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2025 (6) TMI 1635 - AT - Income TaxValidity of reopening of assessment - reasons to believe - A.R. submitted that the reopening u/s. 148 does not meet the requirement of law including the failure to provide proper reasons for reopening to provide a clear basis for such action - DR submitted that the reopening was rightly done as the assessee has not filed any return of income and there was huge transaction related to the immovable property owned by the assessee. HELD THAT - It is pertinent to note that the assessee has not filed the return of income. In fact after receiving the information relating to the sale of immovable property the department after following all the procedure issued notice u/s. 148 of the Act. The assessee never filed return of income in response to notice u/s. 148 of the Act. As the reopening was properly done as per Income Tax Act and no discrepancy pointed out by the Ld. A.R. the proceedings u/s. 148 of the Act are valid and assessment order passed u/s. 147 is just and proper. Thus ground no. 1 is dismissed. LTCG - Transaction related to the immovable property owned by the assessee - Real owner of property - The assessee s contention before the Assessing Officer that the assessee is not owner and the amount was not at all paid to the assessee has failed and the revenue has pointed out as to why the said contention of the assessee has failed. AO has rightly made calculation of long term capital gain on the whole immoveable property and the same is justified. CIT(A) has also taken into cognizance of these aspects and has rightly confirmed the same. As regards the assessee s contention that there was attachment on the property in question and company Motorol India Ltd. was in liquidation the same has been taken care of by the Hon ble Gujarat High Court by declaring assessee as owner of the said property which was at no point of time was denied by the assessee before the Hon ble High Court despite showing the documents of 2005 only to the tax authorities and not to the Hon ble High Court. Therefore the journal entry as well as payment entry made by the Neptune Realty Pvt. Ltd. in the case of (assessment proceedings) of Neptune Realty Ltd. appears to be co-relating with the decision of Hon ble Gujarat High Court and hence sales amount of Rs. 97, 00, 000/- was paid to the assessee and the property sale price of Rs. 3, 20, 00, 000/- to that extent has to be treated as long term capital gain and the calculation to that effect was rightly done by the Assessing Officer. Hence the appeal of the assessee is dismissed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal include:
2. ISSUE-WISE DETAILED ANALYSIS Validity of Reopening under Section 148 Legal Framework and Precedents: Section 148 permits reopening of assessments if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The reopening must be based on valid reasons recorded in writing and prior approval from the competent authority must be obtained. The reopening must comply with procedural safeguards and the reasons must be clear and justifiable. Court's Interpretation and Reasoning: The Tribunal noted that the reopening was initiated after the Assessing Officer received information from AIR (Annual Information Return) data showing a transaction involving immovable property worth over Rs. 3.28 crores that was not reflected in the original return. The notice under Section 148 was issued after recording reasons and obtaining prior approval. The appellant had not filed a return of income initially. Key Evidence and Findings: The Assessing Officer issued notice under Section 148 on 27-03-2018, followed by notices under Section 142(1). The appellant filed return of income only after the reopening notice. No discrepancy was pointed out by the appellant's representatives regarding the procedural validity of reopening. Application of Law to Facts: The Tribunal found that the reopening complied with statutory requirements, including recording of reasons and prior approval. The appellant's failure to file return of income initially justified reopening. Treatment of Competing Arguments: The appellant argued improper reasons and lack of clear basis for reopening, but the Tribunal rejected these, emphasizing adherence to procedure and availability of information justifying reopening. Conclusion: The reopening under Section 148 was valid and the assessment order passed under Section 147 was proper. Ground 1 was dismissed. Ownership of Property and Application of Section 50C Legal Framework and Precedents: Section 50C applies to capital gains arising from transfer of land or building, where the sale consideration is less than the value assessed by the stamp valuation authority. Ownership of the property at the time of sale is a precondition for applicability of this provision. The burden is on the assessee to prove non-ownership if claimed. Court's Interpretation and Reasoning: The appellant contended that the property was sold in 2005 to relatives with registered documentation, and thus the addition under Section 50C for AY 2011-12 was incorrect and double taxation. The appellant submitted sale deed and earlier ITR showing capital gains for AY 2005-06. The Tribunal analyzed the facts that the appellant had not disclosed the sale before the Hon'ble Gujarat High Court during liquidation proceedings, where the official liquidator was appointed and the appellant was declared owner for distribution of sale proceeds. The appellant's contention that ownership had passed in 2005 was not supported before the Court or the official liquidator. Key Evidence and Findings: The sale deed dated 08-02-2011 