2024 (2) TMI 468 - HC - Income Tax

Reopening of assessment u/s 147 - change of opinion - notice issued after the expiry of more than 4 years - unaccounted sale of immovable properties - It is assessee s case that they never owned these two properties and, therefore, question of it being accounted in books of account does not arise. It is also assessee s case that assessee was only a developer and, therefore, was a confirming party for the agreement for sale entered into between original tenants, who were shown as vendors and the purchasers of the flat. HELD THAT - In the assessment order, there is a discussion with regard to work in progress of assessee. In the letter dated 8th December 2016, assessee has given examples of certain transactions and also copies of those agreements for sale to convince the AO that assessee s role was only that of confirming party and assessee had no right in the sale consideration. Copies of the agreements for sale with regard to the two flats mentioned in the reasons for reopening the assessment are also annexed to the petition. In the affidavit in reply, there is no denial of the facts mentioned in the petition. In the reasons recorded, a statement which is not entirely correct has been made, in as much as, it is stated that copies of the agreements for flat no. 1201 and 2002 has not been provided to the AO to examine. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. The only requirement is that the AO ought to have considered, the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. In the case at hand, the AO having raised a query and the petitioner having replied to it, it follows that the query raised was subject of consideration of the AO while passing the assessment order dated 23rd December 2016. In our view, the re-opening of assessment by the impugned notice is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are the validity of a notice issued under Section 148 of the Income Tax Act, 1961 and the order disposing objections passed thereafter.

Impugned Notice under Section 148:
The petitioner, engaged in real estate development, filed its income tax return for A.Y. 2014-15, which was accepted by the assessing officer. Subsequently, a notice was issued alleging that income had escaped assessment due to the sale of properties not accounted for in the books. The petitioner contended that they were only confirming parties in the sale agreements and did not own the properties in question. The court found that the notice was based on a change of opinion by the assessing officer and did not constitute valid reasons to believe that income had escaped assessment.

Reasons for Reopening Assessment:
The reasons for reopening the assessment included the sale of two properties for a significant amount not accounted for in the books. The assessing officer believed that income had escaped assessment due to the failure of the assessee to disclose all material facts. However, the court held that the assessing officer's query during the original assessment proceedings had been adequately addressed by the assessee, and the re-opening of the assessment was based on a change of opinion, not valid reasons to believe that income had escaped assessment.

Court's Decision:
In light of the above findings, the court allowed the petition and quashed the notice issued under Section 148 and the order disposing objections. The court concluded that the re-opening of the assessment was not justified and did not meet the legal requirements for validly reopening an assessment under the Income Tax Act, 1961.