In a matter of reopening of assessment after 4 years based on a change of opinion without stating any reason, the Bombay High Court (HC) set aside the re-assessment order being void.
The petitioner Bharat Amratlal Shah’s mother late Smt. Subhadra Amritlal Shah(“Subhadra”) had leasehold rights and interest in land situated at JVPD Scheme,Vile Parle (West), Mumbai, owned by the Friends Co-operative Housing society and was allotted 5 sharesby the societyacknowledging her rights in the land. Subhadra and her husbandexpired intestate on 24th March 1987.
The sons entered into a family arrangement /understanding with their sisters and the sisters executed a release deed whereby they gave up their claim of any right over the entirepropertyagainst payment of compensation. The sons sold their respective flats to the purchasers by a deed of transfer for consideration of Rs.9,75,00,000/and Rs.9,25,00,000/-. Out of the said sale proceeds, each sister was paid Rs.38 lakhs by each son towards the settlement of their claim over the flats.
The Petitioner filed a return of income and computation of income for A.Y. 2015-16 on 4th January 2016. The Petitioner computed Rs.6.82 crores as long-term capital gain (LTCG) after deducting the indexedcost of acquisition, payments made to their sisters, expenses including the cost of furniture left and as per exemptions available under Section 54(2) of the Income Tax Act, 1961 by depositing the balance amount in the Capital Gains Accounts Scheme and under Section 54EC under by investing in Bonds.
A notice under section 143(2) of the Income Tax Act was given for which the Petitioner submitted responses with all relevant details and documents. The Assessment under section 143(3) was completed on 25th September 2017. The notice to reopen the assessment has been issued on 31st March 2021 i.e. more than four years after the end of the relevant assessment year viz. A.Y. 2015-16.
Justice Dhiraj Singh Thakur & Justice Kamal Khata viewed that the department on account of the internal audit objection that a remedial action of reopening the assessment by an action u/s 148 of the Act was taken to settle the audit objection
Further observed that as per section 147, no action can be taken for reopening after four years unless the AO has reason to believe that income has escaped assessment because of the failure on the part of the assets to disclose fully and truly all material facts necessary for assessment.
The Court held that the department has purported to reopen the assessment only based ona change of opinion and the Petition does not spell out failure on the part of the assessee to disclose fully and truly all material facts. The Court set aside the impugned notice.
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