showed payments made directly by the purchaser to various parties including the official liquidator and mutual funds, but the appellant did not receive the full sale consideration directly. Ledger and journal entries from Neptune Realty Pvt. Ltd. indicated payments to the appellant after 31-03-2011. The appellant's own submissions before the Assessing Officer acknowledged ownership and receipt of payments through the liquidator. Application of Law to Facts: The Tribunal held that the appellant was the owner in the eyes of law at the relevant time as per the High Court's decision and liquidation proceedings. The 2005 sale deed was considered a colourable device to evade creditors and reduce tax liability, lacking bona fide ownership transfer. Treatment of Competing Arguments: The appellant's claim of prior sale and non-ownership was rejected due to failure to establish ownership change before the High Court and inconsistencies in submissions. The revenue's contention that the property was owned by the appellant and capital gains were rightly assessed was accepted. Conclusion: The addition under Section 50C and consequent capital gains tax was justified. Grounds 2, 4, and 5 were dismissed. Procedural Fairness in Application of Section 50C Legal Framework and Precedents: Proper notice and opportunity to submit valuation reports are mandatory before making additions under Section 50C to ensure natural justice. Court's Interpretation and Reasoning: The appellant contended that no proper notice was issued before making additions under Section 50C. However, the record showed that notices under Sections 148 and 142(1) were issued and the appellant was given opportunity to submit documents and explanations. Key Evidence and Findings: The appellant submitted sale deed, ledger entries, and other documents during assessment proceedings. The Assessing Officer considered these before making the addition. Application of Law to Facts: The Tribunal found that procedural requirements were complied with and the appellant was afforded adequate opportunity. Treatment of Competing Arguments: The appellant's argument was rejected as the procedural safeguards were fulfilled. Conclusion: The addition under Section 50C was made after due procedure. Ground 3 was dismissed. Validity of CIT (Appeals) Order Legal Framework and Precedents: The CIT (Appeals) must consider all relevant facts and documents and provide reasoned order. Failure to consider crucial evidence may vitiate the order. Court's Interpretation and Reasoning: The appellant argued that CIT (Appeals) ignored crucial facts such as payment details in the sale deed and dismissed the appeal without proper inquiry. Key Evidence and Findings: The Tribunal observed that the CIT (Appeals) had considered the submissions and evidence including the sale deed, ledger entries, and High Court's decision. The CIT (Appeals) upheld the Assessing Officer's findings after due consideration. Application of Law to Facts: The Tribunal found no infirmity in the CIT (Appeals) order and held that it was based on proper appreciation of facts and law. Treatment of Competing Arguments: The appellant's contention was rejected due to lack of substantive evidence to overturn the findings. Conclusion: The CIT (Appeals) order was proper and justified. Ground 4 was dismissed. Reassessment under Section 147 and Timing of Sale Legal Framework and Precedents: Reassessment under Section 147 requires valid reasons and the capital gains tax liability arises in the year of transfer. The date of sale deed and registration are relevant for determining the year of capital gain. Court's Interpretation and Reasoning: The appellant argued that the sale deed dated 09-02-2005 was registered only in 2007 and thus reassessment for AY 2011-12 was invalid. Key Evidence and Findings: The Tribunal noted that the appellant had not disclosed this sale to the tax authorities or the High Court during liquidation proceedings. The High Court had declared the appellant owner for distribution of proceeds in 2011. The reassessment was triggered by information regarding sale in 2011, which was not disclosed earlier. Application of Law to Facts: The Tribunal held that the reassessment was valid as the sale consideration was received or deemed to be received in AY 2011-12 and the appellant had not disclosed the transaction earlier. Treatment of Competing Arguments: The appellant's argument based on registration delay was rejected as the legal ownership and receipt of sale consideration were determinative. Conclusion: The reassessment was valid and additions were justified. Ground 5 was dismissed. 3. SIGNIFICANT HOLDINGS The Tribunal held: "The reopening under Section 148 was valid as the Assessing Officer had recorded proper reasons and obtained prior approval, and the appellant had not filed return of income initially." "The appellant's contention of prior sale in 2005 to relatives was a colourable device to evade creditors and reduce tax liability, as the appellant was declared owner by the Hon'ble Gujarat High Court and received sale proceeds through the official liquidator." "The addition under Section 50C was rightly made as the appellant was owner at the time of sale and received sale consideration, and procedural safeguards including notice and opportunity to submit valuation were complied with." "The CIT (Appeals) order dismissing the appellant's appeal was based on proper appreciation of facts and law and did not suffer from any infirmity." "The reassessment under Section 147 was valid and justified given the non-disclosure and timing of receipt of sale consideration."
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