2023 (9) TMI 626 - HC - Income Tax

Reopening of assessment u/s 147 - Reason to believe - capital gains as regards the property and application of Section 50(C) - Government Notification determining the market value of the said property - HELD THAT - Respondent wanted to make submissions on the provisions of the Indian Stamp Act, (A.P. Amendment) Act, 1971 etc., but in our view none of that is relevant because under Section 148 of the Act as the proposed reopening was beyond four years the only point which we need to consider is whether there was failure to truly and fully disclose material facts. When petitioner filed its return of income on 29th November 2006 and revised return of income on 15th February 2008 and during the assessment proceedings, the Notification of Andhra Pradesh Government was already published on 20th April 2007 which has been made available during the assessment proceedings to the A.O. Therefore, there is no failure to truly and fully disclose material facts. Moreover, the A.O. having accepted, and rightly so, the Government Notification determining the market value of the said property and pass the Assessment Order, the question of reopening the assessment for reasons as recorded would not arise. Amendment in Section 50(C), inserted by the Finance Act, 2016, with effect from 1st April 2017, which provided that where the date of the agreement fixing the amount of consideration and the date of registration for the transfer of the capital asset are not the same, the value adopted or assessed or assessable by the stamp valuation authority on the date of agreement may be taken for the purpose of computing full value of consideration for such transfer. Though not raised initially, later in view of the amendment to Section 50(C) appellant had challenged even this determination of capital gains on the grounds that the capital gains should be worked out on the basis of the date of the agreement fixing the amount of consideration and not the date of registration for the transfer of the capital asset and therefore capital gains should be determined on the basis of consideration - The appellate authority accepted petitioners submissions that this amendment should be read to have been introduced with retrospective effect. CIT A has given its decision accepting petitioner s contentions and directing the Assessing Officer to take the date of agreement for stamp duty value consideration.Therefore, in our view nothing would survive in the impugned notice itself.

Summary

Issues Involved:
1. Validity of Notice under Section 148 of the Income Tax Act, 1961.
2. Reopening of assessment beyond the period of four years.
3. Alleged failure to disclose material facts fully and truly by the petitioner.

Summary:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 4th January 2013 issued under Section 148 of the Income Tax Act, 1961, proposing to reassess the income for Assessment Year 2006-2007. The notice was based on the belief that income had escaped assessment due to the market value of the property being Rs. 179.84 crores instead of Rs. 31.73 crores, as reported by the Sub Registrar, Uppal, Ranga Reddy District.

2. Reopening of assessment beyond the period of four years:
The notice was issued over four years after the expiry of the relevant Assessment Year 2006-2007. Therefore, the proviso to Section 147 of the Act applied, which restricts action under Section 147 after four years unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The court noted that the assessment order under Section 143(3) had already been passed, and the only consideration was whether there was a failure to disclose material facts.

3. Alleged failure to disclose material facts fully and truly by the petitioner:
The court examined the reasons to believe that income had escaped assessment, which were based on AIR information received during the assessment proceedings for Assessment Year 2008-09. The court found that the petitioner had disclosed all relevant details, including the sale deed and the notification by the Government of Andhra Pradesh, during the original assessment proceedings. The Assessing Officer had already considered these details and applied Section 50(C) of the Act, taking the market value of Rs. 31.73 crores for computing capital gains. Therefore, there was no failure to disclose material facts.

Conclusion:
The court concluded that there was no failure on the part of the petitioner to disclose material facts fully and truly. The reasons for reopening the assessment were not justified, and the notice under Section 148 was invalid. The court made the rule absolute in terms of prayer clause (a) and disposed of the petition.