2024 (6) TMI 356 - AT - Income Tax

Reassessment proceedings under section 147 quashed as capital gains from 2010 transaction taxable in different assessment year

The ITAT Surat quashed reassessment proceedings under section 147 initiated against the assessee for AY 2012-13. Following the Gujarat HC precedent in ... Reopening of assessment - reason to believe - reason recorded to reopen - taxability in the previous year of execution of transfer - unexplained investment under section 69 - binding precedent on year of taxationReopening of assessment - reason recorded to reopen - taxability in the previous year of execution of transfer - binding precedent on year of taxation - Validity of reopening assessment under section 147/notice under section 148 for Assessment Year 2012-13 - HELD THAT: - The Tribunal held that the reasons recorded to reopen the assessment for AY 2012-13 relied on a notarised sauda/satakhat dated 16.08.2010. The satakhat related to an agreement executed on 16.08.2010, which falls in the previous year relevant to Assessment Year 2011-12; therefore any tax consequence arising from that transaction would be taxable in the year in which the deed/agreement was executed and not in the subsequent year. Following the binding decision of the jurisdictional High Court (Chintan Jadavbhai Patel), the Tribunal found that the Assessing Officer's reason to believe for reopening AY 2012-13 was unsustainable because the material on which the belief was formed pertained to a transaction executed in an earlier previous year. In view of this misalignment of the transaction date and the assessment year reopened, the reassessment proceedings initiated under section 147/notice under section 148 for AY 2012-13 were quashed. As the reassessment itself was quashed, the Tribunal observed that merits of additions (including the unexplained investment treated under section 69) became academic and did not require adjudication. [Paras 15, 16, 17]Reopening for Assessment Year 2012-13 quashed; grounds 1 and 2 allowed and consequential issues rendered academic.Final Conclusion: The appeal is allowed: reassessment proceedings under section 147/notice under section 148 for Assessment Year 2012-13 are quashed as the material relied upon (satakhat dated 16.08.2010) pertains to an earlier year, and other contested additions were not adjudicated as they became academic. Issues Involved:1. Reopening of assessment u/s 147 by issuing notice u/s 148.2. Validity of assessment order u/s 147 r.w.s. 143(3).3. Addition of Rs. 65,40,750/- on account of unexplained investment u/s 69.Summary:Issue 1: Reopening of assessment u/s 147 by issuing notice u/s 148The assessee challenged the reopening of the assessment u/s 147 by issuing notice u/s 148, arguing that there was no tangible material for the assessment year (AY) 2012-13. The Tribunal noted that the information regarding the Satakhat executed on 16.08.2010, which falls in AY 2011-12, was used to reopen the assessment for AY 2012-13. The Tribunal held that the reasons recorded by the Assessing Officer (AO) for AY 2012-13 based on the Satakhat executed in AY 2011-12 are not sustainable in law. The Tribunal relied on the judgment of the Hon'ble Jurisdictional High Court in the case of Chintan Jadavbhai Patel Vs. Income-tax Officer [2017] 79 taxmann.com 302 (Guj), which held that capital gains are taxable in the year of execution of the deed. Therefore, the Tribunal quashed the re-assessment proceedings initiated against the assessee u/s 147.Issue 2: Validity of assessment order u/s 147 r.w.s. 143(3)The assessee contended that the assessment order u/s 147 r.w.s. 143(3) is bad in law as the assessee was not given a copy of the material available with the department despite repeated requests. The Tribunal, having quashed the reassessment proceedings itself, did not find it necessary to adjudicate on this issue.Issue 3: Addition of Rs. 65,40,750/- on account of unexplained investment u/s 69The AO made an addition of Rs. 65,40,750/- on account of unexplained investment u/s 69, based on the difference between the sale consideration as per the registered sale deed and the Satakhat. The Tribunal, having quashed the reassessment proceedings, rendered this issue academic and did not require any adjudication.Conclusion:The Tribunal allowed the appeal of the assessee, quashing the reassessment proceedings initiated u/s 147 and rendering other matters academic. The order was pronounced on 17/01/2024 by placing the result on the Notice Board.