2017 (1) TMI 1369 - HC - Income Tax

Validity of reopening of assessment - exemption under Section 54B eligibility - reasons to believe - Held that - The issue with respect to exemption under Section 54B of the Act was gone into by the Assessing Officer while framing assessment under Section 143(3) of the Act and same was not disturbed in reassessment proceedings. That thereafter, again Assessing Officer is issued the impugned notice on the very ground i.e. on the ground that the assessee was not entitled to exemption under Section 54B of the Act. Under the circumstances, on the ground that the subsequent reassessment proceedings have been initiated on change of opinion by the subsequent Assessing Officer and also on the ground that there was no failure on the part of the assessee in not disclosing true and correct facts and therefore, condition precedent to assume the jurisdiction under Section 147 of the Act are not satisfied, impugned reassessment cannot be sustained. - Decided in favour of assessee

Summary

Issues:
1. Validity of notice under Section 148 of the Income Tax Act for reopening assessment for AY 2009-10.
2. Whether the assessee failed to disclose material facts necessary for assessment.
3. Entitlement to exemption under Section 54 B of the Income Tax Act.
4. Permissibility of reopening assessment beyond four years.

Analysis:

Issue 1:
The petitioner-assessee challenged the impugned notice under Section 148 of the Income Tax Act, seeking to quash the reopening of the assessment for AY 2009-10. The Assessing Officer alleged that income chargeable to tax had escaped assessment under Section 147 of the Act.

Issue 2:
The petitioner argued that there was no failure on their part to disclose material facts, as the sale deeds related to the land sale were already before the Assessing Officer during the original assessment. The subsequent reassessment did not disturb the exemption granted under Section 54 B of the Act, indicating no failure in disclosure.

Issue 3:
The dispute centered on the entitlement to exemption under Section 54 B of the Income Tax Act concerning the sale of land. The Assessing Officer contended that the land was sold for non-agricultural purposes, rendering the exemption inapplicable. However, the petitioner maintained that the land was sold as agricultural land with proper permissions, justifying the exemption.

Issue 4:
The High Court emphasized that for reopening assessments beyond four years, the conditions of the proviso to Section 147 must be met. It was noted that the Assessing Officer had already considered the exemption under Section 54 B during the reassessment, and since it was not disturbed, there was no failure in disclosure. The court held that the subsequent reassessment, based on a change of opinion and without meeting the conditions for reopening, was unsustainable. The court quashed the impugned notice under Section 148, ruling in favor of the petitioner-assessee.

In conclusion, the High Court found that the reassessment proceedings for AY 2009-10 were not sustainable as the conditions for reopening beyond four years were not met, and there was no failure on the part of the assessee in disclosing material facts. The court ruled in favor of the petitioner and quashed the notice under Section 148 of the Income Tax Act.