2024 (9) TMI 650 - HC - Income Tax

Reopening of assessment u/s 147 - as argued no notice before the adverse conclusion was reached - no communication from bank to confirm the deposit in Capital Gain Account Scheme as claimed by the assessee - as argued not only the Impugned Assessment Order was beyond the period of limitation and without jurisdiction but also without considering the Certificate issued by the Canara Bank - HELD THAT - As petitioners are entitled to a notice before an adverse conclusion was arrived in Paragraph 3 of the Impugned Assessment Order that the Certificate did not mention Capital Gains Account. This ought to have been informed to the petitioners before an adverse order was passed against the petitioners. Under these circumstances, this Court is inclined to set aside the Impugned Assessment Order and remits the case back to the first respondent to pass appropriate orders on merits in accordance with law as expeditiously as possible preferably within a period of six months from the date of receipt of a copy of this order.

Issues Involved:
1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961.
2. Legitimacy of the disallowance of the deduction claimed under Section 54F of the Income Tax Act, 1961.
3. Procedural fairness and the right to notice before an adverse conclusion.

Detailed Analysis:

1. Validity of the reopening of the assessment under Section 148 of the Income Tax Act, 1961:

The petitioners challenged the reopening of the assessment, asserting that the invocation of jurisdiction under Section 148 was beyond the period of limitation under Section 148 read with Section 147 of the Act, and there was no suppression of facts by the petitioners. The assessment was initially completed on 29.08.2016, accepting the petitioners' return of income. However, the assessment was reopened on 25.07.2019, with reasons for reopening provided on 11.02.2021. The purported reason for reopening was the alleged incorrect computation of the cost of land and the improper claim of deductions under Section 54F.

2. Legitimacy of the disallowance of the deduction claimed under Section 54F of the Income Tax Act, 1961:

The core issue was whether the petitioners had deposited Rs. 53,00,000/- in the Capital Gains Account Scheme, 1988, as required for claiming deductions under Section 54F. The Impugned Assessment Order disallowed the deduction, stating that the petitioners had deposited the amount in Term Deposits yielding 9.5% interest, not in the Capital Gains Account Scheme. The bank statement from Syndicate Bank, obtained via notice under Section 133(6), did not mention any deposits in the Capital Gains Account Scheme. The petitioners contended that the amount was indeed deposited in the Capital Gains Account Scheme, supported by a Certificate from Canara Bank dated 19.02.2021.

3. Procedural fairness and the right to notice before an adverse conclusion:

The petitioners argued that they were not given notice before the adverse conclusion was reached in Paragraph 3 of the Impugned Assessment Order, which stated that the Certificate from the bank did not mention the Capital Gains Account. The court observed that the petitioners were entitled to a notice before such an adverse conclusion was made. The respondents contended that they were not obliged to provide information collected through notice under Section 133(6) to the petitioners and denied receiving any confirmation from the bank regarding the deposit in the Capital Gains Account Scheme.

Conclusion:

The court found that the petitioners should have been informed before an adverse order was passed. Therefore, the Impugned Assessment Order was set aside, and the case was remitted back to the first respondent to pass appropriate orders on merits in accordance with law, preferably within six months. All issues were left open for the petitioners to canvass in the remand proceedings. The writ petition was disposed of with no costs, and connected writ miscellaneous petitions were closed.

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