Court rules notices under Income Tax Act Section 148 unjustified. Assessing Officer lacked material for reassessment.

The court ruled in favor of the writ applicant, finding that the notices issued under Section 148 of the Income Tax Act, seeking to reopen the income tax assessments for specific years, were unjustified. The reasons recorded for reopening the assessments were deemed vague and based on suspicion, not meeting the legal requirements. Additionally, the court held that the Assessing Officer did not have sufficient material to form a belief that income had escaped assessment, and conducting fishing and roving inquiries through reassessment was impermissible. Consequently, the court allowed the writ applications, setting aside the notices without imposing any costs.

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Issues Involved:
1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Validity of the reasons recorded for reopening the assessment.
3. Application of Section 45(3) of the Income Tax Act regarding the transfer of capital assets to a partnership firm.
4. Jurisdiction of the Assessing Officer (AO) in reopening the assessment based on received information.
5. Sufficiency of material for the AO to form a belief that income had escaped assessment.
6. Permissibility of reopening assessments for conducting fishing and roving inquiries.

Detailed Analysis:

1. Legality of the notice issued under Section 148 of the Income Tax Act, 1961:
The writ applicant challenged the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the applicant’s income tax assessment for the A.Y. 2011-12 and 2012-13. The applicant contended that the notice was bad in law and against the provisions of Section 147 of the Act. The court examined whether the revenue was justified in reopening the assessment for the years under consideration.

2. Validity of the reasons recorded for reopening the assessment:
The reasons for reopening the assessment were based on information received from the Income Tax Officer, indicating that the assessee had sold land to M/s. Swaminarayan Enterprises and received significant amounts. The AO aimed to verify the genuineness of the transactions and the actual amount of capital gain earned by the assessee. The applicant argued that the reasons recorded were vague and based on suspicion, which is not permissible for reopening assessments.

3. Application of Section 45(3) of the Income Tax Act regarding the transfer of capital assets to a partnership firm:
The applicant transferred land to M/s. Swaminarayan Enterprises as part of a capital contribution in a partnership firm as per a deed executed on 15.08.2008. The court noted that, under Section 45(3) of the Act, the value of the capital asset recorded in the firm's books is considered the full value consideration for computing capital gain. Since no amount was credited by the firm in the applicant's account during AY 2009-10, and the full value of consideration recorded was NIL, the court held that the transfer could only be assessed in AY 2009-10, not in AY 2011-12.

4. Jurisdiction of the Assessing Officer (AO) in reopening the assessment based on received information:
The applicant argued that the AO did not independently apply his mind and merely relied on information from the Investigation Wing, which is impermissible. The court found that the AO's reasons for reopening lacked validity and were based on an erroneous premise, with insufficient material to form a prima-facie view that income had escaped assessment.

5. Sufficiency of material for the AO to form a belief that income had escaped assessment:
The court observed that the information received by the AO was too vague and that the AO proceeded for further verification of land transactions and income received from the sale of constructed flats. The court held that the reopening of the assessment for further verification amounted to a fishing and roving inquiry, which is not permissible under the law.

6. Permissibility of reopening assessments for conducting fishing and roving inquiries:
The court concluded that the reasons recorded for reassessment did not lead to the formation of any belief that income had escaped assessment within the meaning of Section 147 of the Act. The reopening of the assessment to conduct a fishing and roving inquiry was deemed impermissible.

Judgment:
The court allowed both writ applications, quashing and setting aside the impugned notices dated 30.03.2018 and 27.03.2018. There was no order as to costs.

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