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2025 (6) TMI 1123 - AT - Income TaxReopening of assessment - notice beyond period of three years -ITO jurisdiction to issue the notice u/s. 148 - determination of income chargeable to tax - HELD THAT - As per Section 149(1)(b) of the Act if more than three years have been lapsed then Notice u/s. 148 can be issued only if Value of Income Escaping Assessment is more than Rs. 50 lakhs. In this case the value is less than Rs. 50 lakhs therefore ITO had no jurisdiction to issue the notice u/s. 148 of the Act. Since the value of Income Chargeable to tax is less than Rs. 50 Lacs respectfully following Hon ble High Courts decisions of Sunita Purushottam Virgincar 2024 (8) TMI 1081 - BOMBAY HIGH COURT AND Nitin Nema 2023 (8) TMI 1027 - MADHYA PRADESH HIGH COURT we are of the opinion that the order u/s 148A(d) is without any jurisdiction hence not sustainable in law. Therefore the Order u/s 148A(d) of the Act and the consequential Assessment Order is quashed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal include: - Whether the issuance of notice under section 148 of the Income Tax Act, 1961 (the Act) and the conduct of proceedings under section 148A were valid and complied with procedural requirements, especially in the context of faceless assessment schemes introduced in 2022. - Whether the initiation of reassessment proceedings was justified on the basis of information relied upon by the Assessing Officer (AO), particularly when the information was allegedly incorrect or misleading. - Whether the AO had jurisdiction to issue notice under section 148 and pass reassessment order under section 147 when the income escaping assessment was below the monetary threshold prescribed under section 149. - Whether the addition of Rs. 24,00,000 as short-term capital gain in the assessee's income was justified, considering the ownership and source of the immovable property sale transaction. - Whether interest under sections 234A, 234B, and 234C was rightly levied. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity and Procedural Compliance of Notice under Section 148 and Proceedings under Section 148A Relevant Legal Framework and Precedents: Section 148 of the Act empowers the AO to issue notice for reassessment if income chargeable to tax has escaped assessment. The amendment introducing section 148A mandates that before issuing notice under section 148, the AO must conduct an inquiry with prior approval of the specified authority to satisfy that income chargeable to tax has escaped assessment. The e-Assessment of Income Escaping Assessment Scheme, 2022 and Faceless Jurisdiction of Income-tax Authorities Scheme, 2022 require faceless conduct of such proceedings. Court's Interpretation and Reasoning: The Tribunal observed that the AO issued notice under section 148 based on information from the Insight Portal indicating a sale of immovable property valued at Rs. 3.60 crores, which was factually incorrect. The AO did not conduct any inquiry as mandated under section 148A before issuing the notice. The approving authority also failed to apply mind to the correctness of the information. The Tribunal relied on the judgment of the Bombay High Court in Chandni J. Ahuja v. UOI, which held that mere suspicion or information without satisfaction of escaped income does not justify reopening. Key Evidence and Findings: The AO's order under section 148A(d) and the notice under section 148 were issued without proper inquiry. The information relied upon was erroneous, as the actual sale consideration was Rs. 1.20 crores, not Rs. 3.60 crores. The AO did not obtain or consider the sale deed before issuing the notice. Application of Law to Facts: Since the AO failed to conduct the mandatory inquiry under section 148A and issued notice on incorrect information, the notice and consequent reassessment proceedings were held to be without jurisdiction and bad in law. Treatment of Competing Arguments: The Revenue contended that the assessee's name appeared in the sale deed, justifying the reassessment. The Tribunal rejected this argument, noting that the AO did not verify the nature of the transaction or ownership details before issuing the notice. Conclusion: The notice under section 148 and the proceedings under section 148A were procedurally defective and invalid. Issue 2: Justification for Initiation of Reassessment Proceedings Based on Information Relevant Legal Framework and Precedents: Income chargeable to tax is distinct from gross receipts or sale consideration. Section 148 requires that the AO have reasons to believe that income chargeable to tax has escaped assessment. Precedents from Karnataka High Court (Sanath Kumar Murali), Madhya Pradesh High Court (Nitin Nema), and Bombay High Court (Sunita Purushottam Virgincar) emphasize that sale consideration cannot be equated with escaped income without deducting cost of acquisition. Court's Interpretation and Reasoning: The Tribunal found that the AO treated the sale consideration as escaped income without considering cost of acquisition or ownership. The AO's reliance on the Insight Portal information, which was factually incorrect, was misplaced. The Tribunal noted that the property was gifted to the assessee's father in 1964, and the sale consideration was received by him, not the assessee. Key Evidence and Findings: Documentary evidence including the registered sale deed, gift deed, bank statements, and return of income filed by the father showing capital gains tax paid were on record. The