2022 (9) TMI 1326 - HC - Income Tax

Reopening of assessment u/s 147 - show cause notice under Section 148A(b) - claim of the LTCG of the petitioner - Claim of deduction u/s 54 - HELD THAT - The sale of the residential house by the petitioner and purchase of the New Property by the petitioner within the stipulated time is admitted by Revenue - as further admitted that the entire sale consideration for the New Property as well as the stamp duty has been paid by the petitioner. The respondent has not disputed that this information was available and scrutinised by the AO during the assessment proceedings which resulted in the assessment order dated 07th November, 2017, and the AO was satisfied with respect to the claim of the LTCG of the petitioner. The judgment of this Court in Ravinder Kumar Arora 2011 (9) TMI 343 - DELHI HIGH COURT relied upon by the petitioner as regards his entitlement to claim LTCG is squarely applicable to the facts of the case. Re-assessment has been initiated on the basis of change of opinion, which is not permissible. There is no new information available with the respondent to re-assess the LTCG claim. AO had considered the same documents during the earlier assessment proceedings and was satisfied with the claim of LTCG made under Section 54 of the Act. Petitioner is entitled to claim exemption under Section 54 of the Act on these admitted facts, as the conditions stipulated in Section 54 stand fulfilled. The New Property would be treated as the property purchased by the petitioner in his name and merely because he has included the name of his wife and the property has been purchased in the joint names, it would not disentitle the petitioner from claiming the exemption under the statutory provisions. Accordingly, the order dated 28th July, 2022 under Section 148A(d) of the Act, and notice issued under Section 148 by the respondent with respect to the Assessment Year 2015-16 are set aside. WP allowed.

Summary

Issues Involved:
1. Legitimacy of reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Entitlement to Long Term Capital Gain (LTCG) exemption under Section 54 of the Income Tax Act, 1961.
3. Validity of the assessment order dated 28th July, 2022, under Section 148A(d) of the Income Tax Act, 1961.

Detailed Analysis:

1. Legitimacy of Reopening the Assessment under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the reopening of the assessment for AY 2015-16, arguing that there was no new information justifying the reassessment. The original assessment was completed on 07th November 2017, under Section 143(3) of the Act, after a detailed scrutiny where all relevant documents were considered. The reopening was based on an audit objection suggesting that the LTCG exemption was incorrectly claimed as the new property was purchased jointly with the petitioner's wife. However, the court found that the reassessment was initiated on a change of opinion, which is not permissible under the law. The court emphasized that all the information was already scrutinized during the original assessment, and no new material facts were presented to justify reopening the assessment.

2. Entitlement to Long Term Capital Gain (LTCG) Exemption under Section 54 of the Income Tax Act, 1961:
The petitioner claimed LTCG exemption under Section 54 for the sale of a property in Delhi and the subsequent purchase of a new property in Gurugram. The entire sale consideration and stamp duty for the new property were paid from the petitioner's bank account, although the property was purchased jointly with his wife. The court referred to the judgment in Commissioner of Income-Tax vs. Ravinder Kumar Arora, 2011 SCC OnLine Del 5615, which held that an assessee is entitled to claim exemption if the total consideration for the new asset is paid by the assessee, even if the property is purchased in joint names. The court found that the conditions stipulated in Section 54 were fulfilled, and the inclusion of the wife's name did not disqualify the petitioner from claiming the exemption.

3. Validity of the Assessment Order Dated 28th July, 2022, under Section 148A(d) of the Income Tax Act, 1961:
The impugned order dated 28th July, 2022, under Section 148A(d) was set aside by the court. The court noted that the Assessing Officer (AO) failed to consider the irrefutable documents evidencing that the entire sale consideration for the new property was paid by the petitioner. The court held that the AO's conclusion that the petitioner claimed excess exemption was contrary to the judgment in Ravinder Kumar Arora. The court also highlighted that the reassessment was based on a conjecture without any new information, which is not permissible.

Conclusion:
The court concluded that the petitioner is entitled to claim LTCG exemption under Section 54 of the Income Tax Act, 1961, as the conditions were fulfilled. The reopening of the assessment was deemed invalid as it was based on a change of opinion without any new material facts. Consequently, the order dated 28th July, 2022, under Section 148A(d) and the notice issued under Section 148 for AY 2015-16 were set aside. The writ petition was allowed, and the pending applications were disposed of.