2022 (2) TMI 495 - HC - Income Tax

Court upholds decision on reassessment jurisdiction, bars reevaluation of disclosed exempt income.

PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL) – 3 Versus ISHWAR CHAND MITTAL

The High Court dismissed the appeal challenging the Income Tax Appellate Tribunal's decision, emphasizing that reassessment under Section 148 cannot be ... Reopening of assessment u/s 147 - Bogus LTCG - HELD THAT:- As admitted position is that the Long Term Capital Gain had not only been disclosed in the return of income by the respondent/assessee, but the same was also claimed to be exempt. No adverse inference was made to the returned income of the respondent/assessee even when the Assessing Officer was fully aware of the Long Term Capital Gain claimed as exempt from tax. This Court is of the view that in the garb of reassessment proceedings, the appellant cannot seek to verify the same details on the strength of material which was already available on record. This Court is also in agreement with the finding of the Tribunal that the assumption of jurisdiction by issuing notice u/s 148 is bad in law. Accordingly, the present appeal and application are dismissed Issues: Jurisdiction of reassessment under Section 148 of the Income Tax Act, 1961Analysis:The case involves a challenge to an order passed by the Income Tax Appellate Tribunal [ITAT] rejecting the appellant's appeal for the Assessment Year 2011-12. The respondent initially filed the original return of income in July 2011, followed by a search at their premises in March 2012, leading to an assessment under Section 153A of the Income Tax Act, 1961. Subsequently, a notice of reassessment under Section 148 was issued in March 2016 based on information from the Investigation Directorate regarding alleged trading in penny stocks to claim bogus Long Term Capital Gain.The key contention arises from the fact that the Long Term Capital Gain was disclosed in the original return and claimed as exempt from tax. Despite this, no adverse inference was drawn by the Assessing Officer regarding the claimed exempt income. The High Court opined that the reassessment proceedings cannot be used to reevaluate details already available on record. It agreed with the ITAT's finding that the jurisdiction assumed by issuing the notice under Section 148 was legally flawed. Consequently, the court dismissed the appeal and application challenging the ITAT's decision.In summary, the judgment primarily revolves around the jurisdictional aspect of reassessment under Section 148 of the Income Tax Act, emphasizing that reassessment cannot be initiated to reexamine details already disclosed and claimed as exempt income, leading to the dismissal of the appeal challenging the ITAT's decision.