Deepak Kapoor Vs PCIT (Delhi High Court)
Delhi High Court held that reassessment proceedings cannot be initiated by mere change of opinion of the Assessing Officer regarding the question of the fair market value or whether the amount paid by the assessee to his sisters was deductible from the total consideration.
Facts-
The petitioner has filed the present petition under Article 226/227 of the Constitution of India challenging the notice under Section 148 of the Income Tax Act, 1961. By the impugned notice, the assessee was called upon to file the return of income for the relevant assessment year within a period of thirty days from the said date, on the ground that his income chargeable to tax, for the Assessment Year 2016-17, has escaped assessment within the meaning of Section 147 of the Income Tax Act.
AO believed that a part of the assessee’s income, by way of capital gains resulting from the sale of the property at Vasant Vihar, had escaped assessment. It was contended by the assessee that his return of income duly disclosed the transaction regarding the sale of property and the computation of capital gains resulting from the said transaction. The AO did not accept the assessee’s computation and recomputed the capital gains.
Conclusion-
The assessment cannot be reopened only for the reason that the AO has changed his view on the question of the fair market value or whether the amount paid by the assessee to his sisters was deductible from the total consideration.
Held that it is now impermissible to the AO to seek to reopen the assessment to review its decision regarding the fair market value of the Property or deduction on account of the amount of ₹19,20,00,000/- paid by the assessee to his sisters or the expenses incurred by him.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner (hereafter ‘the assessee’) has filed the present petition under Article 226 / 227 of the Constitution of India impugning a notice dated 31.03.2021 (hereafter ‘the impugned notice’) under Section 148 of the Income Tax Act, 1961 (hereafter ‘the Act’). By the impugned notice, the assessee was called upon to file the return of income for the relevant assessment year within a period of thirty days from the said date, on the ground that his income chargeable to tax, for the Assessment Year 2016-17, has escaped assessment within the meaning of Section 147 of the Act.
2. The Assessing Officer (hereafter ‘the AO’) believed that a part of the assessee’s income, by way of capital gains resulting from the sale of property at Vasant Vihar, had escaped assessment. It is the assessee’s case that his return of income duly disclosed the transaction regarding sale of property and the computation of capital gains resulting from the said transaction. The assessee’s return was picked up for scrutiny and his income was assessed under Section 143(3) of Act. The AO did not accept the assessee’s computation and recomputed the capital gains. The assessee, thus, claims that the impugned notice, in effect, seeks to re-examine the assessment, which is impermissible.
3. The only question that arises for consideration in this petition is whether the issue of the impugned notice is occasioned by a possible change of opinion and seeks to review the assessment
4. The controversy in the present case relates to the assessment of income by way of long-term capital gains arising from sale of immovable property bearing no. A-53, Vasant Marg, Vasant Vihar, New Delhi-110057 (hereafter ‘the Property’). According to the assessee, the Property belonged to his parents in equal share. He acquired the Property by virtue of a will dated 17.06.1999 (hereafter ‘the Will’) executed by his father, late Sh. B.S. Ramdas Kapoor and by virtue of a Gift Deed dated 10.02.2006 (hereafter ‘the Gift Deed’) executed by his mother Mrs. Achla Kapoor. The assessee sold the said Property at a consideration of ₹60,00,00,000/- (Rupees Sixty Crores Only) and it was conveyed to the Vendee by a Sale Deed executed on 28.04.20 15.
5. One of the sisters of the assessee instituted a suit in this Court [being CS(OS) No. 1176/2007 captioned Mrs. Meera Dhingra v. Mr. Deepak Kapoor & Ors.], claiming share in the assets (including the Property), which the assessee claimed were inherited/received from his parents by virtue of the Will and the Gift Deed. In the said proceedings, this Court passed certain orders directing status quo in respect of the suit assets (including the Property).
6. The assessee and his siblings settled their disputes in terms of a settlement deed, whereunder the assessee agreed to pay each of his three siblings a sum of ₹6,40,00,000/- (Rupees Six Crores Forty Lacs Only) and they agreed not to contest the Will and the Gift Deed.
7. The aforementioned suit was decreed in terms of the said settlement by an order dated 25.02.20 15 passed by this Court.
8. The assessee filed his return of income for the Assessment Year 2016-17 on 30.06.2016, declaring a total income of ₹26,95,71 ,419/- (Rupees Twenty-six Crores Ninety-five Lacs Seventy-one Thousand Four Hundred and Nineteen Only). The same included a sum of ₹25,86,67,241/- as capital gains arising from the sale of the Property.
9. In the computation of income filed along with the return, the assessee claimed ₹11,06,66,759/- as costs of acquisition of the Property, being the fair market value as on 01.04.1981, enhanced on the basis of Inflation Index published by the Income Tax Authorities for the said purpose. The assessee also claimed a sum of ₹19,20,00,000/- paid to his three sisters in terms of the settlement as decreed, as expenditure incurred wholly and exclusively in connection with the Property. In addition, the assessee also claimed brokerage and other charges amounting to ₹3,86,66,000/-.
10. The assessee’s return was picked up for scrutiny and the AO issued a notice dated 06.07.2017, under Section 143(2) of the Act, inter alia, stating that the following two issues have been identified for examination:
“i. Whether receipt of foreign remittance has been correctly offered for tax.
ii. Whether capital gains / loss is genuine and has been correctly shown in the return of income.”
11. Subsequently, on 06.09.2018, the AO issued another notice under Section 142(1) of the Act seeking further information, inter alia, regarding long-term capital gains (Schedule CG of ITR). This was followed by another notice dated 03.12.2018 under Section 142(1) of the Act, inter alia, calling upon the assessee to provide the following information:
“1. Please provide the copy of valuation report showing the value (land cost, cost of construction and cost improvement) which was taken by you as on 01/04/1981 for the purpose of computation of capital gain.
2. Please provide the documentary evidence (in support of land cost, cost of construction and cost improvement) submitted by you before the registered valuer, who has under taken the valuation of the property.”
12. The assessee responded to the aforesaid notice by a letter dated 12.09.2018, enclosing therewith the various documents including the Will dated 17.06.1999; the Gift Deed dated 10.02.2006; the order dated 25.02.2015 passed by this Court in CS(OS) No.1176/2007; Agreement to Sell dated 28.04.2015; calculation of capital gains; and Certificate under Section 197 of the Act.
13. During the course of the assessment proceedings, the assessee filed a letter dated 07.12.2018 enclosing therewith copy of the Valuation Report regarding the fair market value of the Property as on 01.04.1981. The assessee also set out the details of the expenses incurred in connection with the transfer of the Property. The relevant extract of the said letter is set out below:
“Expenses incurred in connection with Transfer:-
The assessee has claimed following expenses incurred in connection with transfer:
