2023 (11) TMI 854 - AT - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - allegation of escapement of income as assessee has not shown any capital gain from the sale of immovable property in his Return of Income - HELD THAT - Whereas it can be seen from the original Return of Income filed by the assessee assessee declared his salary income and computation of capital loss and working of cost inflation index as on 01-04-1981. So without verifying the original Return of Income, the Ld. A.O. has recorded the reasons that the assessee has not shown any income from capital gain which is an incorrect statement and non-application of mind by the Assessing Officer while recording the reasons for reopening the assessment for the Assessment Year 2008-09. Also as seen from Para 3 of the assessment order, A.O. himself admits that the Return of Income filed by the assessee wherein the computation of capital loss offered by the assessee. This is self-contradictory to the reasons recorded by the A.O. It is thereafter, the Ld. A.O. referred the matter to DVO to ascertain the Fair Market Value of the immovable property as on 01-04-1981. Thus when the reasons recorded itself is found to be incorrect and there is no failure on the part of the assessee in disclosing the capital gain. Therefore invocation of section 147 and issuance of notice u/s. 148 of the Act by the A.O. are without authority of law and cannot be sustained. Assumption of jurisdiction u/s. 147 of the act is without authority of law and the same is not sustainable. Decided in favour of assessee.

Summary

Issues:
The appeal challenges the appellate order against the assessment order under section 144 of the Income Tax Act, 1961 for the Assessment Year 2008-09.

Reopening of Assessment:
The assessee, an individual with salary income and Long Term Capital Gain, filed the original Return of Income for A.Y. 2008-09. The case was reopened under section 147 of the Act based on the sale of immovable property, alleging income escapement. The AO recomputed Long Term Capital Gain and demanded tax. The assessee contended that the reasons for reopening were factually incorrect as the original return declared Long Term Capital loss. The CIT(A) upheld the reopening but directed the AO to adopt the cost of acquisition as disclosed by the assessee. The assessee appealed, arguing that the AO's reasons for reopening were incorrect and lacked authority of law. The Tribunal held that the reasons recorded for reopening were incorrect, citing previous High Court judgments, and quashed the reassessment.

Grounds of Appeal:
The Assessee raised multiple grounds of appeal, challenging the legality of the reassessment. The grounds included issues related to the Notice u/s. 148, incorrect facts in the reasons for reassessment, passing of an Ex-Parte order, and non-adjudication of exemption claimed under section 54 of the IT Act. The Assessee's counsel argued that the reasons recorded by the AO were invalid, as the original return did disclose capital loss, contrary to the AO's assertion of income escapement. The Revenue supported the lower authorities' order.

Decision and Rationale:
The Tribunal found that the AO's reasons for reopening were based on incorrect facts, as the original return did declare capital loss. The AO's referral to the DVO and reliance on previous Tribunal decisions were deemed irrelevant. Citing High Court judgments, the Tribunal held that the assumption of jurisdiction under section 147 was without authority of law and quashed the reassessment. The appeal was allowed in favor of the Assessee.