2023 (10) TMI 206 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - bogus transaction - whether mere disclosure at the time of original assessment proceedings need not mean that the disclosure was true and full? - HELD THAT - As specifically brought to the notice of the Intelligence Wing that the assessee/petitioner is engaged in the business of trading in land. That the land in question was held by the petitioner as stock-in-trade. The income that had arisen to the petitioner on this transaction was in the nature of income from business and profession. The assessee had duly got her books of account audited u/s 44AB. The land was treated as stock-in-trade and hence, jantri rates are not applicable in case of business transactions entered into by the assessee. It was specifically pointed out that in view of the above, the land was not subject to capital gain and jantri value is inapplicable. It was therefore also submitted that Section 50(C) of the Act could not have been applied. When specific queries were made regarding the sale of land and the assessee had given the required details, it could not be said that there was a failure to disclose fully and truly all material facts so as to assume jurisdiction u/s 148 - In fact, as is evident from the reasons itself, no fresh information of tangible material was on record and it was only an information which was known and explained was made a basis of the notice. Even on account of the concept of change of opinion, inasmuch as, based on the notices issued, the Assessing Officer had already made inquiries into the very same land and on the issue of applicability of Section 50C of the Act, it was not open for the respondent to give a different treatment. It has been held that even in the reasons recorded when there is no allegation that there was any failure on the part of the assessee in not disclosing truly and fully material facts necessary for the assessment, the assumption of jurisdiction to reopen the assessment beyond a period of four years in exercise of powers under Section 147 of the Act is bad in law and contrary to the provisions of Section 137. On the concept of change of opinion in the case of Gujarat Power Corporation Limited 2012 (9) TMI 69 - GUJARAT HIGH COURT claims of the assessee which were not rejected by the Assessing Officer in the scrutiny assessment, the court held that in cases where the Assessing Officer has not made an assessment of any item of income chargeable to tax while passing the assessment order, it cannot be said that such income was subjected to an assessment. The court was of the opinion that in the original assessment, the Assessing Officer never really formed an opinion on a particular contentious issue. It was in this background that the Court was of the opinion that since no opinion was formed in this regard, consequently there would be no question of a mere change of opinion. The Court also expressed an opinion that in view of the explanation 2 to section 147 of the Act, power to make assessment or re-assessment within four years would be attracted even in cases where there has been complete disclosure of all material facts. WP allowed.

Summary

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act for assessment year 2012-13.

The petitioner filed a return of income for assessment year 2012-13, which was selected for scrutiny. The petitioner contended that all relevant information regarding the sale of land had been disclosed during the original assessment proceedings. The respondent issued a notice under Section 148 of the Act in 2019, seeking to reopen the assessment. The petitioner raised objections on the grounds that there was no failure to disclose material facts and that the notice was time-barred. The respondent rejected the objections and proceeded with the reassessment.

The petitioner argued that the information forming the basis for reopening the assessment was already available during the original assessment. It was contended that no new material had come to light, and the reassessment was merely a change of opinion by the authorities. The respondent, however, defended the reassessment by stating that the transaction in question was found to be a bogus transaction and that there was deliberate misrepresentation by the petitioner in the sale deed.

The Court examined the reasons supplied for reopening the assessment and found that the information relied upon was known to the authorities before the original assessment was completed. The Court also noted that the petitioner had provided detailed responses regarding the sale of land during the original assessment proceedings. It was observed that there was no failure to disclose material facts, and the reassessment was based on information already on record.

In light of the above, the Court quashed the notice dated 28.03.2019 and the order disposing of the petitioner's objections. The petition was allowed in favor of the petitioner.