Reassessment u/s 147, in the absence of tangible material is not warranted

Madras HC: Reassessment u/s 147 of the income Tax Act, in the absence of tangible material to establish that the assessee failed to disclose fully and truly all materials is not warranted

Commissioner of Income Tax, Coimbatore vs. Mr. John Ettimootil Samuel; T.C.A.No.497 of 2013; High Court of Madras; Chennai

Madras High Court held that reassessment was not warranted under facts and circumstances where the reassessment is opened after years and where there was no tangible material to establish that the assessee failed to disclose fully and truly all materials at the time of first assessment and that non production of original sale deed while assessment u/s 143(3) of the Income tax Act.

The assessment for the year under consideration, viz., 2005-06 was completed by order dated 28.12.2007, under Section 143(3) of the Act. The assessment was subsequently reopened under Section 147 and notice under Section 148 of the Act was issued. The Assessing Officer stated that for the subject assessment year, long term capital gain of Rs.1,62,74,689/- was computed by taking sale consideration of Rs.1,74,00,000/- and from the copy of the Sale Deed, it is seen that the Registering Authority has charged compounding fee on the document of Rs.89,000/- under Section 70(2) of the Indian Stamp Act, which is inclusive of 8% stamp duty and 1% registration fee. Therefore, the sale consideration to be adopted, as per Section 50C of the Act for computation of capital gain, should be Rs.1,83,89,000/- and the increase of capital gain of Rs.9,89,000/- should accordingly be brought to tax.

Assessee filed appeal before the Commissioner of Income Tax (Appeals), and contended that reopening of the assessment, after a period of four years without any tangible material to establish that the assessee failed to disclose fully and truly all facts. The assessee contended that all the documents with regard to the payment of stamp duty and additional stamp duty have been disclosed before the Assessing Officer and the copy of the Sale Deed has been filed and the dispute with regard to the sale consideration is not open for revision. Furthermore, the assessee contended that the order passed under Section 147 is bad in law, since the matter was not referred for valuation in terms of Section 50C(2) of the Act. The CIT(A), did not agree with the assessee and dismissed the appeal .

The Hon’ble High Court held that the Tribunal, rightly took note of the fact that the reopening of the assessment was after years and there was no tangible material to establish that the assessee failed to disclose fully and truly all materials, which are required for the assessment at the first instance. Furthermore, the Tribunal took note of the fact that the assessee has furnished all necessary details required for completing the assessment including the photostat copies of the Sale Deed. Further, the Tribunal observed that the original Sale Deed will always be with the buyer of the property and the assessee will have only a certified copy and the Assessing Officer did not insist upon production of the original Sale Deed while completing the assessment under Section 143(3) of the Act. Therefore, it was held that there was no case for reopening the assessment.