2024 (11) TMI 1094 - AT - Income Tax

Reopening of assessment u/s 148 beyond the limitation period - HELD THAT - In the present case as it appears to us that before issuance of notices the AO did not get himself satisfied though he may obtain a copy of sale deed from the office of the ADSR, Siliguri to verify the truth. It is apparent from the sale deed filed by the assessee that property in question was not sold by the assessee alone but his two sons were also the vendors of the property. As apparent from the assessment order that the AO had signed the notice u/s 148 of the Act on 31.03.2021 but did not issue the same although the AO had stated in his order that the notice was issued by him on 31.03.2021 but at the same time, AO had stated that as there was no e-mail address registered in the e-filing portal, the notice was served on the assessee on 28.12.2021. Hence, in our view, the notice was issued on 28.12.2021, much after the date of the limitation and accordingly, the issuance of notice is also bad in law. We are in this view that issuance of notice is bad in law. Since issuance of notice is bad in law, hence, all the consequent orders passed thereafter has no legal force and accordingly set aside. Appeal filed by the assessee is allowed.

Summary

Issues:
Reopening of assessment under Section 148 of the Income Tax Act, 1961 beyond the limitation period.

Analysis:
The appeal pertains to the Assessment Year 2014-15 and challenges the order passed under Section 250 of the Income Tax Act by the Commissioner of Income-tax (Appeals). The Assessing Officer issued a notice under Section 133(6) based on information about a property transaction by the assessee in the financial year 2013-14. Subsequently, a notice under Section 148 was issued after obtaining necessary satisfaction, alleging an escapement of income chargeable to tax. The AO assessed the appellant based on the entire stamp duty value of the property, treating it as undisclosed capital gain. The appeal to the CIT(A) was dismissed due to non-response from the assessee.

The main contention of the assessee's counsel is that the reopening of assessment by issuing a notice under Section 148 is legally flawed. The counsel argued that the AO did not verify the information correctly and issued the notice beyond the limitation period. The counsel cited relevant case laws to support this argument. On the other hand, the Departmental Representative supported the impugned order.

Upon examination, it was found that the assessee jointly owned a property with his deceased wife and two sons. The AO reopened the assessment assuming the assessee to be the sole owner of the property, which was incorrect. The AO failed to verify the facts before issuing the notice under Section 148, which is crucial for reopening assessments beyond four years. The Calcutta High Court's decision emphasized the importance of the AO's satisfaction before issuing a notice after the limitation period.

The AO's failure to verify the ownership details of the property and the delayed issuance of the notice beyond the limitation period rendered the notice and subsequent orders invalid. The judgment highlighted the significance of proper issuance of notices under the Income Tax Act. Consequently, the appeal by the assessee was allowed, and all consequent orders were set aside.

In conclusion, the judgment focused on the legal flaws in the reopening of the assessment by the AO, emphasizing the importance of adherence to procedural requirements under the Income Tax Act.