Reopening assessment on information of plot purchase quashed as lease deed was already with AO and the fact was known and considered by him in original assessment u/s 143(3) – HC
The petitioner company had filed the instant writ petition praying for setting aside and quashing re-assessment proceedings initiated vide notice under Section 148 of the Income Tax Act, 1961 (Act). The petitioner had also prayed for quashing of the order dismissing the objections raised by the petitioner against initiation of re-assessment proceedings.
ABCAUS Case Law Citation:
ABCAUS 2324 (2018) (05) HC
Important Case Laws Cited/relied upon by the parties:
The Return of income of the petitioner for the relevant Assessment Year declaring Nil income was taken up for scrutiny assessment u/s 143(2) for the reasons that the company had shown income, gross receipts and closing stock as “NIL” but there was increase in share premium account and subscribed & paid up share capital.
A detailed questionnaire was issued asking for note on business activities, depreciation chart, names and addresses of banks along with bank account statements, details of sales and gross receipts etc.. In particular, complete details of the share applicants, unsecured loans given/received, share premium received, current liabilities, creditors, stock register were asked. The petitioner had furnished all the details before the Assessing Officer
Upon consideration of the document and explanations offered, assessment order under Section 143 (3) of the Act was passed, observing that the authorized representative had attended the assessment proceedings from time to time and filed details. The case was discussed. It was also recorded that the business of the assessee company had not commenced. The returned income of Nil was accepted.
Four years thereafter, the Assessing Officer received information from the Investigation Wing to the effect that the petitioner had purchased a plot for development of a farm house and part payment had been paid during the relevant year. The AO recorded “reasons to believe” on the basis of the said information and also gave detailed analysis of the lease deed to establish escapement of income.
The Petitioner contended that it had filed copy of the original Lease Deed with the AO. A letter had been written by the Chartered Accountant of the petitioner to the Assessing Officer enclosing documents in support of the acquisition of land. The Petitioner referred to the order sheet which recorded that the petitioner had filed details and date of taking possession of the farm house as in accordance with an earlier order sheet entry directing that the petitioner would furnish details of advance against the property with documentary evidence.
The Hon’ble High Court observed that the lease deed was already with the Assessing Officer when the original assessment under Section 143(3) was completed. The lease deed was not a document, which had unearthed and was furnished by the Investigation Wing to the Assessing Officer for the first time. The analysis of lease deed obviously was something which could have been undertaken once the lease deed was submitted. Re-opening was entirely predicated and based on the factum that the petitioner had purchased the property, a factum known and considered by the Assessing Officer in the original proceedings.
The Hon’ble High Court accepted that transaction for purchase of the farm house and copy of lease deed was furnished to the Assessing Officer in the first round of assessment. It was further observed that the AO was also aware that in the subsequent assessment year the said farm house was sold to a third party. The amount of premium paid by the petitioner was indicated and examined by the AO as copy of the statement of bank accounts was furnished. Pertinently, the Assessing Officer had specifically examined receipt of share premium. The re-opening could not be done to re-examine this receipt on the ground of fresh and new material.
With regard to the contention of the Revenue that the assessee had not disclosed any fixed asset and investment in his return of income. The Hon’ble High Court opined that it may be correct as was noticed in the “reasons to believe”. However, this would not be relevant as the petitioner was asked to furnish and give details with regard to purchase of farm house in the original assessment.
The Hon’ble High Court opined that the “reasons to believe” recorded did not establish any live nexus that income had escaped assessment and any fresh material and evidence would show that the original assessment framed under Section 143 (3) was erroneous and wrong. Failure to disclose fully and truly all material facts was not made out and established. The transaction between the petitioner-assessee and the Development Authority with regard to purchase of the farm house was examined and considered. The law on re-opening does not permit the Assessing Officer to re-examine the issue already examined in regular assessment under Section 143 (3) of the Act. Change of opinion cannot be a ground to re-open scrutiny assessment.
The writ petition was allowed and the notice u/s 148 and the order passed by the AO dismissing objections to reopening were set aside
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