Bela Pratul Patel Vs ITO (Gujarat High Court)
Reassessment – Reopening a completed scrutiny assessment on capital loss from sale of agricultural land, without fresh tangible material, amounts to a mere change of opinion.
The Assessing Officer had specifically examined the sale transactions, computation of capital loss and supporting documents during the original scrutiny assessment under section 143(3). Since the same issue was reopened without any fresh tangible material, the Gujarat High Court quashed the order under section 148A(d) and the reassessment notice under section 148.
Case Summary: The Gujarat High Court in Bela Pratul Patel, Legal Heir of Late Pratul Ashokkumar Patel v. Income Tax Officer examined the validity of reassessment proceedings for AY 2016-17 concerning the long-term capital loss claimed on the sale of two agricultural land parcels. The Court found that the Assessing Officer had already scrutinised the transactions, called for supporting documents and accepted the computation of capital loss in the original assessment. As no fresh tangible material or information justified reopening the assessment, the proceedings were held to be based on a mere change of opinion, which was impermissible. The reassessment order and notice were accordingly quashed.
Core Issue: Whether reassessment for AY 2016-17 could be initiated to reconsider the long-term capital loss arising from the sale of agricultural land when the same transactions, computation and supporting documents had already been examined and accepted in the original scrutiny assessment.
Fact: The deceased assessee, Pratul Ashokkumar Patel, along with other co-owners, sold two agricultural land parcels situated at Village Santej, bearing Block Nos. 1342 and 1347, for total consideration of ₹2,08,50,303 and ₹5,29,84,510, respectively. His respective shares in the sale consideration were ₹26,06,254 and ₹1,32,46,127. In the return filed for AY 2016-17, he declared total income of ₹1,73,890 after claiming an aggregate long-term capital loss of ₹89,20,626. The return was selected for scrutiny, and notices under sections 143(2) and 142(1) specifically questioned the capital gains/loss, sale consideration, acquisition cost and supporting documents. The assessee furnished the relevant explanations, conveyance deeds, details of co-owners and other documents. The assessment was completed under section 143(3) on 20.12.2018 without disturbing the capital loss. After the assessee’s death, the Assessing Officer initiated reassessment proceedings and passed an order under section 148A(d) on 29.03.2023, followed by a notice under section 148 dated 30.03.2023, alleging escapement of income of ₹1,57,65,733.
AO / CIT Finding: The Assessing Officer relied on information received from the Income Tax authorities dealing with Intelligence and Criminal Investigation and referred to the registered sale deeds and the indexed cost of acquisition claimed by the assessee. The Assessing Officer concluded that income had escaped assessment and proceeded to reopen the assessment despite the issue of capital loss having been examined during the original scrutiny proceedings.
High Court Finding: The Gujarat High Court observed that the original assessment had specifically examined the capital loss of ₹89,20,626, the sale transactions, the consideration received and the supporting documents. The assessee had responded to multiple notices, and the Assessing Officer had accepted the explanation while completing the scrutiny assessment under section 143(3). The Court found no fresh tangible material or information justifying reopening on the same issue. It held that the reassessment proceedings were founded on a mere change of opinion and could not be sustained.
Outcome: The writ petition was allowed. The notice dated 30.03.2023 issued under section 148 and the order dated 29.03.2023 passed under section 148A(d) were quashed and set aside.
Cases Discussed
1. Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd., (2010) 320 ITR 561 (SC) — Relied upon by the petitioner for the principle that reassessment cannot be founded merely on a change of opinion without fresh tangible material.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. By way of the present writ petition, the petitioner has assailed the notice dated 30.03.2023 issued under section 148 of the Income Tax Act, 1961 (for short “the Act”) as well as the order dated 29.03.2023 passed under section 148A(d) of the Act seeking to reopen the assessment of the deceased assessee for the Assessment Year 2016-17.
2. The original assessee, Pratul Ashokkumar Patel, passed away on 13.04.2020, and the present writ petition has been filed by Bela Pratul Patel, wife of the assessee in the capacity of legal heir.
