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2017 (9) TMI 190 - HC - Income TaxReopening of assessment - It was contended that, though the return was filed in pursuance of notice u/s 148 dated 31.3.2012, no assessment was made - Therefore, fresh notice dated 15.3.2016 on the premise of non-filing of return is incorrect - Long Term capital gain on sale of land - estimation of fair market value of the land - Held that - The reasons recorded by the Assessing Officer proceeded on the basis that Takhiben had filed no return which was factually incorrect. He, therefore, proceeded on the entirely wrong premise and his reasons therefore, lacked validity. AO,in the very first paragraph of the reasons, has referred to the fair market value of the plot of land which was, according to the department s valuer, was estimated at ₹ 2,41,800/- as against ₹ 94,55,160/- estimated by the assessee. The reasons recorded do not refer to it as on which the estimation of fair market value of the land is taken. If his reference was, as would be presumed on the basis of later portion of his recording of reasons, to the crucial date of 01.04.1981 he has not said so in the reasons. More importantly, if the fair market value, according to him was ₹ 2,41,800/- for the plot of land while computing the possible value of the income having escaped assessment, he gives no benefit of indexation of such cost of acquisition from 01.04.1981 till the date of sale of land. Assessing Officer exhibited absolute non-application of mind to the facts and materials on record. The notice for reopening of assessment was, therefore, based on reasons which were the product of such non-application of mind. Notice must therefore be quashed. - Decided in favour of assessee.
Issues:
Challenging notice to reopen assessment for AY 2009-10 based on escaped income. Detailed Analysis: Issue 1: Reopening of Assessment The petitioner challenged a notice issued by the Assessing Officer to reopen the assessment for the assessment year 2009-10. The petitioner, as the legal heir, objected to the notice for reopening, which was based on the alleged escapement of income chargeable to tax. The Assessing Officer sought to tax the sale consideration received by the petitioner's deceased relative from the sale of land. The petitioner contended that the Assessing Officer did not pass a final order of assessment despite the initial notice issued earlier. The Assessing Officer's reasons for reopening the assessment were scrutinized by the court. Issue 2: Reasons for Reopening The court found that the Assessing Officer's reasons for reopening the assessment lacked validity. The reasons recorded by the Assessing Officer were based on incorrect premises, such as the petitioner not filing a return of income, which was factually incorrect. The court highlighted that the petitioner had indeed filed a return in response to the earlier notice. The court emphasized that the Assessing Officer exhibited a total non-application of mind while recording reasons and issuing the notice for reopening. The court noted that the Assessing Officer's reasons were flawed and did not comply with the mandatory requirement of recording valid reasons for reopening an assessment. Issue 3: Lack of Application of Mind The court observed that the Assessing Officer failed to apply his mind adequately to the facts and materials on record. The reasons for reopening the assessment were deemed to be a product of non-application of mind. The court pointed out discrepancies in the Assessing Officer's reasoning, such as the failure to consider indexation of the cost of acquisition of the land while determining the income that allegedly escaped assessment. The court concluded that the notice for reopening the assessment was based on flawed reasoning and, therefore, needed to be quashed. Conclusion The High Court quashed the impugned notice dated 15.03.2016 to reopen the assessment for the assessment year 2009-10. The court allowed the petition and disposed of the matter in favor of the petitioner, emphasizing the importance of valid and well-reasoned grounds for reopening assessments to ensure procedural fairness and legal compliance.
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