2023 (12) TMI 983 - HC - Income Tax

Reopening of assessment u/s 147 - Capital Gains arising out of the sale in respect of Thiruporur land - A Power of Attorney was executed by the Petitioner and petitioner states that she has not received any amount subsequent to the execution of Power of Attorney - as apart merely because the Sale Deed was executed by the Power Agent, it will not create any liability for payment of Capital Gains for the Assessment Year 2017-2018. It is because the petitioner received entire sale consideration at the time of execution of Power of Attorney itself - HELD THAT - This Court is of the considered view that since the petitioner has taken a stand that the entire amount of sale consideration was received on 16.12.2015 that would be the date for receipt of the sale consideration by the petitioner either for a sum of Rs. 50,00,000/- (Rupees Fifty Lakhs only) or a sum of Rs. 1,04,64,000/- (Rupees One Crore Four Lakhs Sixty Four Thousand only) as alleged by the Respondents. In view of the admission of this aspect by the Petitioner by virtue of oral submission and by virtue of filing of the additional affidavit, this Court is of the considered view that the Impugned Notice of the 1st Respondent dated 31.03.2022 as well as Impugned Assessment Order dated 29.03.2022 are liable to the set aside. Accordingly, the same are set aside. It is made clear that in the event if the petitioner takes a different stand in future that any of the Capital Gains arising out of the sale of the Thiruporur property has to be considered for Assessment Years 2017-18 in which case, the Respondents are at liberty to initiate proceedings against the Petitioner. Since, the matter is pending before the Appellate authority pertaining to the Assessment Year 2016-17, the Appellate authority shall consider this aspect with regard to the receipt of sale consideration and decide the same for the Assessment Year 2016-17.

Summary

Issues Involved:
1. Validity of reassessment proceedings under Section 148 of the Income Tax Act for AY 2017-18.
2. Determination of the correct Assessment Year for the taxation of capital gains from the sale of Thiruporur land.
3. Alleged dual taxation of the same transaction in different assessment years.
4. Principles of natural justice in the issuance of the Show Cause Notice and assessment order.

Summary:

1. Validity of reassessment proceedings under Section 148 of the Income Tax Act for AY 2017-18:
The Petitioner challenged the reassessment proceedings initiated by the 1st Respondent under Section 148 of the Income Tax Act for AY 2017-18, arguing that there was no "fresh tangible material" justifying the reopening of the assessment for that year. The Petitioner contended that the transaction in question, the sale of Thiruporur land, had already been taxed in AY 2016-17, and thus, the reassessment for AY 2017-18 was without jurisdiction.

2. Determination of the correct Assessment Year for the taxation of capital gains from the sale of Thiruporur land:
The Petitioner executed a Power of Attorney in favor of Mr. R.M. Jagannathan on 16.12.2015, receiving a sum of Rs. 50,00,000/- as consideration for the sale of Thiruporur land. The Department argued that the sale deed executed on 26.05.2016 indicated a market value of Rs. 1,04,64,000/-. The Court held that since the entire sale consideration was received on 16.12.2015, the correct Assessment Year for taxing the capital gains should be 2016-17, regardless of the sale deed execution date.

3. Alleged dual taxation of the same transaction in different assessment years:
The Petitioner argued that the same transaction was being taxed twice, once in AY 2016-17 and again in AY 2017-18, leading to dual taxation. The Court noted that the Department had passed assessment orders for both years based on the same transaction and quantum, but emphasized that the correct year for assessment should be 2016-17. The assessment for AY 2017-18 was deemed a protective assessment to safeguard the revenue's interest.

4. Principles of natural justice in the issuance of the Show Cause Notice and assessment order:
The Petitioner claimed that the Show Cause Notice and draft assessment order were issued on 27.03.2022, and the final assessment order was passed on 30.03.2022, violating principles of natural justice. The Court acknowledged this contention but focused more on the substantive issue of the correct assessment year.

Conclusion:
The Court set aside the Impugned Notice dated 31.03.2022 and the Impugned Assessment Order dated 29.03.2022 for AY 2017-18, ruling that the capital gains from the sale of Thiruporur land should be considered for AY 2016-17. The Appellate authority was directed to consider the receipt of sale consideration and decide the matter for AY 2016-17. The Writ Petition was allowed, and no costs were imposed.