The Madhya Pradesh High Court held that the initiation of reassessment proceeding justified on prima facie view of escapement of income, Long Term Capital Gain (LTCG) disclosed at a lesser amount.
The petitioner, Premlata Soni has sought the quashment of the reassessment proceeding for the Assessment Year 2014-15 in the case of the petitioner which has been initiated vide notice dated 20-12-2019 issued under Section 148 of the Income Tax Act, 1961. The petitioner has further prayed for quashing the order dated 24-5-2021 whereby the objections raised by the petitioner against the reassessment proceedings have been rejected.
The transaction on which reassessment proceedings have been initiated pertains to transfer of a rural agricultural land. For scrutinising the very same transaction, scrutiny proceeding under Section 143(3) of the Act was undertaken in case of the petitioner. In pursuance to the same the petitioner appeared and filed a detailed reply along with relevant documents. The matter was discussed in detail with the Assessing Officer and opportunity of personal hearing was granted to the petitioner. Accordingly, an assessment order recording all relevant facts and figures was passed by the respondents. It is put forth that the respondents have sought to reopen the same transaction.
Advocate Ruchesh Sinha for the petitioner submitted that no tangible material came to the notice of the respondents and, therefore, there was no failure on the part of the petitioner to disclose any information during the course of the original assessment proceedings.
Advocate Sinha submitted that approval for reassessment has been given merely in a mechanical manner. The reassessment proceeding in the case of the petitioner is clearly a case of “change of opinion” and review of the earlier assessment proceeding and, therefore, the same is impermissible.
Advocate Sanjay Lal on behalf of the respondents, National E-assessment Centre urged that initiation of reassessment proceeding against the petitioner is absolutely legal and justified and it is not a mere “change of opinion”, because there was escapement of income by virtue of the provisions of Section 50C of the Act and the LTCG disclosed by the petitioner at a lesser amount necessitated initiation of proceedings under Sections 147 and 148 of the Act.
The division bench headed by Chief Justice Mohammad Rafiq and Justice Vijay Kumar Shukla held that based on tangible material the Assessing Officer has initiated the reassessment proceedings, and if the same is examined on the touchstone of “reason to believe” for issuance of notice under Section 148 of the Act recorded by the Assessing Officer. A bare reading of the “reason to believe”, would show that the twin requirement of Section 147 of the Act that the Assessing Officer prima facie have some material on the basis of which there should be reason to believe that certain income chargeable to tax has escaped assessment.
“It is luminescent from the record that re-assessment proceeding has been initiated on the basis of the material which has given rise to “reason to believe” as well as escapement of assessment has been quantified by the Assessing Officer,” the court said.
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