assessee's name appeared only as a consenting party, not as owner or beneficiary. Application of Law to Facts: The AO's initiation of reassessment on incorrect and misleading information without proper verification violated the principles of natural justice and statutory requirements. Treatment of Competing Arguments: The Revenue argued the presence of the assessee's name in the sale deed was sufficient. The Tribunal held that mere presence as a consenting party does not amount to ownership or taxable income. Conclusion: The reassessment proceedings initiated on the basis of incorrect information were vitiated and the order passed was bad in law. Issue 3: Jurisdiction to Issue Notice under Section 148 when Escaped Income is Below Rs. 50 Lakhs Relevant Legal Framework and Precedents: Section 149(1)(b) stipulates that where more than three years have elapsed since the end of the relevant assessment year, notice under section 148 can be issued only if the amount of income escaping assessment is Rs. 50 lakhs or more. Court's Interpretation and Reasoning: The Tribunal noted that even assuming the entire sale consideration of Rs. 1.20 crores was income escaping assessment, the assessee's share (one-fifth) would be Rs. 24 lakhs, below the Rs. 50 lakhs threshold. Therefore, jurisdiction to issue notice under section 148 was lacking. Key Evidence and Findings: The sale deed named five vendors; the AO added only one-fifth share as income. The Tribunal relied on judicial precedents affirming that escaped income must be computed net of cost of acquisition and not on gross receipts. Application of Law to Facts: The AO's issuance of notice under section 148 after three years without meeting the monetary threshold was invalid. Treatment of Competing Arguments: The Revenue did not effectively counter the jurisdictional bar under section 149. Conclusion: The notice under section 148 was without jurisdiction and thus void. Issue 4: Justification of Addition of Rs. 24 Lakhs as Short-Term Capital Gain Relevant Legal Framework and Precedents: Capital gains tax computation requires determination of ownership, cost of acquisition, and period of holding. Long-term capital gains apply if holding exceeds 36 months for immovable property. The AO must consider documentary evidence and ownership details. Court's Interpretation and Reasoning: The Tribunal found the AO erred in treating the addition as short-term capital gain without considering that the property was gifted to the father in 1964, making it a long-term asset. The AO failed to reduce cost of acquisition or refer the matter to the DVO for valuation. Key Evidence and Findings: Gift deed dated 17/04/1964, sale deed, bank receipts, and the father's income tax return showing capital gains were on record. The assessee was only a consenting party and not the owner. Application of Law to Facts: The addition was unjustified and incorrect in law and fact. Treatment of Competing Arguments: The Revenue maintained the assessee's name in the sale deed justified addition. The Tribunal rejected this, emphasizing ownership and actual receipt of sale proceeds. Conclusion: The addition was not justified and the assessment order was liable to be quashed on this ground. Issue 5: Levy of Interest under Sections 234A, 234B, and 234C The Tribunal did not adjudicate this issue, as the legal grounds in favor of the assessee led to quashing of the reassessment order, rendering the question of interest levy academic. 3. SIGNIFICANT HOLDINGS - "The Assessing Officer has not conducted any inquiry before issuing the Notice u/s 148 dated 13/04/2022 as is evident from the above paragraph of the Assessment Order." - "The so-called Insight Information relied by the ITO is not reliable, it is factually incorrect. That may be the reason that Parliament in its wisdom has kept a safe guard in the form of Section 148A where in the ITO is required to conduct inquiry." - "Even for argument's sake, the 1/5th of Rs. 1.20 crores are Rs. 24,00,000/- only. This amount has been considered by the Assessing Officer in the assessment order u/s. 147 of the Act. Therefore, even for argument's sake, if the entire sale consideration is considered as Income Escaping Assessment, the Assessee's Share would have been only Rs. 24,00,000/- which is less than Rs. 50 lakhs." - "The order u/s 148A(d) is without any jurisdiction hence not sustainable in law. Therefore, the Order u/s 148A(d) of the Act and the consequential Assessment Order is quashed." - "The Notice u/s. 148 is bad in law. Accordingly, the order u/s 147 is quashed." - The Tribunal upheld the principle that "income chargeable to tax" is not the gross sale consideration but net of cost of acquisition and other permissible deductions, citing judicial precedents from Karnataka and Madhya Pradesh High Courts. - The Tribunal emphasized that procedural safeguards under section 148A are mandatory and failure to comply renders the reassessment invalid. - The Tribunal held that jurisdictional limits under section 149 are binding and cannot be bypassed by treating gross receipts as escaped income. - The Tribunal recognized that presence of the assessee's name in the sale deed as a consenting party does not establish ownership or taxable income in the assessee's hands. - Final determination: The appeal was partly allowed by quashing the reassessment order and notice under sections 148 and 147, on grounds of lack of jurisdiction, procedural lapses, and erroneous application of law and facts.
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