BRIEF FACTS
3. During the year under consideration, the deceased-assessee along with few other co-owners sold two immovable properties being agricultural lands situated at village Santej bearing Block Nos.1342 and 1347 for total consideration of Rs. 2,08,50,303/- and Rs.5,29,84,510/- respectively. Share of the deceased-assessee in such sale consideration was Rs.26,06,254/- and Rs.1,32,46,127/-. The deceased-assessee filed the return of income for the year under consideration on 26.07.2016 declaring total income at Rs.1,73,890/-. The same was filed after taking into account the consideration on sale of the two immovable properties. After deducting indexed cost of acquisition, the deceased-assessee incurred Long Term Capital Loss aggregating to Rs.89,20,626/-, which was duly disclosed in the return of income.
4. The return of income was selected for scrutiny by the issuance of a notice dated 03.07.2017 under Section 143(2) of the Act on the issues with regard to capital gains/loss relating to the properties in question. Subsequently, by the notice dated 03.01.2018 issued under section 142(1) of the Act, the deceased-assessee was called upon to furnish various details relating to the return of income and computation, justification of capital gains/loss, and questioning the value of consideration for the computation of capital loss relating to the sale of land and justifying capital gains/loss on such sale of property.
5. The deceased-assessee vide letter dated 17.01.2018 furnished all relevant documents along with a reply and explained the calculation of capital gains and computation of income, supplied the conveyance deeds along with clarification regarding share of co-owners, etc. However, the Assessing Officer issued the notice dated 14.12.2018 under Section 142(1) of the Act and further called for various details and information seeking explanation to the working of capital loss of Rs.89,20,626/- as well as the purchase deeds of immovable properties sold during the year under consideration for Rs.5,29,84,510/- and Rs.2,08,50,030/- along with the extracts of 7/12 and 8A of the properties in question. The deceased- assessee responded to the notice vide letter dated 18.12.2018 furnishing all the details as called for. Eventually, a scrutiny assessment order under Section 143(3) of the Act was passed on 20.12.2018, without disturbing or questioning the capital loss on the two immovable properties in question.
6. After demise of the original assessee, the Assessing Officer issued the notice dated 30.03.2021 under section 148 of the Act, again questioning the selling of two immovable properties and the capital gains on such properties. Though, the petitioner furnished a detailed reply to the notice on 28.02.2023 pointing out the earlier assessment proceedings and the assessment order passed under section 143(3) of the Act and justified that there is no escapement of income chargeable to tax, the respondent issued the show-cause notice on 09.03.2023 under Section 148A(b) of the Act, again calling upon information relating to the sale of land and the capital loss on such sale of property. The petitioner furnished replied to the notice on 24.03.2023 and urged to drop the reassessment proceedings. However, vide the impugned order dated 29.03.2023 passed under section 148A(d) of the Act, the Assessing Officer concluded that there is an escapement of income chargeable to tax to the tune of Rs.1,57,65,733/- and the same resulted into the issuance of notice dated 30.03.2023 under Section 148 of the Act.
7. Learned Senior Advocate Mr.Hemani at the outset, has submitted that the reopening of the assessment for the year under consideration is required to be quashed and set aside as the same is nothing but premised on change of opinion,, as all the facets of the sale of the properties in question, including the capital gains derived from the same, was disclosed in the scrutiny assessment. He further submitted that there was no fresh tangible material or any incriminating material, which has come into the possession of the Assessing Officer compelling him to reopen the assessment. Thus, it is urged that the petition may be allowed by setting aside the impugned notice as well as the order.
8. In response to the aforesaid submissions, learned Senior Standing Counsel Mr.Patel, while placing reliance on the reasons recorded by the Assessing Officer in the order dated 29.03.2023 passed under Section 148A(d) of the Act, has submitted that the Assessing Officer was in possession of the material, which suggests that the assessee had shown cost of acquisition of both of the lands and its share in the land inherited at the rate of Rs.100 per square meter and Rs.105 per square meter respectively and claimed indexation audit which comes to Rs.1,81,25,397/- and Rs.66,47,610/- respectively. From the information received from the record of the office of Income Tax Officer (for short “ITO”), Intelligence & Criminal Investigation (for short “I&CI”), Surat and ITO (I&CI), Rajkot, Directorate of Income Tax (for short “DIT”) (I&CI), Ahmedabad, it was found that the assessee has claimed a loss on sale of properties of Rs.89,20,626/-. Registered sale-deed Nos.5363 of 2015 and 5364 of 2015, both dated 29.07.2015, for considerations of Rs.2,08,50,030/- and Rs.5,29,84,510/- respectively for the immovable properties in question show that the income chargeable to tax has escaped assessment for the year under consideration. Thus, it is urged that the assessment may not be set aside at this stage.
