2023 (11) TMI 596 - HC - Income Tax

Escapement of income of trust - assessment year selection - as alleged petitioner had sold an immovable property and income arising there from was not offered to tax under the head Capital Gains in the return of income - as per assessee transfer of lease hold rights was duly offered to tax by petitioner on its own in the year of transfer - HELD THAT - In the affidavit in reply filed through one Mr. P. N. Nair, Joint Commissioner of Income Tax (OSD) affirmed on 30th May 2022 it is admitted that the assessment for Assessment Year 2018-19 was completed on 27th August 2021 while the notice under Section 148 of the Act was issued on 31st March 2021. Respondent as agreed to a query posed by the court that if the amount has already been considered in the subsequent assessment years and assessment order has been passed, the question of escapement of income for the same amount in the previous year will not arise. We are also informed that there is no change in the rate of tax. Reopening order set aside - Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are related to the assessment of income by the petitioner for different assessment years, treatment of income arising from the transfer of leasehold rights, scrutiny by the Income Tax department, reopening of assessment for a previous year, and the legality of notices and orders issued by the tax authorities.

Assessment Year 2018-19:
The petitioner, a charitable trust, had shown an income of Rs. 43 Crores in its books for the financial year 2017-18, representing the total cost to the developer arising from the transfer of leasehold rights. This income was also considered as the cost of new school buildings by the petitioner. The return of income for Assessment Year 2018-19 was filed, showing the same amount as consideration for the transfer of leasehold rights and as an application of income under Section 11 of the Income Tax Act, 1961. The assessment proceedings were initiated, and after providing necessary explanations and documents, the returned income was accepted by the department in an assessment order dated 27th August 2021.

Reopening of Assessment Year 2016-17:
A notice was issued under Section 143 of the Act for Assessment Year 2016-17, proposing to assess the income of the petitioner as having escaped income. The reasons for reopening indicated that the petitioner had sold an immovable property for Rs. 40 Crores in 2015, and the income arising from it was not offered to tax as capital gains. The petitioner objected to the reopening, stating that the income of Rs. 43 Crores from the transfer of leasehold rights had already been offered to tax in the subsequent assessment year, i.e., 2018-19. Despite the objections, the reopening was upheld by the tax authorities in an order dated 13th January 2022.

Court's Decision:
During the proceedings, it was acknowledged that the income of Rs. 43 Crores had been considered in subsequent assessment years, and assessment orders had been passed. The court, considering this fact and the absence of any change in the tax rate, allowed the petition. The court issued a writ quashing the impugned notice dated 31st March 2021 for reopening the assessment of Assessment Year 2016-17 and the order dated 13th January 2022. The petition was disposed of with no order as to costs.