2018 (5) TMI 63 - HC - Income Tax

Re-opening proceedings u/s. 148 - Validity of reason to believe - change of opinion - tax the profit of sale of a flat and 2 car parking in Tanhee Heights as long term capital gains - Held that - We note that during the regular assessment proceedings leading to the assessment order dated 12th September, 1996 under Section 143(3) of the Act, the respondent-assessee had furnished all information in respect of the issue of capital gains by letters during assessment proceedings. Assessing Officer had applied his mind to the facts and the law while passing the order of regular assessment. The decision in the case of Beena K. Jain (1993 (11) TMI 7 - BOMBAY High Court) being relied upon by the appellant in support of the re-opening notice was available at the time when the regular assessment order dated 12th September, 1996 under Section 143 of the Act was passed. Therefore, it would not be fair to presume that the Assessing Officer was ignorant of the decision rendered by this Court. Moreover, as the impugned order of the Tribunal itself records that the reasons recorded in support of the impugned notice was merely on the basis of borrowed satisfaction of the audit party. This also makes the impugned notice bad. - Decided in favour of assessee.

Summary

Issues involved:
1. Validity of re-opening proceedings under Section 148 of the Income Tax Act
2. Tax treatment of profit from the sale of property

Analysis:
1. The appeal challenged an order by the Income Tax Appellate Tribunal (Tribunal) regarding Assessment Year 1994-95 under Section 260A of the Income Tax Act. The main issue was the validity of re-opening proceedings under Section 148 of the Act. The Tribunal held the re-opening to be without jurisdiction, citing it as a case of change of opinion by the Assessing Officer without any new reason to believe income had escaped assessment. The Tribunal found the reasons for the re-opening lacking in application of mind and based on borrowed satisfaction from an audit objection. The appellant argued that the re-opening was valid due to a recent decision of the Bombay High Court, but both the CIT(A) and the Tribunal disagreed, emphasizing that all relevant information on capital gains had been disclosed during the regular assessment proceedings. The Tribunal concluded that the re-opening notice was invalid, leading to the dismissal of the appeal.

2. The second issue raised was the tax treatment of profit from the sale of property. The Tribunal did not delve into this matter extensively due to the primary focus on the validity of the re-opening notice. It was noted that the examination of the merits of the addition would only be relevant if the re-opening notice was deemed valid. Ultimately, the appeal was dismissed by the High Court, with no order as to costs.