Ramilaben Balubhai Ahir Vs ITO (Gujarat High Court)
Summary: The Gujarat High Court in Ramilaben Balubhai Ahir Vs ITO allowed the petitioner’s challenge to reopening for Assessment Year 2016-17 and set aside the notice under section 148 and order under section 148A(d), both dated 23 March 2023. The Court held that the proceedings could not continue beyond three years once the Assessing Officer accepted alleged escaped income of ₹37,55,365, below the ₹50 lakh threshold under section 149(1)(b) applicable to the impugned reopening.
The proceedings originated from information about sale of immovable property for ₹6,27,04,000. The petitioner had not filed her return for the relevant assessment year and did not respond to notices dated 14 February 2023 and 10 March 2023. Consequently, the Assessing Officer initially treated the entire sale consideration as escaped income and issued the impugned order and reopening notice. During subsequent assessment proceedings, the petitioner explained through objections dated 18 December 2023 that the property belonged to her and seven family members, and her 6.25% share amounted to ₹39,19,000. She furnished ownership details, purchase and sale deeds, and Form 26QB reflecting TDS of ₹39,190.
The Assessing Officer accepted the petitioner’s share of the sale consideration and allowed indexed cost of acquisition of ₹1,63,635, computing long-term capital gains at ₹37,55,365. A show cause notice dated 15 January 2024 proposed taxation of that amount. The petitioner sought dropping of the proceedings as time barred under section 149. Before the High Court, she argued that reopening beyond three years could not survive when the accepted escaped income was below the statutory threshold. The Revenue opposed interference, relying on her failure to respond to the initial notices and failure to file the return.
The Court rejected the Revenue’s justification. It held that non-response to the initial notices did not relieve the Assessing Officer of the obligation to follow statutory limitations. Once the petitioner’s explanation was accepted and the alleged escapement was determined below ₹50 lakh, the proceedings ought to have been dropped. The Court also observed that TDS information was already available when the initial notices were issued and that the officer should have applied his mind to the statement, including the 1% deduction corresponding to the petitioner’s share.
Holding the Assessing Officer’s action to be in direct conflict with section 149, the Court quashed both the impugned notice and order dated 23 March 2023, allowed the writ petition and made the rule absolute, without any order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
1. Since the issue involved in the present writ petition is in short compass, with consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing and final disposal. The affidavit-in-reply dated 21.10.2024 filed by the respondent is ordered to be taken on record.
2. At the outset, we may record that while granting the ad-interim relief restraining the Assessing Officer not to pass any final orders, this Court vide order dated 20.02.2024 has recorded the submissions advanced by learned Senior Advocate, Mr.Tushar Hemani to the extent that the reopening of assessment for the Assessment Year (for short ‘A.Y.’) 201617 is beyond the period of three years as the Assessing Officer would not assume the jurisdiction if the income assessed is less than Rs.50 Lakh. As on today, this submission remains uncontroverted.
3. By way of present writ petition, the petitioner challenges the notice dated 23.03.2023 issued under section 148 of the Income Tax Act, 1961 (for short ‘the Act’) as well as the order dated 23.03.2023 passed under section 148A(d) of the Act.
BRIEF FACTS :
4. The respondent-Assessing Officer has issued a notice dated 14.02.2023 under section 148A(a) of the Act wherein, the petitioner has been called upon to furnish certain details relating to the immovable property, which was sold for total consideration of Rs.6,27,04,000/-. The petitioner did not file reply to the said notice, which compelled the respondent to issue further notice dated 10.03.2023 under section 148A(b) of the Act calling upon the petitioner as to why the show cause notice under section 148 of the Act should not be issued relating to the same issue as mentioned herein above of sale of the property-in-question. The petitioner also did not furnish any reply to this notice. Hence, the respondent vide order dated 23.03.2023 passed under section 148A(d) of the Act concluded that there is escapement of income chargeable to tax to the tune of Rs.6,27,04,000/- and accordingly, notice dated 23.03.2023 was issued under section 148 of the Act seeking to reopen the case of the petitioner for the year under consideration.
4.1 During the assessment proceedings, the petitioner raised objections vide letter dated 18.12.2023. The petitioner categorically pointed out that she along with seven family members purchased an agricultural piece of land and details of ownership of all the family members in the tabulated form including its share was pointed out. It was clarified by the petitioner that looking to the 6.25% of her share from the total sale consideration of Rs.6,27,04,000/-, it would come to Rs.39,19,000/- and accordingly, as per her share, the Form 26QB of TDS return was filed. The petitioner accordingly, provided all the details in the form of documentary evidence to the Assessing Officer. The petitioner specifically mentioned for dropping of the proceedings in view of provision of section 149(1) of the Act as it does not permit the Assessing Officer to reopen the assessment of income as it was below the statutory limit of Rs.50 Lakh and hence, the reassessment was time barred.
