2023 (3) TMI 417 - HC - Income Tax

Reopening of assessment u/s 147 - reassessment proceedings initiated after six years - indexed cost of acquisition litigation cost and capital gain in the alleged transaction was less than Rs.50 Lakhs - HELD THAT - In this case prima facie there is some material on the basis of which a notice for reopening of escaped assessment has been issued. It would be for the petitioner/assessee to show that there are no reasons for reopening the assessment or the valuation of escaped assessment is less than Rs.50 Lakhs which dis-entitles reopening of the assessment after the prescribed statutory period. It would be difficult for us to render our findings regarding correctness or otherwise of the grounds shown in the show-cause notice. If the Authorized Officer has formed the opinion that income tax has escaped and reassessment is necessary if he has formed the opinion that the valuation of escaped assessment is more than Rs.50 Lakhs based on some material and has also recorded reasons it is for the petitioner/assessee to establish that the view taken by the Authorized Officer is contrary to the material on record or it is perverse. When the challenge to the show-cause notice is based on disputed questions of facts this Court would be slow in entertaining the writ petition in exercise of jurisdiction under Article 226 of the Constitution of India particularly when decision of authority would be susceptible to appeal in terms of Section 246 of the Act. We are not inclined to entertain the writ petition. Hence the writ petition is dismissed accordingly.

Summary

Issues:
Challenge to show-cause notice under Section 148 of the Income Tax Act, 1961 for alleged escaped assessment for the assessment year 2015-2016.

Analysis:
The petitioner, a Co-operative Society, sought relief through a writ petition under Article 226 of the Constitution of India to quash the impugned order and notice issued by the Income Tax authorities. The petitioner contended that a settlement deed was executed for a land parcel, correcting a layout mistake, and no property transfer for consideration occurred. The petitioner had filed Income Tax Returns for the relevant year, showing capital gains below Rs.50 Lakhs, which were accepted by the authorities.

The respondent claimed that the petitioner sold a property at a higher value, triggering a capital gain tax liability. The Assessment Officer initiated proceedings under Section 148 of the Act, alleging an escapement of income exceeding Rs.50 Lakhs. The respondent argued that the notice was valid, considering the stamp duty valuation and disputed the petitioner's indexed cost of acquisition.

The respondent contended that the petitioner had an alternative remedy to challenge the notice through an appeal under Section 246 of the Act, citing various judicial precedents. The Court examined the submissions and documents presented by both parties. It noted the amendment to the Act, restricting reassessment after six years for escaped assessments below Rs.50 Lakhs. The Court found the notice to be without jurisdiction and ordered its quashing.

The Court observed that the notice was based on information from a sale deed, indicating undisclosed capital gains. It emphasized the importance of statutory remedies but acknowledged exceptions where authorities act against legal provisions. The Court highlighted the need for the petitioner to demonstrate the absence of grounds for reopening the assessment or that the escaped assessment valuation was below Rs.50 Lakhs.

The Court declined to entertain the writ petition, emphasizing the need for the petitioner to challenge the notice through statutory avenues. It stressed the reluctance to interfere in cases involving disputed factual issues, especially when appeal options are available under the Act. Ultimately, the Court dismissed the writ petition, maintaining the importance of statutory remedies and the limitations of writ jurisdiction.