SHRI VEER TEJA REAL ESTATE AND DEVELOPERS PVT. LTD. vs. INCOME TAX OFFICER

Facts

The petitioner, Shri Veer Teja Real Estate And Developers Pvt. Ltd., filed a civil writ petition challenging an order passed under Section 148A(d) and a notice issued under Section 148 of the Income Tax Act, 1961, for assessment year 2016-17. The notice dated 27.07.2022 was based on information that the petitioner had sold an immovable property for Rs. 2,84,000/- (DLC value Rs. 2,84,000/-) on 13.07.2017 and failed to disclose the transaction. However, the petitioner contended that the notice was based on wrong facts, as they had purchased, not sold, an immovable property for Rs. 2.84 crore. The Assessing Officer, despite the petitioner's reply, found the objection not tenable and issued the notice under Section 148, concluding that income chargeable to tax had escaped assessment.

Held

The High Court held that the authorities had acted dehors the Act and the provisions contained under Section 148 of the Income Tax Act, 1961. The proceedings were initiated on a wrong footing, with an inquiry conducted regarding the sale of land when, in fact, it was a purchase. The court found that the notice under Section 148A(b) was issued without verifying the factum of sale or purchase. Despite the petitioner submitting a reply clarifying that they had purchased the property and were not liable for capital gains tax, the authorities, ignoring this reply, concluded that the matter required reassessment and that income chargeable to tax to the tune of Rs. 2.84 crores had escaped assessment. The court determined that the impugned order and notice, being based on wrong facts, could not be sustained and that the assessee had been harassed. Therefore, the civil writ petition was allowed, and the impugned order and notice were set aside and quashed.

Key Issues

1. Whether the impugned order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961, are sustainable when based on incorrect factual premises regarding the sale or purchase of an immovable property, thereby violating the principles of natural justice and the provisions of Section 147 of the Act? Assessee's Contentions: - The notice under Section 148A(b) and the subsequent order under Section 148A(d) were based on erroneous facts, specifically that the petitioner had sold an immovable property for Rs. 2.84 crore and failed to disclose capital gains. In reality, the petitioner had purchased the property and was therefore not liable for capital gains tax. - The authorities went beyond the terms of the notice under Section 148A(b) and committed a grave illegality in passing the order under Section 148A(d). - Proceedings under Section 148A or Section 148 can only be initiated where income has escaped assessment. Revenue's Contentions: - The Union of India agreed that the notice mentioned the sale of a property, but argued that since there was a high-value purchase of Rs. 2.84 crore, it required verification by the authorities, and no error was committed. - No specific authorities, circulars, or precedents were cited by either party.