The Gujarat High Court recently held that if the basic facts were not present, then there was no basis to request a reassessment. A division bench of Justice comprising N.V. Anjaria and Devan M. Desai held that there was a lack of essential facts and evidence to support the assessing officer's decision to reopen the assessment.
Brief Facts:
The challenge in this petition filed under Article 226 of the Constitution is directed against notice dated 30.3.2018 issued by the assessing officer against the petitioner under section 148 of the Income Tax Act, 1961 in respect of the Assessment Year 2011-2012 seeking to reopen the assessment of the petitioner for the year under consideration. It was stated in the notice that for the said assessment year 2011-2012, the income chargeable to tax had escaped the assessment within the meaning of section 147 of the Income Tax Act, 1961 (‘the Act’). The return of income came to be filed by the petitioner Assessee in respect of the Assessment Year 2011-2012 on 20.7.2011. The said return of income came to be processed by the competent authority.
The petitioner assessee filed his objections to the reasons provided by stating inter alia in his letter dated 1st September 2018 that the immovable property was sold by the petitioner assessee along with four other persons for the total sale consideration of Rs. 9 crores. It was stated that the return of income was filed for the Assessment Year 2011- 2012 after considering the capital gains, the computation of income was duly reflected and 1/5th share of the value of the sale of the immovable property-bungalow was also shown. There is no dispute about the fact that the sale of the immovable property bungalow was by five joint owners having equal shares.
Contentions of the Petitioner:
The learned Counsel for the Petitioner submitted that 1/5th share in the bungalow and other attendant facts were mentioned and thereafter the entire action to reopen the assessment was without any basis, on the other hand, the learned advocate for the respondent relied on the affidavit-in-reply filed by the respondent to contend on that basis that the return of the petitioner was accepted under section 143(1) of the Act without scrutiny. 4.1 It was submitted that the assessing officer had reopened the case beyond the period of four years from the end of the relevant assessment year. According to the submission, the petitioner had jointly with the other five co-owners sold the immovable property for total consideration of Rs. 9 crores and filed a return of income, which was only for the net income, it was submitted of Rs. 41,500/-.
His further contention was that the assessing officer had reopened the case beyond the period of four years from the end of the relevant assessment year. According to the submission, the petitioner had jointly with other five co-owners sold the immovable property for total consideration of Rs. 9 crores and filed a return of income, which was only for the net income, it was submitted of Rs. 41,500/-
Contentions of the Respondent:
According to the contention of the respondent, the petitioner had not declared the capital gains and there was an escapement of income. It was also contended that other co-owner assessed total capital gain at Rs. 1,27,94,856/-. Learned advocate for the respondent relied on the decision of the Supreme Court in Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. [(2007) 291 ITR (SC)].
Observations of the Court:
This Court observed that when the reasons for reopening are to be looked at, the assessing officer stated that there was a sale of immovable property for a consideration of Rs. 9 crores jointly with others and that in the return of income filed on 20.7.2011, the net income declared by the assessee was Rs. 41,500/- only and that the assessee had not declared the capital gains.
After analyzing the whole facts, in view of this Court, the notice for reopening and the grounds on which it was rested, were without supported by any foundational facts. When the return of income was filed and all the relevant details including the share in the sale proceeds, the basis of the details of exemption claimed under section 54EC, the index cost, etc. were shown, there was nothing to doubt the said details which figured in the return of income, which was processed. The submission that the co-owners showed the capital gains of different amounts, was also held not as a valid ground since the facts and computation in the case of each assessee in respect of return of income would differ.
Therefore, the Court held that neither there existed foundational facts, nor it could be said that any tangible material was available with the assessing officer to justify the exercise of power. Further, the basis for reopening was absent. When the foundation was missing, there could not have been an erection of ground to seek reopening of assessment. It could not be said, in the facts of the case, that the assessing officer could have harbored a reason to believe it acceptable in the eye of the law to seek reopening.
The decision of the Court:
The Gujarat High Court, allowing the petition, set aside the notice dated 30.03.2018 seeking to reopen the assessment of the petitioner in respect of Assessment Year 2011-2012.
Case Title: Bimlakumari Lajpatraj Hurra Versus Income Tax Officer
Coram: Hon’ble Justice N.V. Anjaria and Devan M. Desai
Case no.: R/SPECIAL CIVIL APPLICATION NO. 16884 of 2018
Advocate for the Petitioner: DARSHAN R PATEL
Advocate for the Respondent: MR. KARAN SANGHANI WITH MRS KALPANAK RAVAL
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