9.We have heard the learned advocates appearing for the respective parties and also perused the documents, as pointed out by them.
ANALYSIS
10. The established facts from the petition as well as from the pleadings are as under:
10.1 By the impugned notice as well as the order dated 30.03.2023 and 29.03.2023 passed under Section 148 and 148A(d) of the Act respectively, the respondent has attempted to reopen the income tax assessment of the deceased- assessee for the Assessment Year 2016-17. The deceased-assessee, Pratul Ashokkumar Patel, passed away on 30.04.2020, and is represented by his wife as the legal heir for questioning the reopening of the assessment. The assessee along with co-owners sold two immovable properties being agricultural lands bearing Block Nos.1342 and 1347 situated at Village Santej, Taluka Kalol, District Gandhinagar.
10.1 By the impugned notice as well as the order dated 30.03.2023 and 29.03.2023 passed under Section 148 and 148A(d) of the Act respectively, the respondent has attempted to reopen the income tax assessment of the deceased- assessee for the Assessment Year 2016-17. The deceased-assessee, Pratul Ashokkumar Patel, passed away on 30.04.2020, and is represented by his wife as the legal heir for questioning the reopening of the assessment. The assessee along with co-owners sold two immovable properties being agricultural lands bearing Block Nos.1342 and 1347 situated at Village Santej, Taluka Kalol, District Gandhinagar.
10.3 The husband of the petitioner, vide letter dated 17.01.2018 furnished all the relevant documents along with its reply and explained the calculation of capital loss, computation of income, supplied the conveyance deeds along with clarification in relation to the share of co-owners, etc. Further, notice dated 14.12.2018 under Section 142(1) of the Act was issued asking the deceased-assessee to furnish various details relating to working of capital gain of Rs.89,20,626/- and purchase deeds of immovable properties sold during the year under consideration for Rs.5,29,84,510/- and Rs.2,08,50,030/- along with the extracts of 7/12 and 8A of the properties in question. The deceased-assessee responded to the notice by letter dated 18.12.2018 furnishing all the details as called for.
10.4 Finally, the scrutiny assessment order was framed under Section 143(3) of the Act on 20.12.2018, wherein the Assessing Officer did not disturb or question the Long Term Capital Loss on the sale of two immovable properties in question. Thus, in the scrutiny assessment, after various details were called upon as mentioned hereinabove, the Assessing Officer passed the aforesaid order and accepted the justification of the deceased assessee in calculating the Long Term Capital Loss of Rs.89,20,626/-.
10.5 The original assessee passed away on 13.04.2020, and almost after a period of 11 months, the assessment has been reopened by the notice dated 30.03.2021, calling upon the petitioner, who is the wife of the deceased assessee, on the same issues relating to the selling of two immovable properties and questioning the Long Term Capital Loss. The petitioner furnished a detailed reply vide letter dated 28.02.2023, pointing out the earlier assessment proceedings and urging that the issues, which have been placed in the reopening of the assessment by issuing the impugned notice, have already been considered in the original assessment proceedings, and the same is nothing but change of opinion. In support, the petitioner also relied upon the decision of the Supreme Court in the case of Commissioner of Income Tax, Delhi vs. M/s.Kelvinator of India Ltd., [2010] 320 ITR 561. However, without dealing with these submissions, the Assessing Officer has proceeded further by passing the order under section 148A(d)”>Section 148A(d) of the Act dated 29.03.2023.
11.On a perusal of the aforesaid order, we are of the opinion that the issues, which are referred therein, have already been considered and dealt with by the Assessing Officer in the original scrutiny assessment, and the explanation tendered by the husband of the petitioner was accepted resulting into an assessment order. We do not find that the Assessing Officer was in possession of any fresh tangible material or information, which would justify reopening of the assessment.
12.Thus, the impugned order as well as the notice are premised on mere change of opinion. As per settled legal precedents, the petitioner, who is wife of the deceased-assessee, cannot be allowed to be embroiled in the reassessment proceedings on the basis of change of opinion.
13.In light of the foregoing observations, the present writ petition succeeds. The impugned notice dated 30.03.2023 issued under section 148 of the Act as well as the order dated 29.03.2023 passed under section 148A(d) of the Act are hereby quashed and set aside. Rule made absolute.
