2023 (1) TMI 1391 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Notice beyond the period of 4 years - capital gain on sale of land - HELD THAT - In the instant case for A.Y.2012-13, the original assessment was finalized u/s 143(3) of the Act, after the notice under Section 142 had been issued on 7.11.2014. The impugned notice issued under Section 148 of the Act on 27.3.2019 and admittedly, it is beyond the period of 4 years from the end of A.Y.2012-13 and therefore, the requirements of the first proviso to Section 147 shall need to be necessarily satisfied for the respondent to reopen the assessment after period of 4 years from the end of the relevant assessment year. As can be noticed from the reasons recorded for reopening the assessment although the Assessing Officer has mentioned that there has been failure on the part of the petitioner to disclose the transaction fully and truly in the return of income. The fact remains that this very issue has been already scrutinized. There is no other outer source. Assessee in the return of income had not considered the jantri value for calculating the capital gain - As been mentioned that there is failure on the part of the petitioner to disclose truly and fully all material facts, as quite apparent from the record that not only in response to the notice issued u/s 142(1) of the I.T.Act, all particulars have been furnished by the petitioner at the time of finalizing the assessment. There has been reference on the part of Assessing Officer of the short term capital gain and hence, to say that there had been non-disclosure of all particulars fully and truly is without any merit. Mere perusal of the reasons recorded for reopening indicates that this is not case of any omission or failure on the part of the assessee to disclose the material. It has furnished that in response to the notice and thereafter on 1.9.2014 which lead to finalizing the assessment on 7.11.2014 . Resultantly, this petition warrants interference at the end of the Court. However, being aware of the fact that other issue which has been raised in relation to the provison of Section 45(3) r/w section 50C of the Act is still at large in other matters which are pending for final adjudication before this Court, the same has been kept open for being considered in those matters.

Summary

Issues Involved:
1. Legality of the reopening of assessment under Section 147 of the Income Tax Act.
2. Compliance with the conditions for reopening after four years under the proviso to Section 147.
3. Applicability of Sections 50C and 45(3) of the Income Tax Act to the case.

Detailed Analysis:

1. Legality of the Reopening of Assessment under Section 147 of the Income Tax Act:
The petitioner, an individual with income from agriculture and other sources, filed a return for the Assessment Year 2012-13. This return was scrutinized, and the assessment was completed under Section 143(3) on 7.11.2014. The respondent issued a notice under Section 148 on 27.3.2019 to reassess the income. The petitioner objected, arguing that the conditions for reopening under Section 147 were not satisfied, as all material facts were fully and truly disclosed during the original assessment.

2. Compliance with the Conditions for Reopening After Four Years under the Proviso to Section 147:
The petitioner contended that the reopening of assessment beyond four years is barred unless there was a failure to disclose fully and truly all material facts necessary for the assessment. The court noted that the original assessment was completed under Section 143(3) after detailed scrutiny, and all relevant documents were provided by the petitioner. The court found no new external information that justified the reopening. The reasons recorded for reopening were based on the same facts already scrutinized, indicating a mere change of opinion by the Assessing Officer.

3. Applicability of Sections 50C and 45(3) of the Income Tax Act:
The respondent argued that the land introduced as capital in the partnership firm should be valued as per the stamp duty value under Section 50C, leading to a short-term capital gain. The court, however, did not delve into the applicability of Sections 50C and 45(3) as these issues were pending in other related matters before the court. The court focused on the procedural aspect of reopening the assessment and found that the conditions under the proviso to Section 147 were not met.

Conclusion:
The court concluded that the reopening of the assessment was not justified as there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment. The notice issued under Section 148 was quashed, and the petition was allowed. The court kept open the issue of the applicability of Sections 50C and 45(3) for consideration in other pending matters.