2025 (2) TMI 56 - HC - Income Tax

Reopening of assessment u/s 147 - reason to believe - as argued assessment cannot be opened twice for the same reason - value of the immovable property held by TREPL (Friends Colony property). HELD THAT - Information on the basis of which the impugned order has been passed was subject matter of examination in the earlier round of reassessment u/s 147 - AO s reason to believe that the petitioner s income had escaped assessment which had led to the issuance of notice dated 31.03.2021 was founded on an assumption that the petitioner had sold the shares of TREPL at a price below its correct value. The notice issued u/s 143 (2) during the said proceedings and the petitioner s response dated 24.03.2022 issued to the said notice clearly establishes that the examination revolved around the value of the immovable property held by TREPL (Friends Colony property). The petitioner s response dated 24.03.2022 indicates that the petitioner had forwarded the audited balance sheet and the profit and loss account of TREPL and had also explained that TREPL owned only two floors of the Friends Colony property. AO had examined the said response and accepted the same. Clearly the impugned order has been passed in respect of the same issue that was subject matter of examination in the earlier round. The question whether the TREPL owned the entire Friends Colony property is one that is easily verifiable by the AO. As noted above the AO has completely ignored the petitioner s response to the notice issued u/s 148A(b) in this regard in the impugned order. Similar approach has also been adopted in the counter affidavit as well. Section 148A (d) of the Act mandates that the AO is required to pass an order on the basis of record and considering the response to the notice u/s 148A(b). In this case the record indicates that the information on the basis of which the assessment is sought to be reopened was fully examined in the earlier round of reassessment under Section 147 read with Section 144B of the Act. Petitioner s response clearly stated that TREPL owned only two floors of the Friends Colony property and there is nothing credible on record that controverts it. The impugned order does not even advert to the said issue. Decided in favour of assessee.

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment were:

Whether the Assessing Officer (AO) was justified in reopening the assessment for Assessment Year (AY) 2017-18 on the same grounds that had been previously examined and concluded in the earlier reassessment proceedings.
Whether the issuance of the notice under Section 148 of the Income Tax Act, 1961, was beyond the period of limitation.

ISSUE-WISE DETAILED ANALYSIS

Reopening of Assessment on Previously Examined Grounds

Relevant Legal Framework and Precedents: The reopening of assessments is governed by Section 147 of the Income Tax Act, which allows the AO to reassess income if it has escaped assessment. However, this must be based on new information or material not previously considered.
Court's Interpretation and Reasoning: The Court noted that the AO had previously reopened the assessment for AY 2017-18 on similar grounds, which were thoroughly examined during the reassessment proceedings. The AO had accepted the petitioner's explanation regarding the valuation of shares of Trustline Real Estate Pvt. Ltd. (TREPL) and concluded the reassessment by accepting the petitioner's returned income.
Key Evidence and Findings: The petitioner had sold shares of TREPL, and the AO suspected undervaluation. However, the petitioner provided a valuation report and other documents to support the declared value, which the AO accepted in the previous reassessment proceedings.
Application of Law to Facts: The Court found that the AO's decision to reopen the assessment was based on the same information that had been previously scrutinized. The Court emphasized that reopening on identical grounds without new material is not permissible.
Treatment of Competing Arguments: The Revenue argued that new information suggested that TREPL owned the entire Friends Colony property, which was not considered earlier. However, the Court found no new material to support this claim and noted that the AO had ignored the petitioner's consistent explanation regarding the extent of property owned by TREPL.
Conclusions: The Court concluded that the reopening of the assessment was unjustified as it was based on previously examined grounds without any new material evidence.

Period of Limitation for Issuance of Notice

Relevant Legal Framework: The issuance of notices under Section 148 is subject to a limitation period, which, according to the petitioner, had expired on 31.03.2024.
Court's Interpretation and Reasoning: Given the Court's decision on the primary issue, it found it unnecessary to delve into the question of limitation.
Conclusions: The Court did not make a determination on this issue due to its decision to set aside the impugned order and notice on other grounds.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "Section 148A (d) of the Act mandates that the AO is required to pass an order on the basis of record and considering the response to the notice under Section 148A(b) of the Act."
Core Principles Established: Reassessment cannot be initiated on the same grounds that were previously examined and concluded without any new material evidence. The AO must consider the taxpayer's response and the existing record before proceeding with reassessment.
Final Determinations on Each Issue: The Court set aside the impugned order and notice, finding them unsustainable due to the lack of new material evidence and the failure to consider the petitioner's response adequately.

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