2023 (12) TMI 987 - HC - Income Tax

Reopening of assessment - Sales consideration shown double / twice in AIS - allegation of undisclosed source of purchase of property - As per AO the the assessee has purchased two properties and purchase consideration is more than sale consideration of property - Petitioner has been candid in admitting that though the residential flat sold during the year was a short term capital asset and petitioner was liable to pay tax thereon, petitioner did not pay any tax on short term capital gain because petitioner was advised that as the flat was a residential flat and in the same year petitioner had purchased another flat, no income was chargeable to tax - HELD THAT - On the working of the short term capital gain for the flat sold, the Assessing Officer came to a finding that taxable capital gain was Rs. 13,64,000/-. But strangely in the impugned order dated 29th March 2023 issued under Section 148A(d) of the Act, the Assessing Officer proceeded further on the basis as regards the two immovable properties purchased by the assessee, the assessee has submitted that, she has purchased only one property for the consideration of Rs. 35,00,000/- . What we find difficult to digest is even in the notice issued u/s 148A(b) or the information annexed thereto, nowhere does it state petitioner has purchased two properties for Rs. 70 lakhs. Petitioner has provided documents to justify that petitioner has purchased only one property for Rs. 35 lakhs and also has explained the source of funding. If the Assessing Officer has to say that there are two properties purchased, either erroneously the figure of Rs. 35 lakhs is doubled and shown as Rs. 70 lakhs in the AIS, or the Assessing Officer should provide the details of the second property, which according to the Assessing Officer, petitioner has purchased but has failed to disclose resulting in an escapement of income. An assessee cannot prove negative. If the Assessing Officer has any positive information about the details of the second property allegedly purchased, the Assessing Officer was duty bound to apply his mind and confront petitioner with those documents. Simply relying on what the AIS states and passing an order is not something which this Court can accept. As we agreed to entertain this petition only in view of this undertaking given by Mr. Phadke that assessee will pay the capital gain payable and will not raise the issue of limitation under Section 149(1)(b) of the Act. The impugned order to the extent of Rs. 35 lakhs remaining as unexplained is hereby quashed and set aside. AO shall give effect to this order and provide computation of income to petitioner within four weeks of this order being uploaded and as per the undertaking given, petitioner shall pay the amount as computed within four weeks thereafter. Even if petitioner feels the computation is wrong, the amount will be paid and thereafter, petitioner may take such steps as advised in accordance with law to impugn the computation of income.

Summary

Issues involved:
The issues involved in this case are related to the assessment of short term capital gain on the sale of a residential flat, the purchase of another residential flat, the notice issued under Section 148A(b) of the Income Tax Act, 1961, discrepancy in the information provided by the Assessing Officer, and the unexplained source of investment for the purchase of the property.

Assessment of Short Term Capital Gain:
The petitioner sold a residential flat during the Financial Year 2015-2016 and purchased another residential flat. The petitioner did not pay tax on the short term capital gain as advised that no income was chargeable to tax due to the purchase of another flat. However, the Assessing Officer found taxable capital gain of Rs. 13,64,000. The petitioner explained the source of investment for the purchase of the property, including a loan from the petitioner's brother and a home loan. The Assessing Officer raised concerns about the unexplained source of investment for the property purchase and undisclosed capital gain.

Notice under Section 148A(b) of the Act:
The petitioner received a show cause notice under Section 148A(b) for Assessment Year 2016-2017 based on information indicating the sale of an immovable property valued at Rs. 30,00,000 or more and the purchase of another property. The petitioner provided relevant documents to support the purchase of only one property for Rs. 35 lakhs, contrary to the information in the notice. The Assessing Officer failed to provide details of the alleged second property and relied solely on the information system, leading to discrepancies in the assessment.

Court Decision and Order:
The High Court quashed and set aside the impugned order to the extent of Rs. 35 lakhs remaining unexplained. The petitioner agreed to pay the determined capital gain within 30 days and waived the issue of limitation under the Act. The Court directed the Assessing Officer to provide a computation of income within four weeks, and the petitioner was required to pay the amount as computed within the subsequent four weeks. The petitioner retained the right to challenge the computation of income after making the payment.