Home Case Index All Cases Income Tax Income Tax + HC Income Tax - 2021 (9) TMI HC This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (9) TMI 565 - HC - Income TaxValidity of Reopening of assessment u/s 147 - Eligibility of reason to believe - Capital gain u/s 45 on partners transfer of capital asset - whether the revenue is justified in reopening the assessment for the year under consideration ? - writ applicants being partners of the partnership firm transferred their capital assets received by them in the form of gift to the partnership firm by way of capital contribution at a market rate and therefore, they are liable for capital gain u/s 45 (3) - whether the writ applicants were engaged in trading business of gold and gold ornaments before the partnership firm came into existence ? - HELD THAT:- The reasons for reopening are merely based on the observations made by the AO while framing the assessment of the partnership firm vide order dated 31.12.2017. It is pertinent to note that, against the assessment order dated 31.12.2017, the firm is in appeal before the appellate authority and the appeal is still pending. Thus, while recording the reasons, the AO has considered the relevant facts like issue of stock in trade, the way in which the stock of proprietary concern came to be gifted to the family members by proprietor Mr. Ashok Zinzuvadia. It could be said that there was proper application of mind on the part of the AO while recording the reasons for reopening. When the return of income of both the assessees was processed under Section 143(1) of the Act and not under Section 143 (3) of the Act, the AO is justified in arriving at the conclusion that the income has escaped assessment. As held by the Apex court in the case of Central Provinces Manganese Ore Company Ltd.[1991 (8) TMI 4 - SUPREME COURT] and Rajesh Jhaveri [2007 (5) TMI 197 - SUPREME COURT] that the word “reason” in the phrase “reason to believe” in Section 147 would mean cause or justification. If the AO has cause or justification to know or suppose that income has escaped assessment, he can be said to have reason to believe that income has escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. We are convinced that there was tangible material before the AO to initiate the proceedings U/s. 147 of the Act. In our view, the AO is justified in reopening the assessment of both the assessees and it cannot be said that the impugned Notice is without jurisdiction or contrary to Section 147 - Decided against assessee.
|