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2021 (2) TMI 673 - AT - Income TaxReopening of assessment u/s 147 - eligibility of reasons to believe - mandatory requirements for re-opening the assessment have not been complied with by the AO - assessment had been reopened on account of the survey findings that the assessee had entered into the two JDAs and the income accruing to the assessee out of these JDAs had not been offered to tax and the assessee had not provided any documentary evidence that the transfer of the property to the developer had happened at a later date - HELD THAT - Assessing Officer has power to reopen the assessment provided there is tangible material to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief. In the present case there is no tangible material. The issuance of the impugned notice u/s.148 is nothing but mere change of opinion. In absence of any new tangible material available with the A.O. it is not open to the A.O. to change his opinion by issuing the notice of re-assessment. Being so in our opinion the reopening of assessment which is already concluded under Section 143(3) of the Act on 26.03.2010 cannot be reopened without any allegation by the Assessing Officer that there was non-disclosure of true and correct facts by the assessee while framing the original assessment. In order to assume jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143 two conditions are required to be satisfied. Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; Such escapement occurred by reason of failure on the part of the assessee either to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all the material facts necessary for his assessment for that purpose. The power to assess or reassess income under section 147 of the I.T. Act cannot invoked routinely . During the course of original assessment proceedings the issue for which the assessment is sought to be reopened was subject matter of examination by the A.O. Thus it is clear that the assessee had disclosed all the material facts during the regular assessment proceedings. Therefore it cannot be alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment - we hold that the reassessment proceedings is bad in law and we quash the same.- Decided in favour of assessee.
Issues Involved:
1. Legality of the reopening of assessment under Section 147 of the Income Tax Act. 2. Validity of the assumption of income during the impugned period. 3. Basis for determining the selling price and capital gains. 4. Applicability of Section 2(47)(v) regarding "transfer" of property. 5. Consideration of statutory documents and ongoing litigation affecting the property. 6. Evaluation of the cost of acquisition and sale value of capital assets. Issue-wise Detailed Analysis: 1. Legality of the Reopening of Assessment under Section 147: The assessee challenged the reopening of the assessment on multiple grounds, including the absence of a "reason to believe" that income had escaped assessment, the reopening being based merely on suspicion, and the lack of necessary sanction under Section 151 of the Act. The Tribunal noted that the original assessment was completed under Section 143(3) and the reopening was initiated beyond four years from the end of the relevant assessment year, which required the Assessing Officer (AO) to show a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found that the reasons recorded for reopening did not indicate any such failure by the assessee and thus held the reopening to be invalid. 2. Validity of the Assumption of Income During the Impugned Period: The AO assumed income based on the Joint Development Agreements (JDAs) dated 14.05.2007 and 07.05.2009, considering the transfer of land to have occurred in the respective assessment years. The assessee argued that due to ongoing litigation, possession of the land was handed over to the developer only in October 2013, and therefore, the income should be assessed in a later year. The Tribunal found that the AO did not have sufficient grounds to assume that income had accrued during the impugned period without proper evidence of possession transfer. 3. Basis for Determining the Selling Price and Capital Gains: The assessee contended that the AO assumed the selling price without any basis, arriving at an imaginary figure. The Tribunal observed that the AO's determination of the selling price and capital gains lacked tangible material and was not supported by documentary evidence, rendering the assessment arbitrary and speculative. 4. Applicability of Section 2(47)(v) Regarding "Transfer" of Property: The AO applied Section 2(47)(v) of the Income Tax Act, which pertains to the transfer of property, to bring the capital gains to tax. However, the Tribunal noted that the AO did not substantiate the claim that possession was transferred in the years of the JDAs. The Tribunal emphasized that the mere existence of JDAs did not automatically lead to the conclusion of transfer without concrete evidence of possession transfer. 5. Consideration of Statutory Documents and Ongoing Litigation Affecting the Property: The assessee argued that various statutory documents and ongoing litigation over the property were not considered by the AO, which affected the ability to carry out any activity on the property. The Tribunal agreed that the AO overlooked these critical aspects, which were essential to determine the correct assessment year for the income. 6. Evaluation of the Cost of Acquisition and Sale Value of Capital Assets: The assessee claimed that the AO incorrectly considered the cost of acquisition and the sale value of capital assets on an imaginary basis without any material evidence. The Tribunal found merit in the assessee's argument, noting that the AO's calculations were speculative and lacked proper substantiation. Conclusion: The Tribunal quashed the reassessment proceedings, holding that the reopening of the assessment was invalid due to the lack of a valid "reason to believe" and the absence of tangible material evidence. The Tribunal also noted that the AO failed to consider the full and true disclosure of material facts by the assessee during the original assessment. Consequently, the Tribunal annulled the assessment and allowed the assessee's appeal.
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