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Facts
The assessee sold four immovable properties. The Stamp Valuation Authority determined a higher Fair Market Value (FMV) than the sale consideration, attracting provisions of Section 50C. The AO reopened the assessment under Section 147 based on the Supreme Court's decision in Ashish Agarwal, adding LTCG of Rs. 34,12,500/-.
Held
The Tribunal held that the reopening of assessment and the consequential order under Section 147 are bad in law. This is because the notice under Section 148 was issued based on a Supreme Court decision, but the escaped income was less than Rs. 50,00,000/-, making the notice invalid according to amended provisions and subsequent Supreme Court rulings.
Key Issues
Whether the reopening of assessment under Section 147 read with Section 148 was valid when the escaped income was less than Rs. 50,00,000/- and the notice was issued based on a Supreme Court decision that was later clarified by CBDT circulars and subsequent judicial pronouncements.
Sections Cited
147, 148, 149, 250, 50C, 271(1)(c), 274, 142(1), 10(38)
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Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, “the Act”) dated 05.12.2024 by the National Faceless Appeal Centre, Delhi/Commissioner of Income-tax (Appeals) [in short, “CIT(A)”] for the Assessment Year (AY) 2013-14, which in turn arises out of assessment order passed by Assessing Officer (in short, “AO”) u/s 144 r.w.s. 147 of the Act dated 20.05.2023. Grounds of appeal
raised by the assessee are as under:
1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in re-opening the A.Y 13-14 Dineshbhai M Patel assessment u/s 147 of the Act and issuing notice u/s 148 of the Income tax Act,1961.
2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer that there is no dispute that notice u/s 148 dated 21.04.2021 was issued by making basis of decision of Hon’ble Supreme Court Ashish Agarwal (supra),m the case of assessee was reopened for A.Y 2013-14 which falls within clause(b) of section149(1) i.e., income escaped less than Rs.50,00,000/- .Thus, the reopening is not valid. Even otherwise, the cause of assessee is squarely covered by the Circular of CBDT No.1/2022 dated 1.05.2022.
3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.34,12,500/- on account of alleged undisclosed long term capital gain on sale of immovable property without calculating cost of purchase of property.
4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the Assessing Officer has erred in not referring to the DVO for determining the cost of acquisition as on 01.04.1981.
5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer has erred in not referring to the DVO for determining fair market value u/s50C of the Income Tax Acte,1961.
6. On the facts and I the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiating penalty u/s 271(1)(c) r.w.s.274 of the Income Tax Act, 1961 7. It is therefore prayed that the above addition may please be delete as learned Members of the Tribunal may deem it proper.
8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
Brief facts of the case are that in the instant case, the case of the assessee was reopened on the basis of information that assessee along with other co- owners sold four immovable properties situated at Bhestan. The sale A.Y 13-14 Dineshbhai M Patel consideration of each of the co-owners was Rs. 28,51,000/-. The Stamp Valuation Authority has determined the fair market value (in short, ‘FMV’) of each of co-owners for the purpose of registration at Rs.68,25,000/- each. In view of the same, the difference between FMV and consideration as per sale deed came to Rs.39,74,000/- each and accordingly, provisions of section 50C of the Act were attracted. The case of the assessee for AY 2013-14 was re-opened under section 147 of the Act and notice under section 148 of the Act was issued on 21.04.2021. Notice under section 148 of the Act was issued by AO on the basis of decision of Hon’ble Supreme Court in the case of Union of India vs. Ashish Agarwal, 444 ITR 1 (SC).
3.1 During the course of assessment proceedings, notices were issued to the assessee u/s.142(1) of the Act, however, no compliance was made by the assessee to any of these notices. Therefore, AO was left with no option other than finalizing the assessment proceedings on the basis of material available on records. Since the assessee remained non responsive and did not claim any cost of acquisition/improvement/other expenses, etc., therefore, cost of acquisition was taken as nil and LTCG amounting to Rs.34,12,500/- was added to the total income of the assessee. Accordingly, order u/s. 144 rws 147 of the Act was passed determining total income at Rs.34,12,500/-.
