Zain Constructions Vs ITO (Bombay High Court)
The petitioner, a partnership firm engaged in real estate development, challenged a notice issued under Section 148 reopening the assessment for AY 2013-14 and the consequential reassessment order. The original assessment under Section 143(3) had followed a survey under Section 133A, during which the Assessing Officer found that certain flats had been sold below the stamp duty valuation and made an addition based on the partner’s statement and other material.
The reasons recorded for reopening relied on two grounds. First, the Assessing Officer stated that the total stamp duty value of thirteen flats exceeded the sale consideration disclosed by the petitioner, resulting in alleged escaped income of ₹66.36 lakh after considering the amount already declared during the survey. Secondly, it was alleged that the petitioner had undervalued its closing stock by showing only one unsold flat instead of three, leading to an alleged escapement of ₹48.80 lakh. On this basis, the Assessing Officer formed a belief that income of ₹1.15 crore had escaped assessment and issued notice under Section 148.
The High Court first examined the allegation relating to the closing stock. It found that the Revenue could not substantiate the factual basis for claiming that three flats remained unsold. The Assessing Officer had asserted the discrepancy without producing supporting material. The Court held that once the Assessing Officer alleged such discrepancy, it was his duty to establish it with evidence, and the assessee could not be expected to prove a negative. Consequently, this ground for reopening remained unsubstantiated and was ignored.
