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2024 (1) TMI 292 - AT - Income TaxReopening of assessment u/s 147/148 - failure to issue notice u/s 143(2) - assessee has sold jointly held immovable property admeasuring area 19627 sq. mtr. during F.Y.2011-12, relevant to A.Y.2012-13 - violation of provisions of section 50C as assessee is required to show the consideration received in the computation of capital gain, however, the assessee was failed to do so - assessee argued that provision of section 143(2)/143(3) of the Act, cannot be substituted with the provision of section 147/148 of the Act, hence reasons recorded by the Assessing Officer on same set of facts, which were disclosed by the assessee in the return of income, are not a valid reason to reopen the assessment. HELD THAT - As provisions of section 143(2)/143(3) of the Act, have been substituted by the Income Tax Department with the provisions of section 147/148 of the Act, which is not acceptable in the eye of the law, hence reasons recorded by the Assessing Officer on same set of facts, which were disclosed by the assessee in the return of income filed u/s 139 of the Act, are not a valid reason to reopen the assessment. I also note that in the return of income, the assessee has disclosed the correct and full material facts about the disputed land, therefore on the same set of facts, the reopening of assessment is not allowed. We also note that assessee filed return of income for the assessment year under consideration and it is within the power of the Income Department to issue the scrutiny notice u/s 143(2) of the Act and conduct the scrutiny assessment on the assessee instead of reopening of the assessee s case u/s 147/148. Therefore, reopening of assessment is not valid as the Income Tax Department has power to conduct the scrutiny assessment by issuing notice u/s 143(2) of the Act. After filing the return of income u/s 139 of the Act, if the Department does not conduct the scrutiny assessment, by issuing notice u/s 143(2) of the Act then in that situation, on same set of facts, which are narrated in the return of income filed by the assessee, the Department cannot reopen the assessment u/s 147/148 of the Act. The assesse has disclosed in the return of income filed by him, all material facts relating to disputed land, therefore the Department should have conducted the scrutiny assessment by issuing notice u/s 143(2) of the Act rather than reopening the assessment u/s 147/148 of the Act, which is not acceptable. If the Assessing Officer had any doubt about the correctness of the items disclosed in the return of income filed by him u/s 139 of the Act, and he wanted to verify the same, he ought to have issued notice u/s 143(2) of the Act within the time limit permissible under the proviso to above sub-section. Having failed to issue the notice u/s 143(2) of the Act, within the period of limitation, the provisions of section 147/148 cannot be invoked to get the extended time limit for verification of the correctness of the income returned. Based on these facts and circumstances, quash the reassessment proceedings. Appeal of assessee allowed.
Issues Involved:
1. Addition of Long Term Capital Gain (LTCG) and Short Term Capital Gain (STCG) on sale of immovable property. 2. Applicability of Section 50C of the Income Tax Act. 3. Deduction under Section 54EC for investment in NHAI Bonds. 4. Interpretation of Release Deed as Purchase Deed. 5. Reopening of assessment under Section 147 and issuance of notice under Section 148. Summary: 1. Addition of LTCG and STCG on Sale of Immovable Property: The assessee contested the addition of Rs. 16,68,295/- as LTCG and Rs. 16,68,295/- as STCG for the sale of agricultural land. The assessee argued that the land was agricultural and should not attract capital gains tax. The Assessing Officer (AO) determined that part of the land was a Short Term Capital Asset due to its purchase date, thus subject to STCG. 2. Applicability of Section 50C: The AO applied Section 50C, which mandates using the stamp duty valuation for computing capital gains. The assessee claimed that the agreement to sell was executed in 2010, and the stamp duty valuation from that period should apply. The AO found discrepancies in the documents and upheld the higher valuation, adding Rs. 33,36,590/- to the assessee's income. 3. Deduction under Section 54EC: The assessee claimed a deduction of Rs. 29,60,000/- under Section 54EC for investment in NHAI Bonds. The AO disallowed this, stating the bonds were allotted beyond the six-month period from the date of transfer. 4. Interpretation of Release Deed as Purchase Deed: The AO treated the Release Deed as a Purchase Deed, leading to the assessment of 25% LTCG as STCG. The assessee argued that the land was inherited, and the AO's interpretation was incorrect. 5. Reopening of Assessment under Section 147/148: The assessee challenged the reopening of the assessment, arguing that the AO should have issued a notice under Section 143(2) for scrutiny instead of reopening the case under Section 147/148. The Tribunal agreed, stating that the AO substituted the provisions of Section 143(2)/143(3) with Section 147/148, which is not permissible. The Tribunal quashed the reassessment proceedings, rendering other issues academic and infructuous. Conclusion: The Tribunal allowed the appeal, quashing the reassessment proceedings on the grounds that the AO should have conducted a scrutiny assessment under Section 143(2) instead of reopening the case under Section 147/148. The other issues on merits of the additions were rendered academic and not adjudicated.
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