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2014 (10) TMI 8 - HC - Income TaxReopening of assessment u/s 148 – Held that:- Two distinct conditions must be satisfied before the AO can assume jurisdiction to issue a notice u/s 148 of the Act, that he must have reasons to believe that the income of the assessee had escaped assessment and, that he must have reasons to believe that such escapement was by reasons of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment - If either of these conditions are not fulfilled, the notice issued by the Assessing Officer would be without jurisdiction - the AO in his reasons should also state that the escaped income is likely to be ₹ 1 lac or more, which is an essential ingredient for seeking the approval and satisfaction that is to be recorded by the Competent Authority u/s 151 of the Act. The difference between "short term capital asset" and "long term capital asset" is the period over which the property has been held by the assessee - It has nothing to do with the nature of the title over the property – assessee already had rights as owner of the property subject to the covenant of the lease for all purposes such as transfer of the lease hold rights of the property with the previous consent of the lessor - The conversion of the rights of the lessee in the property from lease hold to free hold was only an improvement of the rights over the property, which the petitioner enjoyed and this would not have any effect on the taxibility of capital gains from such property - the property was held for more than three years, short term capital gains would not be applicable - The conversion from lease hold to a free hold being an improvement of the title, does not have any effect on the taxibility of profits as short term capital gains - the notices issued u/s 148 of the Act does not comply with the proviso to Section 147 and 149 of the Act - The reasons recorded does not indicate that the assessee has failed to disclose fully and truly all material facts necessary for his assessment and that the escaped income was likely to be ₹ 1 lac or more – the notice issued u/s 148 cannot be sustained and is to be set aside – Decided in favour of assessee.
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