opening is permissible after audit party expresses opinion? - Re-opening of the case on the basis of factual error pointed out by the audit party is permissible, we may revert back to the decision delivered in the case of Reckitt Bencksier Healthcare India (P.) Ltd., ( 2016 (9) TMI 338 - GUJARAT HIGH COURT wherein it has been propounded that it is settled position of law that reason to believe need to be of the assessing officer alone and same cannot be substituted based upon receiving objection from the Audit Department and as such, considering the aforesaid situation which is prevailing on record, and having found this fundamental error as indicated above, we are of the opinion that a case is made out by the petitioner. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the impugned notice dated 28.03.2021.
2. Validity of the impugned order dated 10.03.2021.
3. Whether the reopening of assessment under Section 148 of the Income Tax Act is permissible based on a change of opinion.

Summary:

1. Validity of the Impugned Notice:
The petitioner challenged the notice dated 28.03.2021 under Article 226 of the Constitution of India, seeking its quashing. The petitioner argued that the notice was issued based on a mere change of opinion, which is impermissible. The original assessment was completed on 04.12.2019 under Section 143(3) of the Income Tax Act without any additions. Despite detailed scrutiny and acceptance of the return, the notice for reopening was issued almost two years later, which the petitioner contended was based on an erroneous valuation of the land as open land instead of agricultural land.

2. Validity of the Impugned Order:
The petitioner also sought to quash the impugned order dated 10.03.2021, which disposed of the objections against the reopening notice. The petitioner argued that the order was based on non-application of mind and incorrect premises, particularly the erroneous valuation of the land. The petitioner contended that the valuation by the assessing officer contradicted the stamp authority's accepted valuation and that the land in question was agricultural, not open land.

3. Reopening of Assessment:
The petitioner argued that the reopening under Section 148 was based on a change of opinion and lacked fresh tangible material. The petitioner cited several judicial precedents to support the contention that reopening based on a mere change of opinion is impermissible. The respondent, however, argued that the reopening was within four years and not based on a mere change of opinion. The respondent contended that the issue of taxability under Section 50C was neither raised nor opined upon during the original assessment.

Court's Findings:
The court found that the sale document and the stamp authority's valuation clearly indicated the land as agricultural. The court noted a fundamental error in the respondent authority's assumption of the land as open land. The court referred to judicial precedents, emphasizing that reopening based on a mere change of opinion is not permissible. The court highlighted that the original assessment had scrutinized the transaction, and no new tangible material was presented to justify reopening.

Conclusion:
The court quashed the impugned notice dated 28.03.2021 and the impugned order dated 10.03.2021, allowing the petition. The court held that the reopening of assessment was impermissible as it was based on a mere change of opinion and lacked fresh tangible material.