2024 (8) TMI 1369 - HC - Income Tax

Validity of reopening of assessment - Reason to believe - no Capital Gains was offered for assessment on sale of land - whether the impugned notice and proceedings consequent thereto are liable to be interfered with? - HELD THAT - In effect, both in Jet Airways 2010 (4) TMI 431 - BOMBAY HIGH COURT and TAFE 2018 (12) TMI 1217 - MADRAS HIGH COURT , the Court held that Section 147 enables the assessing officer to travel beyond the reasons for initiating reassessment proceedings provided such reassessment is also carried out on the grounds or reasons on which reassessment was initiated. On the other hand, if the ground on which reassessment was initiated was no longer available to the assessing officer, the Court held that reassessment cannot be continued on the basis of the original notice under Section 148, and that a fresh notice is necessary. Counsel as submitted that the interpretation placed on Section 147 in Maninder Singh Kang 2012 (6) TMI 616 - PUNJAB AND HARYANA HIGH COURT and Govindaraju 2015 (8) TMI 271 - KARNATAKA HIGH COURT should be adopted. In view of the binding decision of the Division Bench of this Court in TAFE , the course of action canvassed by learned senior standing counsel is not open and his contention cannot be countenanced. Keeping the above legal position in mind, it becomes necessary to examine the assessment order to determine the basis of such order. In paragraph 15 of the assessment order, the assessing officer recorded findings with regard to the transaction that triggered reassessment proceedings. The reason cited for reopening the assessment for assessment year 2013- 14 was the deletion under the head 'land' without offering capital gains for assessment. As discussed earlier, the assessment order clearly discloses that no additions were being made on this account since there was no capital gain. The conclusion that follows from the above discussion is that no additions were made in the assessment order as regards the deletion of the relevant immovable asset although the said transaction formed the basis for reopening assessment - the notice u/s 148 and, therefore, the assessment order issued cannot be sustained. Since reassessment cannot be sustained on this ground, the other contentions regarding the invalidity of the notice under Section 148 are not being examined. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act.
2. Interpretation of Section 147 and Explanation 3 of the Income Tax Act.
3. Jurisdiction under Article 226 in tax assessment/reassessment matters.
4. Impact of the assessment order issued in contravention of the interim stay order.

Issue-wise Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act:

The petitioner challenged the notice under Section 148 dated 28.03.2018 and subsequent proceedings on the grounds that it did not set out the reasons for believing that there was escaped assessment. The reasons were later provided on 09.05.2018, citing a transaction related to the deletion of fixed assets value of lands. The petitioner argued that the reassessment was based on a change of opinion without tangible material, and all relevant documents were already available with the respondents. The court concluded that no additions were made in the assessment order regarding the transaction that triggered the reopening of the assessment, rendering the notice and the assessment order unsustainable.

2. Interpretation of Section 147 and Explanation 3 of the Income Tax Act:

The court examined the interpretation of Section 147 and Explanation 3, particularly in light of the judgments in "Jet Airways" and "TAFE." Both judgments held that reassessment must be carried out on the grounds on which it was initiated. If the initial grounds for reassessment are no longer valid, a fresh notice under Section 148 is required. The court rejected the respondents' reliance on contrary interpretations from other High Courts, adhering to the binding precedent in "TAFE."

3. Jurisdiction under Article 226 in tax assessment/reassessment matters:

The court addressed whether discretionary jurisdiction under Article 226 should be exercised given the existence of statutory remedies. The court noted that while alternative remedies are a material factor, they do not act as an embargo on the exercise of jurisdiction. Given the facts, including the issuance of the assessment order despite an interim stay, the court found it appropriate to exercise jurisdiction under Article 226.

4. Impact of the assessment order issued in contravention of the interim stay order:

The petitioner argued that the assessment order issued on 31.03.2022 was in contravention of the interim stay granted by the court on 30.03.2022. The court found that the issuance of the assessment order despite the interim stay further justified interference with the impugned notice and the assessment order.

Conclusion:

The court quashed the impugned notice under Section 148 and the assessment order dated 31.03.2022, leaving it open to the respondents to initiate fresh reassessment proceedings in accordance with the law. The court allowed the writ petition and closed the connected miscellaneous petitions.