2024 (1) TMI 1009 - HC - Income Tax

Validity of reopening of assessment - allegation of violation of the provisions of section 50C of the Income Tax Act, 1961 and due to noncompliance, assessee also failed to explain the transaction - HELD THAT - As petitioner states, and rightly so, that provisions of Section 50C of the Act would apply only to a seller and not the assessee in this case, who is the buyer of the property. Therefore, it is Mr. Basu s/petitioner case that there has been total nonapplication of mind while issuing this order under Section 148A(d) of the Act. Mr. Basu states that in the order also it is mentioned that the assessee is buyer of the property and if only the sanctioning authority had read the order, he would not have granted the sanction because Section 50C of the Act does not apply to buyers. We would agree with above Revenue relies on an affidavit-in-reply filed by one Manish - In our view, the said Manish is incompetent to make the statement because it is not the said Manish, who had passed the impugned order. There is also nothing to indicate in the affidavit that Manish made inquiries with the officer Abhishek Kumar Sinha, who passed the impugned order seeking an explanation for reliance on Section 50C of the Act. Therefore, we shall not accept this explanation of Respondents. Reason to believe - Assessing Officer before issuing a notice must have satisfied himself that what he writes makes sense. Even the Principal Commissioner, who granted sanction should have also applied his mind and satisfied himself that the order passed under Section 148A(d) of the Act was being issued correctly by applying mind. It cannot be a mechanical sanction. On these grounds alone, the petition should be allowed. We also should note that there is nothing in the notice to explain as to how, if the transaction amount is less than the stamp duty value, there can be escapement of any income particularly in the hands of a buyer. Decided in favour of assessee. .

Summary

Issues involved: Impugning of various notices and orders under the Income Tax Act, 1961, specifically under Sections 148A(b), 148A(d), 148, and 143(2) read with Section 147.

Impugned Notices and Orders under the Income Tax Act:
The petitioner challenged a notice dated 23rd March 2022 issued under Section 148A(b) of the Income Tax Act, an order dated 22nd April 2022 under Section 148A(d) of the Act, and subsequent notices dated 22nd April 2022, 30th January 2023, and 16th June 2023. The petitioner also contested a notice issued under Section 143(2) read with Section 147 of the Act. The petitioner did not respond to the initial notice received under Section 148A(b), leading to further actions by the authorities.

Application of Section 50C of the Act:
The order passed under Section 148A(d) of the Act alleged a violation of Section 50C of the Income Tax Act, 1961, pertaining to the consideration received from the transfer of a capital asset. The petitioner, being the buyer and not the seller, argued that Section 50C should not apply in this case. The petitioner's counsel highlighted the error in applying this provision to the buyer and emphasized the lack of due diligence in issuing the order.

Validity of Reopening and Assessing Officer's Decision-Making:
The respondents defended the reopening of the case as an opportunity for the assessee to present evidence and analyze the facts. However, the court disagreed, emphasizing that the Assessing Officer and the Principal Commissioner should have ensured the correctness of the order under Section 148A(d) before granting sanction. The court rejected the notion that sufficiency or correctness of material could be disregarded during the reopening process, stressing the importance of a thorough examination before issuing notices.

Judicial Decision and Quashing of Notices:
The court found in favor of the petitioner, allowing the petition and quashing the notices and orders challenged. The court granted the prayer clause seeking a writ to call for the records of the petitioner's case and set aside the impugned notices and orders. The court's decision was based on the errors in applying Section 50C, lack of proper explanation in the notices, and the failure to ensure due diligence in the decision-making process. The petition was disposed of accordingly.