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Facts
The assessee made two immovable property transactions in FY 2014-15 but did not file a return. A reassessment notice u/s 148 for AY 2015-16 was issued on 29.03.2022, leading to an addition of Rs. 47 lakhs u/s 69/115BEE, which was sustained by the CIT(A). The assessee claimed that the sale proceeds of Rs. 43 lakhs from one property and Rs. 14.98 lakhs from jewellery were used to purchase a new property of Rs. 90 lakhs.
Held
The Tribunal held that the reopening of assessment initiated beyond three years (notice issued 29.03.2022 for AY 2015-16) was invalid. As per Section 149(1)(b), the threshold for reopening beyond three years is Rs. 50 lakhs, but the actual addition made by the AO was only Rs. 47 lakhs. The AO's reliance on the cumulative value of property transactions (Rs. 1.33 crore) without differentiating the actual income escaping assessment was deemed a mechanical reopening. Therefore, the reopening was vitiated for lack of jurisdiction.
Key Issues
Whether the reopening of assessment under section 147/148 of the Income Tax Act, 1961, is valid when initiated beyond three years but the income alleged to have escaped assessment is below the statutory threshold of Rs. 50 lakhs as prescribed by section 149(1)(b).
Sections Cited
147, 144B, 148, 143(3), 54, 69, 115BEE, 250, 151A, 151, 148A, 149(1)(b), 149(1)(a), 194IA
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Income Tax Appellate Tribunal, DELHI BENCHES : SMC : NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI BRAJESH KUMAR SINGH
(Appellant) (Respondent) Assessee by : Shri Kapil Goel, Advocate Revenue by : Shri Sanjay Kumar, Sr. DR Date of Hearing : 22.11.2024 Date of Pronouncement : 29.11.2024 ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the Assessee against the order dated 06.03.2024 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No. NFAC/2014-15/10244595 arising out of the appeal before it against the order dated 26.03.2023 passed u/s 147 read with section 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the Assessment Unit, Income Tax Department (hereinafter referred to as the Ld. AO).
The facts, in brief, are that on the basis of information that during the year under consideration, the assessee had made two transactions in immovable properties, however, no return of income was filed, the notice u/s 148 of the Act dated 29.03.2022 was issued calling the assessee to file the return. The assessee filed return on 23.03.2023 and, subsequently, a notice u/s 143(3) was issued on 01.03.2023 and the impugned assessment was completed on 26.03.2023. 2.1 The AO had examined the transaction of purchase of immovable properties worth Rs.43 lakh and Rs.90 lakh, respectively. It came up in the assessment proceedings that the assessee had sold one property on 10.09.2014 for an amount of Rs.43 lakh which was purchased on 11.08.2009 for an amount of Rs.15 lakhs and that during the year the assessee had purchased another property on 19.09.2014 for an amount of Rs.90 lakhs. The assessee had claimed that Rs.43 lakhs, from the sale of immovable property and Rs.14,98,000/- from sale of jewellery was used for the purpose of purchase of new immovable property of Rs.90 lakhs. As per the AO, the remaining amount of Rs.35,61,501/- remained unexplained. The AO also concluded that the amount received on account of sale of jewellery to the extent of Rs.14,98,500/- not substantiated by evidence and, accordingly, a long-term capital gains of Rs.17,05,405/- was calculated on the sale of property and as the same was invested during the year, deduction u/s 54 of the Act was allowed for the entire sale consideration and for the remaining amount of Rs.47 lakhs (Rs.90 lakhs (-) Rs.43 lakhs) was added u/s 69 r.w.s. 115BEE of the Act being unverified. The ld.CIT(A) has sustained this addition by the impugned order for which the assessee is in appeal raising the following grounds:- “
PART
1. GROUND ON JURISDICTIONAL VALIDITY OF IMPUGNED REOPENING ACTION U/S 148 OF 1961 ACT I. Thai impugned assessment order passed u/s 147/144B of 1961 Act (dated 26.03.2023) and further impugned first appeal order passed u/s 250 of 1961 Act (dated 06.03.2024) are both invalid and deserve to be quashed in toto because they are founded and based on invalid and flawed reopening action u/s 148 of 1961 act which “reopening” is made totally contrary to mandate of 1961 Act; 1.1 Impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 which is patently in violation of section 151A of 1961 Act read with CBDT notifications issued thereunder; therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside; 1.2 Impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 which is patently in violation of CBDT guidelines dated 01.08.2022 and without mandatory supply of sanction u/s 151 which is held as fatal to reopening, thereunder; therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside. 1.3 Impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 which lacks valid/requisite legal foundation and thereunder; therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside. 1.4 Impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 in turn based on invalid order u/s 148A (d) based on wrong and erroneous facts (without application of mind) as admitted in