Aggrieved by the aforesaid assessment order, assessee preferred appeal before CIT(A). During appellate proceedings, CIT(A) issued several notices to the assessee, however, no details/submission was furnished by the assessee A.Y 13-14 Dineshbhai M Patel other than seeking adjournments. Therefore, CIT(A) proceeded to adjudicate the appeal on the basis of material available on records. After considering the grounds of appeal, statement of facts and the assessment order. The CIT(A) upheld the order of the AO and dismissed the appeal of the assessee.
5. Aggrieved by the order of CIT(A), assessee filed present appeal before the Tribunal. The Ld. AR for the assessee by referring to the contents in para-2 of the assessment order submitted that notice u/s 148 of the Act was issued by AO based on the decision of Hon’ble Supreme Court in case of Ashish Agarwal (Supra). After the judgment of Ashish Agarwal (supra), the CBDT issued Circular No.01/2022 dated 11.05.2022 wherein it was stated that notice u/s 148 for assessment years 2013-14, 2014-15 and 2015-16 can be issued, with the approval of specified authority, only if the case falls under clause (b) of sub- section (1) of section 149 as amended by Finance Act, 2021. As per amended provisions, notice u/s 148 could be issued only if escaped income is more than Rs.50,00,000/-. Admittedly, in case of assessee, the alleged escaped income is less than Rs.50,00,000/-, as evident from para-1 of the assessment order. Therefore, neither issuance of notice u/s 148 of the Act was valid nor the consequential reassessment order u/s 147 is sustainable. The Ld. AR further submitted that the Hon’ble Supreme Court in its subsequent decision in the case of Union of India vs. Rajeev Bansal [2024] 469 ITR 46 (SC) held that reopening notice under section 148 for AY 2013-14 is not valid, if escaped income is less than Rs.50,00,000/-. The Ld. AR, therefore, submitted that the A.Y 13-14 Dineshbhai M Patel action of the AO in reopening is not valid. Accordingly, the subsequent order passed u/s 147 of the Act by the AO is also void ab-initio.
On the other hand, Ld. Sr. DR for the Revenue supported the order of lower authorities.
We have heard both parties and perused the material available on record. We have also deliberated on the decision relied upon by the Ld.AR. There is no dispute regarding the quantum of escaped income at Rs.34,12,500/-, which is less than the thrush hold limit of Rs.50,00,000/-. Hence, the impugned issue is fully covered by the decisions relied upon by the Ld.AR. The case is also covered by the CBDT Circular No.1/2022 dated 11.05.2022. We also find that the co-ordinate bench of this Tribunal in the case of ‘Balubhai Narsinhbhai Patel Vs. ITO, Ward -2(3)(1), Surat in dated 14.11.2024 had decided the issue in favour of the appellant. In the instant case, there is no dispute that notice u/s 148 of the Act for A.Y. 2013-14 was issued based on the decision of Hon’ble Supreme Court Ashish Agarwal (supra), which falls within clause (b) of Section 149(1) i.e. escaped income amounts to or is likely to amount to Rs.50,00,000/- or more. Useful reference in this regard may also be made to the decision of Hon’ble Delhi High Court in the case of Manjeet Kaur Duggal Vs. ITO [2025] 175 taxmann.com 202 (Delhi), wherein it was held that where AO issued notice u/s 148 to assessee on ground that income which assessee had claimed as exempt u/s 10(38) would be income that was chargeable to tax under Act and had escaped assessment, since amount of income which had escaped assessment was below threshold limit of Rs. 50 A.Y 13-14 Dineshbhai M Patel lakhs for attracting provision of section 149(1)(b), impugned notice having been issued beyond period of limitation as prescribed u/s 149(1)(a), same was to be set aside.
7.1 In view of the above factual and legal positions, it is clear that reopening of assessment in case of assessee is not in accordance with the provisions of Act and the principles laid down by the Hon’ble Apex Court. Hence, the notice issued u/s 148 of the Act as well as the consequential order u/s 147 are bad in law. Accordingly, the grounds are allowed. 8. In the result, the appeal of the assessee is allowed.
Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 17/10/2025 in the open court.