2022 (4) TMI 1230 - HC - Income Tax

Court invalidates tax notice for 1998-99, deems reopening as 'change of opinion.' Reassessment ordered with legal compliance.

Deputy Commissioner of Income Tax, Corporate Circle 2 (1), Chennai Versus Gay Travels (P) Limited

The court set aside the notice issued under Section 148 of the Income-tax Act for the assessment year 1998-99, deeming the reopening attempt as 'a mere ... Reopening of assessment u/s 147 - HELD THAT:- On a perusal of the order passed by the learned Judge, it could be seen that there was a mention only about the notice dated 25.01.2001 and subsequent notice dated 16.08.2002 relating to the assessment year 1997-98 and the same were set aside, along with the notice issued u/s 148 for the assessment year 1998-99 by order 31.07.2017. More over, what was challenged in the writ petition is only the notice issued u/s 148. Therefore, taking note of the reasons recorded by the assessing officer coupled with the submissions made by the learned counsel for the appellant, we set aside the order of the learned Judge and remand the matter to the respondent for passing appropriate orders. Since the respondent / assessee is now, in possession of the reasons recorded by the AO it is open to them to file its objections within a period of two weeks from the date of receipt of a copy of this order. AO shall proceed with the matter and pass appropriate orders, on merits and in accordance with law, after providing an opportunity of personal hearing to the respondent, within a period of four weeks. Issues Involved:1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961 for the assessment year 1998-99.2. Whether the reopening of the assessment for the year 1998-99 was justified based on fresh material.Issue-wise Detailed Analysis:1. Validity of the notice issued under Section 148 of the Income-tax Act, 1961 for the assessment year 1998-99:The respondent sought to quash the notice dated 16.08.2002 issued under Section 148 of the Income-tax Act, 1961 for the assessment year 1998-99. The learned Judge allowed the writ petitions and set aside the notices, stating, 'there is no fresh material in possession of the Assessing Officer suggesting escapement of the income at the time of issuance of notice dated 25.01.2001.' The Judge found that the reopening attempt was 'a mere change of opinion' and thus 'wholly without jurisdiction.'Upon appeal, the Co-ordinate Bench dismissed the writ appeal for the assessment year 1997-98, observing that 'reassessment powers were invoked by assessing officers very casually and lightly not adhering to the legal restrictions for exercise of such powers under Section 147/148 of the Act.' For the assessment year 1998-99, the Bench issued notice to the respondent to ascertain the difference of facts.2. Whether the reopening of the assessment for the year 1998-99 was justified based on fresh material:The appellant argued that the land sold by the respondent was not agricultural land and should be assessed under 'capital gains.' They contended that the assessment for 1998-99 was reopened because 'the land was situated eight kilometers beyond the corporation limit and belongs to Chingleput District.' The appellant also highlighted that the land had the potential to be developed as a residential locality, indicating it was not agricultural land.The reasons for reopening recorded by the assessing officer on 16.08.2002 included:- The sale agreement between the assessee and M/s. Shoreline Developers (P) Ltd. indicated the land was not used for agricultural purposes.- The land's proximity to commercial complexes suggested it was a capital asset.- The sale agreement's clauses and the manner of transaction pointed to a real estate business transaction rather than an agricultural sale.The court found merit in the appellant's submissions, noting that the learned Judge's order primarily addressed the notice dated 25.01.2001 and subsequent notice dated 16.08.2002 for the assessment year 1997-98. The Co-ordinate Bench affirmed the order only for 1997-98, leaving the 1998-99 assessment open for further consideration.The court concluded that the respondent should file objections within two weeks of receiving the reasons recorded by the assessing officer. The assessing officer is to proceed with the matter and pass appropriate orders, providing an opportunity for a personal hearing to the respondent within four weeks.Conclusion:The writ appeal was disposed of, and the matter was remanded to the respondent for passing appropriate orders. The respondent was given the opportunity to file objections, and the assessing officer was directed to proceed with the matter in accordance with the law. The court emphasized the need for a thorough and fair reassessment process, ensuring all legal requirements are met.