impugned assessment order which is fatal to reopening and therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside. 1.5 impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 in turn based on invalid order u/s 148A (d) passed for mere roving and fishing inquiries and in contravention to sec 149(1) (b) , which is fatal to reopening and therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside. 1.6 Impugned Assessment order dated 26.03.2023 passed u/s 147/144B is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 29.03.2022 in turn based on invalid sanction u/s 151 which also suffers from total non application of mind as evident from admitted and undisputed facts recorded in para 2.4 of impugned asst order, therefore first appeal order dated 06.03.2024 is also invalid. Both order may please be quashed and set aside PART-2 GROUNDS ON MERITS: ABRITRARY AND NON APPLICATION OF MIND ON PART OF LD AO AND LD CIT-A 2. That Impugned Assessment order dated 26.03.2023 passed u/s 147/144B and first appeal order dated 06.03.2024 are totally invalid and unlawful in so far as sole /only impugned addition made u/s 69/115BBE is considered which is sustained based on perverse and arbitrary reasoning with no legal weight; PRAYER (RELIEF SOUGHT): A) TO QUASH THE UNDERLYING ASSESSMENT FRAMED BY LD AO FOR WANT OF VALID ASSUMPTION OF JURISDICTION U/S 148 AND SO HELD IMPUGNED FIRST APPEAL /NFAC/CIT-A ORDER U/S 250 IS ALSO INVALID B) TO DELETE THE IMPUGNED ADDITION MADE IN IMPUGNED ASST ORDER AND ARBITRRAILY SUSTAINED IN FIRST APPEAL ORDER C) TO QUASH AND SET ASIDE BOTH LD AO AND FIRST APPEAL ORDERS IN TOTO
D) ANY OTHER APPROPRIATE /SUITABLE RELIEF AS DEEMED FIT IN FACTS AND CIRCUMSTANCES OF THE CASE APPELLANT MOST RESPECTFULLY CRAVES FOR LEAVE TO ADD/MODIFY THE ABOVE GROUNDS OF APPEAL.”
3. At the time of argument, the ld. counsel for the assessee has primarily argued on grounds challenging the reopening of the assessment. It was submitted by the ld. counsel that the threshold for the reopening an assessment u/s 147 after the end of three years is Rs.50 lakhs. However, the addition in the case in hand is of Rs.47 lakhs, thus reopening is vitiated. 3.1 Ld. DR however defended the orders of Ld. Tax authorities below and contended that the whole amount found to be undisclosed should be considered and not the final addition.
We have gone through the record and the submissions and find that as a matter of admitted facts with regard to the transactions in immovable properties in FY 2014-15, the reassessment notice was issued u/s 148 of the Act was issued on 29.03.2022. Thus, the reopening proceedings and notice pertain to the period beyond three years. We find that section 149(1)(b) of the Act lays down the threshold for reopening in case of income escaping assessment is of Rs.50 lakhs, if the reopening is of a period beyond three years. This new regime for reopening assessment takes away the jurisdiction of reassessment beyond the limitation prescribed u/s 149(1)(a) of the Act where the amount alleged to have escaped is less than Rs.50 lakh.
As we consider the notice under clause (b) of section 148A of the Act available at page 1 of the paper book along with the Annexure available at page No.2 of the paper book, we observe that while issuing this notice under clause (b) of section 148A of the Act, the AO has mentioned of the fact that the assessee had sold a property worth Rs. 43 lakhs and had sold another property worth Rs.90 lakhs and, thus, there were escapement of income on the basis of undeclared sale consideration/capital gain. The AO specifically mentions that the income is likely to be escaped is more than Rs.50 lakhs and is represented in the form of asset.
However, as the facts have come up before us and as before the Assessing Officer, that the assessee had merely sold immovable property amounting to Rs.43 lakhs and, in fact, had invested this amount in purchase of another property of Rs.90 lakhs leading to an addition of Rs.47 lakhs. In this context, we have also examined the order under clause (d) of section 148 of the Act dated 29.03.2022 and we find that on the basis of sale of immovable properties worth Rs.1,33,00,000/-, the assessee was show caused for the purpose of section 147 of the Act and, accordingly, the notice u/s 148 of the Act dated 29.03.2022 was issued. While in notice u/s 148A(b), the AO had relied information of sale of immovable property worth 43lacs, received, from Sub-registrar and the TDS return filed u/s 194IA of the Act, was also considered to be sale of immovable property, while it was, in regard to TDS deduced as purchaser. Thus it was not a case of capital gain of Rs 1,33,00,000/- escaping assessment, as alleged in 6 notice under clause (b) of section 148A of the Act. It is no doubt a case of mechanical reopening, as the AO, did not even bother to differentiate, on the two different information heads independently, and cumulatively considered to be escapement of capital gains of more than Rs. 50, lacks. The contention of Ld. DR that only prima facie case has to be seen at time of reopening is not sustainable it the light of mandate of new regime with regard to reopening of assessment beyond three years. We are inclined to allow the ground no. 1.3 to 1.5. Consequently, the appeal of the assessee is allowed.