2024 (7) TMI 440 - HC - Income Tax

Validity of reassessment proceedings - capital gain on sale on co-owned land - reassessment proceedings on the basis of the report obtained from the DVO in case of co-owner making allegation of suppression of lower valuation for sale of land in question - as in the case of co-owner as referred the matter to the DVO for fair market valuation and long term capital gain was computed by making addition under Section 50C of the Act based upon the valuation report of the DVO - HELD THAT - Reasons recorded nowhere mentioned about forming reason to believe due to the report of the DVO in case of co-owner and therefore, reliance placed on the report of the DVO by the respondent in the affidavit-in-reply to justify the reopening is not tenable as no fresh material to justify the reassessment forming part of the reasons recorded can be pressed into service to justify the validity of the reassessment notice. In view of the foregoing reasons, when the petitioner of Special Civil Application No. 22046 of 2019 has disclosed fully and truly all the material facts during the course of the original assessment, there was a change of opinion for reopening of the assessment by issuing the impugned notice u/s 148 of the Act. Therefore, the reliance placed on behalf of the respondent on the decision of Yogendrakumar Gupta 2014 (7) TMI 391 - GUJARAT HIGH COURT would also not apply as the allegation in the said case pertains to the transaction with shell companies which stands on a different footing. The impugned notice under Section 148 of the Act therefore cannot be sustained. The petition deserves to be allowed. Reliance on benefit of other co-owners enjoyed - Different yardstick cannot be applied for treating the notice under Section 148 of the Act for reopening in view of the decision relied on by the petitioner in case of Kumararani Smt. Meenakshi Achi 2006 (10) TMI 123 - MADRAS HIGH COURT wherein it is held that the assessee who is also a co-owner of the property, is entitled to the benefit enjoyed by the other co-owners, whose valuation of the same property, at the same rate as that of the assessee, was accepted by the Commissioner of Income Tax and recorded in the order under appeal by the Tribunal. Therefore, in the present case also, when the notice of reopening is held bad in law in case of the co-owner, on the same ground, the impugned notice for reopening, on the same facts, would not sustain and permitting such notice to be proceeded would be an exercise in futility. Assessee appeal allowed.

Issues Involved:
1. Reopening of assessment under Section 148 of the Income Tax Act, 1961.
2. Applicability of Section 50C of the Income Tax Act, 1961.
3. Allegation of change of opinion by the Assessing Officer.
4. Validity of tangible material for reopening assessment.
5. Treatment of co-owners in assessment proceedings.

Detailed Analysis:

1. Reopening of Assessment under Section 148:
The court examined the legality of the reopening of assessment under Section 148 of the Income Tax Act, 1961. The petitioner argued that the reopening was based on a mere change of opinion, as all relevant details were already furnished during the original assessment. The court noted that the Assessing Officer issued the impugned notice for reopening after almost four years, with the prior approval of the Income Tax Commissioner, based on the belief that income had escaped assessment.

2. Applicability of Section 50C:
The core issue was whether the provisions of Section 50C of the Income Tax Act, 1961, which deals with the adoption of stamp duty valuation for calculating capital gains, were applicable. The petitioners had sold immovable property and declared capital gains based on the actual sale consideration. The Assessing Officer contended that the sale consideration was lower than the stamp duty valuation, thus invoking Section 50C. The petitioners argued that the difference in jantri value pertained to a different block of land and not the subject property in question.

3. Allegation of Change of Opinion:
The petitioner contended that the reopening of the assessment was merely a change of opinion, which is not permissible. The court observed that during the original assessment, the Assessing Officer had specifically considered the applicability of Section 50C for a different block of land and had consciously not applied it to the subject property. The court held that the reopening based on the same facts amounted to a change of opinion.

4. Validity of Tangible Material for Reopening Assessment:
The court examined whether the information received from the ITO, which led to the reopening, constituted tangible material. The court held that the valuation made by the stamp valuation authority could not be considered tangible material. The court cited its previous decision in Munir Ismail Voraji v. Income Tax Officer, where it was held that a DVO report in respect of a co-owner's valuation is not tangible material without additional evidence.

5. Treatment of Co-owners in Assessment Proceedings:
The court addressed the issue of whether the same treatment should be extended to co-owners in assessment proceedings. The petitioners argued that since the original assessment in the case of one co-owner did not invoke Section 50C for the subject property, the same should apply to them. The court agreed, noting that different yardsticks could not be applied to co-owners of the same property. The court relied on the decision in Kumararani Smt. Meenakshi Achi, which held that co-owners are entitled to the same benefits.

Conclusion:
The court concluded that the reopening of the assessment was based on a change of opinion and lacked tangible material. Therefore, the impugned notices under Section 148 and the orders rejecting the objections were quashed and set aside. Both petitions were allowed, and the rule was made absolute to the extent of quashing the reopening notices. No order as to costs was made.

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