2024 (9) TMI 968 - HC - Income Tax

Reopening of assessment - sale of the land - notice beyond the period of four years - respondent contended that the transactions were in the nature of trade and should be taxed as business income - HELD THAT - The reasons recorded pertain to sale of the land during the year under consideration which was subjected to scrutiny in the regular assessment. As per the second proviso to Section 147, AO would not have any jurisdiction to reopen the assessment when there is no failure on part of the assessee to disclose fully and truly all the material facts relevant for the assessment. The reasons recorded by AO are also not correct as the assessee has never filed the return in Form ITR-3 or Form ITR-4, as stated in the reasons recorded by treating the income so as to treat the sale consideration received as a business income. Assessee has filed the return of income in Form ITR-5 which is for the purpose of salary income and the other income from the capital gain and as such, the information recorded in the reasons is not correct and the entire reasons are based on the assumption and presumption that the assessee ought to have disclosed the LTCG as business income, without there being any basis. AO has, therefore, not arrived at an independent reasoning for reopening of the assessment. It appears that the impugned notice is issued on the basis of the audit objection which is not permissible in law, in absence of any fresh tangible information available with the AO to reopen the assessment, which is already completed u/s 143 (3) after more than four years in absence of any failure on part of petitioner to disclose fully and truly all material facts relevant for the assessment. The impugned notice u/s 148 is hereby quashed and set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income-Tax Act, 1961 for Assessment Year 2016-17.

Analysis:
The petitioner challenged a notice issued under Section 148 of the Income-Tax Act, 1961 for Assessment Year 2016-17. The notice was based on the contention that the petitioner treated Long Term Capital Gain (LTCG) as business income, leading to an alleged evasion of tax. The Assessing Officer believed that the petitioner's main intention was trading and that the transactions should be treated as business income. The petitioner argued that the notice was issued beyond the statutory period and was a change of opinion by the respondent. The respondent contended that the transactions were in the nature of trade and should be taxed as business income. The court considered the reasons recorded and found them to be incorrect, as the petitioner had filed returns in Form ITR-5, not Form ITR-3 or ITR-4 as mentioned in the reasons. The court held that the notice was based on assumptions and lacked a proper basis for reopening the assessment. The court ruled in favor of the petitioner, quashing the notice under Section 148 of the Act.

This case involved a challenge to a notice issued under Section 148 of the Income-Tax Act, 1961 for Assessment Year 2016-17. The Assessing Officer alleged that the petitioner had wrongly treated LTCG as business income, leading to tax evasion. The petitioner argued that the notice was issued beyond the statutory period and was a change of opinion by the respondent. The respondent contended that the transactions were in the nature of trade and should be taxed as business income. The court analyzed the reasons recorded and found them to be incorrect, as the petitioner had filed returns in Form ITR-5, not Form ITR-3 or ITR-4 as mentioned in the reasons. The court held that the notice lacked a proper basis for reopening the assessment and ruled in favor of the petitioner, quashing the notice under Section 148 of the Act.

The court considered the contentions raised by both parties regarding the notice issued under Section 148 of the Income-Tax Act, 1961 for Assessment Year 2016-17. The Assessing Officer alleged that the petitioner wrongly treated LTCG as business income, while the petitioner argued that the notice was beyond the statutory period and was a change of opinion by the respondent. The respondent claimed that the transactions were in the nature of trade and should be taxed as business income. The court scrutinized the reasons recorded and found them to be incorrect, as the petitioner had filed returns in Form ITR-5, not Form ITR-3 or ITR-4 as stated in the reasons. The court concluded that the notice lacked a proper basis for reopening the assessment and ruled in favor of the petitioner, quashing the notice under Section 148 of the Act.