Bombay HC Quashes Reassessment Order against Wife as Husband Bought Property

Kalpita Arun Lanjekar Vs ITO (Bombay High Court)

 In a recent case before the Bombay High Court, the legality of an income tax reassessment against a housewife, Kalpita Arun Lanjekar, came under scrutiny. The crux of the matter lies in a notice received by Kalpita Arun Lanjekar from the Income Tax Officer, Ward-28(2)(1), under Section 148A(b) of the Income Tax Act, 1961. The notice alleged that income chargeable to tax for the Assessment Year 2016­2017 had escaped assessment due to high-value transactions, particularly the purchase of immovable property valued at Rs. 30,00,000 or more.

Despite explanations and documentary evidence provided by Kalpita, including the fact that the property was purchased solely by her husband, the reassessment order was still issued. The order cited a lack of details regarding the source of funds for the property purchase.

However, the court’s analysis revealed flaws in the order. It was noted that the Assessing Officer failed to recognize that Kalpita had not contributed financially to the property purchase. Moreover, the Principal Chief Commissioner’s sanction for the order was deemed questionable.

In conclusion, the Bombay High Court ruled in favor of Kalpita Arun Lanjekar, quashing the reassessment order. The judgment underscores the importance of thorough scrutiny in tax proceedings, especially concerning joint property ownership and individual tax liabilities. This case sets a precedent for fair treatment of individuals, particularly housewives, in income tax matters.

FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT

1. Petitioner, a housewife who had no income and therefore, was not filing any income tax return, received a notice dated 19^th February 2023 from Respondent No. 1, the Income Tax Officer, Ward-28(2)(1) under Section 148A(b) of the Income Tax Act, 1961 (“the Act”). In the notice it is stated that the officer has information which suggests that income chargeable to tax for Assessment Year 2016-­2017 has escaped assessment. The details of information were also made available and it reads as under :

“As per information received from “INSIGHT PORTAL” under Risk Management Strategy (RMS), you have done high value transaction during the year under consideration, however, on verification of the various portals viz. ITBA, Insight, e-filing & CPC-2 portal, it is seen that no ITR has been filed by you for the A.Y.-2016-2017. Therefore, the case has been classified as “Non-filer cases under RMS Cycle for A.Y.-2016-2017”. Since, you have not filed return of income for A.Y.-2016-2017 even though you have made huge transaction during F.Y.-2015-2016 for which information is already available on portal, hence, enquiry is not required in your case.

2. The details of information description, source and nature of information, value/amount of transaction related to show-cause notice u/s 148A(b) of the Income Tax Act is attached separately, and the same are as under :

3. The above mentioned information suggest that the income chargeable to tax has escaped assessment for the A.Y.-2016-2017. Therefore, you are hereby required to show-cause as to why proceedings u/s 148 of the Income Tax Act should not be initiated against you. Your reply should be supported by following details/documents :

i) Head-wise computation of income.

ii) Details of purchase of immovable property during F.Y.-2015-2016 supported with copy of registered agreement with Index-II.

iii) Details of payment made and source for acquisition of said immovable property supported with copy of bank statement highlighting the transaction.

iv) If the property was purchased jointly, please furnish the details and source of all joint holders with supporting documents and copy of return of income filed.

v) Please specify the reason in detail as to why you have not filed return of income for A.Y.-2016-2017 even though, you have taxable income during F.Y.-2015-2016.

You may submit any other details you relied upon, as deemed fit in support of your claim.”

2. Petitioner by a letter dated 28^th February 2023 issued through Raju More & Associates, Chartered Accountants submitted that the property was purchased by her husband Mr. Pravin Patil and all the payments were made by him. Petitioner also explained that Petitioner’s name was included as a joint holder in the agreement for sale, but no payment has been made by Petitioner. Copy of the registered agreement for the property, husband’s bank details etc. were made available.

3. Notwithstanding the details and documents being provided, the impugned order dated 31^st March 2023 under Section 148A(d) of the Act has been passed. It is stated in the order that the Assessing Officer (“AO”) has examined whether assessment is needed and the explanation and documents submitted by assessee do not conclusively preclude the suggestion based on the information available that the income chargeable to tax has escaped assessment. The only basis on which the order has been passed is, the assessee has not submitted the details of source of Rs. 88,75,000/- paid for purchase of property by her husband, source and the details of receipt of amount from the relatives, whereas the husband’s income is only Rs. 18,49,980/-.

4. Though Mr. Gupta has strongly opposed the petition, but at the end he agreed that those details have to be sought from the husband for husband’s assessment and not from Petitioner herein because the AO has accepted that Petitioner has not made any payment for purchase of property.

5. We also have to notice that surprisingly the Principal Chief Commissioner of Income Tax has also accorded sanction for issuance of this order instead of directing the AO to drop the proceedings against Petitioner.

6. In the circumstances, we hereby quash and set aside the order dated 31^st March 2023 passed under Section 148A(d) of the Act, because in our opinion, it is not a fit case for reopening the assessment in the case of Petitioner.

7. Petition disposed.