2024 (11) TMI 699 - HC - Income Tax

Validity of reopening of assessment - income that could have escaped assessment was below the threshold amount specified in Section 149 (1) (b) - as argued assessment proceedings have been initiated after an expiry of a period of three years and the information available indicates that the income that could possibly have escaped assessment is less than the threshold amount of Rs. 50,00,000/- as specified u/s 149 (1) (b) - HELD THAT - A plain reading of the impugned order indicates that it is ex facie erroneous and has been passed without application of mind. AO has now concluded that the income, which has escaped assessment and that the petitioner had received the said amount during the financial year (FY) 2016-17. The conclusion that the petitioner had received any amount from M/s Bhagwati Developers and its group concern during FY 2016-17 is without any basis. Apparently, the AO has lost track of the allegation made in the notice issued u/s 148A (b) of the Act, which was to the effect that the petitioner had purchased a flat for a consideration which included Rs. 25,35,940/-. There was no allegation that the petitioner had received any amount from M/s Bhagwati Developers or any of its group concern. The information available with the AO is also not suggestive of the petitioner having received any money from M/s Bhagwati Group. The information available on the portal also indicates that the petitioner had purchased an immovable property for a consideration of Rs. 70,35,940/-, which included payments in cash. Prima facie, it appears that the AO had erroneously added the value of the transaction, which includes the element of cash, and the alleged cash payment. However, the information available with the AO as disclosed does not support this computation. The impugned order is set aside. The matter is remanded to the AO to consider afresh in the light of the information as available as well as the petitioner s reply to the notice issued u/s 148A (b) of the Act.

Summary

Issues:
Challenge to reopening of assessment proceedings under the Income Tax Act based on the grounds of exceeding the time limit and threshold amount for income escaping assessment.

Analysis:
The petitioner challenged the reopening of assessment proceedings initiated under Section 148 of the Income Tax Act, 1961, on the basis that the income that could have escaped assessment was below the threshold amount specified in Section 149 (1) (b) of the Act, and the proceedings were initiated after the prescribed three-year period. The Assessing Officer (AO) alleged that the petitioner's income for the assessment year 2018-19 had escaped assessment due to discrepancies in the purchase of a residential flat. The petitioner contended that the information did not justify the conclusion that income above the threshold amount had escaped assessment. The AO passed an order determining the alleged escaped income at Rs. 95,71,880, which the petitioner disputed as erroneous and without proper application of mind.

The AO's order was found to be erroneous as it incorrectly concluded that the petitioner had received a certain amount from a developer during a specific financial year, which was not supported by the available information or the initial allegation in the notice. The AO had mistakenly added the value of the transaction, including cash elements, leading to an incorrect computation. The High Court noted that the AO had deviated from the original allegation in the notice and the available information did not support the AO's computation of the alleged escaped income. Consequently, the High Court set aside the impugned order and remanded the matter back to the AO for fresh consideration in light of the available information and the petitioner's response to the notice.

The High Court directed that any fresh order by the AO should be based on the notice issued under Section 148A (b) of the Act and any additional information provided by the AO. If the AO possessed further information, they were instructed to provide it to the petitioner for a response. The court emphasized that the AO's future actions should be limited to the scope of the original notice and any supplementary information provided, ensuring a fair and accurate assessment process. The petition was disposed of accordingly, and pending applications were also resolved.