2024 (12) TMI 69 - AT - Income Tax

Reopening of assessment - undeclared sale consideration/capital gain - AO specifically mentions that the income is likely to be escaped is more than Rs. 50 lakhs and is represented in the form of asset - HELD THAT - The assessee had merely sold immovable property amounting to Rs. 43 lakhs and, in fact, had invested this amount in purchase of another property of Rs. 90 lakhs leading to an addition of Rs. 47 lakhs. In this context, we have also examined the order under clause (d) of section 148 dated 29.03.2022 and we find that on the basis of sale of immovable properties worth Rs. 1,33,00,000/-, the assessee was show caused for the purpose of section 147 of the Act and, accordingly, the notice u/s 148 dated 29.03.2022 was issued. While in notice u/s 148A(b), AO had relied information of sale of immovable property worth 43lacs, received, from Sub-registrar and the TDS return filed u/s 194IA of the Act, was also considered to be sale of immovable property, while it was, in regard to TDS deduced as purchaser. Thus it was not a case of capital gain of Rs 1,33,00,000/- escaping assessment, as alleged in notice under clause (b) of section 148A of the Act. It is no doubt a case of mechanical reopening, as the AO, did not even bother to differentiate, on the two different information heads independently, and cumulatively considered to be escapement of capital gains of more than Rs. 50, lacks. The contention of Ld. DR that only prima facie case has to be seen at time of reopening is not sustainable it the light of mandate of new regime with regard to reopening of assessment beyond three years. Appeal of the assessee is allowed.

Summary

Issues:
1. Jurisdictional validity of impugned reopening action u/s 148 of 1961 Act
2. Merits: Arbitrary and non-application of mind on part of LD AO and LD CIT-A

Jurisdictional Validity of Impugned Reopening Action u/s 148 of 1961 Act:
The appeal was against the order of the Commissioner of Income Tax (Appeals) arising from a notice issued under section 148 of the Income Tax Act, 1961. The assessee challenged the reopening of the assessment on the grounds of jurisdictional validity. The threshold for reopening an assessment after three years is Rs. 50 lakhs, but the addition in this case was Rs. 47 lakhs, leading to the argument that the reopening was flawed. The Tribunal found that the reopening proceedings and notice were beyond the three-year period, violating section 149(1)(b) of the Act, which sets the threshold for reopening in such cases. The AO had mentioned undeclared income based on property transactions exceeding Rs. 50 lakhs, but it was revealed that the actual addition was only Rs. 47 lakhs. The Tribunal concluded that the reopening was mechanical and not based on a proper assessment, leading to the appeal being allowed.

Merits: Arbitrary and Non-Application of Mind:
The Tribunal also addressed the grounds challenging the merits of the assessment. The AO had made an addition under section 69/115BBE, which the assessee contended was arbitrary and lacked legal basis. The Tribunal found that the AO's reasoning for the addition was flawed and lacked legal weight. The assessee sought relief to quash the assessment and deletion of the addition. The Tribunal held that the assessment and the addition were invalid and unlawful, as the reasoning provided was arbitrary. The appeal was allowed, and the Tribunal set aside both the AO and the first appeal orders.

In conclusion, the Tribunal found the reopening of the assessment to be flawed due to the discrepancy in the amount considered for reopening and the actual addition. Additionally, the Tribunal determined that the addition made by the AO lacked legal basis and was arbitrary. As a result, the appeal of the assessee was allowed, and both the assessment and the addition were set aside.