2023 (7) TMI 1519 - HC - Income Tax

Reopening of assessment - validity of order passed u/s 148A(d) - Petitioner failed to submit any documentary evidence for double reporting of sale of property and details of cost of acquisition and the entire sale consideration will be treated as capital gain and this will be the escaped income in the year under consideration - HELD THAT - We fail to understand how a person can prove the negative. The onus was on the AO to prove that what the Petitioner has stated in the Reply was incorrect and in fact there were two transactions linked to Petitioner as against Petitioner s stand that there was only one transaction during the relevant Assessment Year. Moreover, how can the entire sale consideration be treated as capital gain. There must have been some cost price which after applying the required formula has to be reduced from the sale consideration to determine capital gain. In the circumstances, though Mr. Shirsat had requested for some time to take instructions and file reply, we see no reason to grant any time. In the circumstances, we quash and set aside the order u/s 148A(d) of the said Act. Consequently subsequent notice issued u/s 148 is also quashed and set aside. Matter is remanded to the concerned officer to pass a correct order.

Issues:
1. Validity of the order passed under Section 148A(d) of the Income Tax Act, 1961
2. Alleged incorrect recording of transactions by the Assessing Officer
3. Burden of proof on the Assessing Officer
4. Treatment of entire sale consideration as capital gain
5. Requirement of cost price deduction for determining capital gain
6. Quashing of the order and subsequent notice
7. Remanding the matter for a correct order and personal hearing
8. Preservation of rights and contentions
9. Authority of Respondent No.1 to make further inquiries

Analysis:
The High Court of Bombay heard a petition challenging an order passed under Section 148A(d) of the Income Tax Act, 1961. The petitioner, an individual resident of India, contended that the order was based on incorrect information regarding the sale of two properties, whereas the petitioner had only sold one property during the relevant assessment year. The petitioner had responded to the notice issued under Section 148A(b) by clarifying the discrepancy, but the Assessing Officer erroneously recorded that the petitioner admitted to both transactions. The court emphasized that the burden of proof lies with the Assessing Officer to establish the accuracy of the reported transactions linked to the petitioner. The court also questioned the treatment of the entire sale consideration as capital gain without considering the cost price deduction, highlighting the flaw in the Assessing Officer's approach.

Furthermore, the court expressed skepticism about the Assessing Officer's decision to not consider the petitioner's explanation and evidence provided in response to the notice. The court emphasized that the Assessing Officer failed to justify the recording of two transactions and the treatment of the entire sale consideration as capital gain. Consequently, the court quashed the order and subsequent notice issued by the Assessing Officer, remanding the matter for a correct order in accordance with the law and providing the petitioner with a personal hearing. The court also kept all rights and contentions open, including the petitioner's argument that the amount involved was below a certain threshold, making it ineligible for reopening.

In conclusion, the court directed the concerned officer to reevaluate the matter, giving due consideration to the petitioner's submissions and ensuring a fair opportunity for the petitioner to present their case. Additionally, the court acknowledged the authority of Respondent No.1 to conduct further inquiries and gather evidence to support the claims made in the original notice issued under Section 148A(b).

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