2023 (4) TMI 954 - HC - Income Tax

Reopening of assessment u/s 147 - Exemption u/s 54EC - HELD THAT - Notice for reopening and the grounds on which it was rested were without supported by any foundational facts. When the return of income was filed and all the relevant details including the share in the sale proceeds the basis of the details of exemption claimed under section 54EC the index cost etc. were shown there was nothing to doubt the said details which figured in the return of income which was processed. The submission that the co-owners showed the capital gains of different amount is also not a valid ground since the facts and computation in case of each assessee in respect of return of income would differ. Petitioner assessee showed all facts and details in the return of income. Neither there existed foundational facts nor it could be said that any tangible material was available with the assessing officer to justify exercise of power. It could be said that the basis for reopening was absent. When the foundation was missing there could not have been erection of ground to seek reopening of assessment. It could not be said in the facts of the case that the assessing officer could have harboured a reason to believe acceptable in eye of law to seek reopening. Decided in favour of assessee.

Issues involved:
The challenge against a notice issued by the assessing officer under section 148 of the Income Tax Act, 1961 for the Assessment Year 2011-2012, seeking to reopen the assessment of the petitioner.

Details of the Judgment:

Issue 1: Reopening of Assessment
The petition challenged a notice issued by the assessing officer under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the Assessment Year 2011-2012. The notice was based on the alleged escapement of income due to the petitioner not declaring capital gains on the sale of an immovable property. The petitioner contended that the return of income had duly reflected the relevant details, including the share in the sale proceeds and exemption claimed under section 54EC of the Act. The assessing officer's reasons for reopening were found to be without foundational facts or tangible material to justify the exercise of power. The court held that the notice lacked a valid basis and set it aside.

Issue 2: Compliance with Income Tax Provisions
The petitioner had filed the return of income for the Assessment Year 2011-2012, declaring gross total income and net income. The return was duly processed, and all relevant details, including the share in the sale proceeds and exemption claimed under section 54EC, were disclosed. The petitioner had computed the value of the property, claimed exemptions, and investments as per the provisions of the Income Tax Act. The court noted that the petitioner had complied with the necessary income tax provisions and had provided all required information in the return of income.

Issue 3: Legal Basis for Reopening
The assessing officer sought to reopen the assessment based on the alleged escapement of income from the sale of an immovable property. However, the court found that the reasons for reopening were not supported by foundational facts or concrete belief of material. The absence of a valid basis for reopening the assessment led the court to set aside the notice dated 30.03.2018. The court emphasized that the assessing officer must have a valid reason to believe, supported by tangible material, to justify the reopening of an assessment under the Income Tax Act.

In conclusion, the court allowed the petition and made the rule absolute, setting aside the notice seeking to reopen the assessment for the Assessment Year 2011-2012.

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