Reassessment notice and section 54F relief: mandatory section 143(2) notice and timely house purchase control the outcome.

Reassessment beyond four years requires recorded reasons to allege failure by the assessee to fully and truly disclose material facts, and where a return is treated as filed in response to notice under section 148, notice under section 143(2) is mandatory for valid reassessment. The note also states that section 54F relief is not defeated merely because the sale consideration was not deposited in the capital gains account scheme, if the new residential property is purchased within the prescribed period and the investment is otherwise supported by the record. The commentary therefore addresses both reassessment validity and the substantive conditions for capital gains exemption.

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Issues: (i) Whether the reassessment was invalid for want of notice under section 143(2) after the return was treated as filed in response to notice under section 148. (ii) Whether the assessee was entitled to deduction under section 54F when the new residential property was purchased within the prescribed period and the sale consideration was not deposited in the capital gains account scheme.

Issue (i): Whether the reassessment was invalid for want of notice under section 143(2) after the return was treated as filed in response to notice under section 148.

Analysis: The original scrutiny assessment had accepted the claim under section 54F after the assessee produced supporting material. The reassessment was initiated beyond four years from the end of the relevant assessment year, and the recorded reasons did not allege any failure by the assessee to disclose fully and truly all material facts. The record also showed that the return filed earlier was treated as the return in response to the reassessment notice, yet no notice under section 143(2) was issued. In these circumstances, the reassessment proceedings were held to be legally unsustainable.

Conclusion: The reassessment was invalid and the assessment order was bad in law for want of notice under section 143(2).

Issue (ii): Whether the assessee was entitled to deduction under section 54F when the new residential property was purchased within the prescribed period and the sale consideration was not deposited in the capital gains account scheme.

Analysis: The assessee had booked and purchased the new residential property within the statutory period. The denial of exemption rested only on non-deposit of the sale consideration in the capital gains account scheme by the due date. The decision relied on the principle that such non-deposit, by itself, does not defeat the substantive claim where the investment in the new residential house is otherwise within time and supported by the record.

Conclusion: The assessee was entitled to deduction under section 54F.

Final Conclusion: The reassessment and the disallowance of the capital gains exemption were set aside, and the assessee obtained complete relief.

Ratio Decidendi: For a reassessment beyond four years, the recorded reasons must allege failure by the assessee to fully and truly disclose material facts, and where a return is treated as filed in response to notice under section 148, issuance of notice under section 143(2) is mandatory; in addition, non-deposit of sale consideration in the capital gains account scheme does not by itself defeat section 54F relief when the qualifying investment is made within time.

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