4.2 Thereafter, the respondent issued a show cause notice dated 15.01.2024 calling upon the petitioner as to why the capital gain of Rs.37,55,365/- should not be taxed in the hands of the petitioner for the year under consideration. Thus, it is an accepted fact that on the explanation tendered by the petitioner, the revenue/Assessing Officer has accepted that the escapement of income is Rs.37,55,365/-. Since no action of dropping the assessment was taken, the same compelled the petitioner to file the present writ petition.
SUBMISSIONS ON BEHALF OF THE PETITIONER :
5. Learned Senior Advocate Mr.Tushar Hemani, at the outset, while pointing out the interim order dated 20.02.2024, has submitted that it is not in dispute that the reopening of the assessment is premised on the amount of Rs.37,55,365/-pertaining to the long term capital gain and why it should not be added to his total income of the petitioner being short term capital gain on sale of immovable property, which is below the threshold limit as stipulated under the provision of section 149 of the Act. Thus, it is urged that the impugned notice may be quashed and set aside.
SUBMISSIONS ON BEHALF OF THE RESPONDENT :
6. Responding to the foregoing submissions and opposing the present writ petition, learned Senior Standing Counsel Mr.Karan G. Sanghani appearing for the respondent while referring to the affidavit-in-reply dated 21.10.2024, has submitted that the impugned notice issued under section 148 of the Act may not be quashed and set aside more particularly, looking to the non-cooperation of the petitioner in responding to the initial show cause notices. It is contended that on the explanation tendered by the petitioner of receiving the sale consideration of Rs.39,19,000/- and since the petitioner did not file return of income for the A.Y. 2016-17, the assessment may not be interfered with.
ANALYSIS AND OPINION :
7. The undisputed and established facts of the case is that, the petitioner has not filed the return of income for A.Y. 2016-17. The petitioner along with seven family members sold the immovable property for total sale consideration of Rs.6,27,04,000/- and accordingly, a TDS statement under section 194-IA of the Act was filed of Rs.39,19,000/-. The petitioner was issued show cause notices dated 14.02.2023 and 10.03.2023 however, she did not file any reply to such notices. Ultimately, the respondent vide order dated 23.03.2023 passed under section 148A(d) of the Act concluded that there is escapement of income chargeable to tax to the tune of Rs.6,27,04,000/- and also issued notice under section 148 of the Act on 23.03.2023.
7.1 During the assessment proceedings, the petitioner raised objections vide letter dated 18.12.2023 pointing out the details of the sale consideration along with the seven family members. She has categorically in her reply pointed out that her share was 6.25% of the total sale consideration, which comes to Rs.39,19,000/- and as per Form 26QB i.e. TDS return, the TDS of Rs.39,190/- was effected that is 1% of the total consideration of her share of Rs.39,19,000/-. The petitioner accordingly, also supplied the copies of purchase and sale deeds.
8. It is not in dispute that the respondent accepted the explanation tendered by the petitioner and considered her share of Rs.39,19,000/- from the total sale consideration of Rs.6,27,04,000/- and after granting the benefit of indexed cost of acquisition of Rs.1,63,635/-, the long term capital gain of Rs.37,55,365/- has been worked out. Thus, in the impugned notice issued under section 148 of the Act, it is established that the amount which is alleged to have escaped assessment in the hands of the petitioner for the year under consideration, is Rs.37,55,365/-, is less than Rs.50 Lakh as specified under the provision of section 149(1) of the Act.
9. Having determined the amount beyond the threshold limit of Rs.50 Lakh by the Assessing Officer, the further proceedings ought to have been dropped and in fact, there was no requirement of issuance of notice under section 148 of the Act after determining the amount of Rs.37,55,365/- since the provision of section 149(1)(b) of the Act and the proviso referred therein, does not permit the reopening of the assessment beyond the period of three years in case the escapement of income chargeable to tax is below the threshold limit of Rs.50 Lakh. Thus, it was not open for the respondent to issue the impugned notice under section 148 of the Act after the expiry of three years in view of the specific bar contained under the provision of section 149(1)(b) of the Act.
10. The respondent has attempted to justify its action of issuance of notice under section 148 of the Act on the ground of not responding to the show cause notices issued to the petitioner initially under section 148A(b) of the Act. In our considered opinion, even if the petitioner did not respond to the show cause notices issued under section 148A(b) of the Act, the Assessing Officer after considering the explanation tendered by the petitioner during the assessment proceedings under section 148 of the Act, ought to have dropped the proceedings and would not have issued the notice under section 148 of the Act after having acquired the knowledge that the alleged escapement of income is below the statutory limit of Rs.50 Lakh as stipulated under the provision of section 149 of the Act.
11. At this stage, we may clarify that the information relating to the TDS was already available with the Assessing Officer even while issuing the initial notices as the sale is premised on the sale consideration of Rs.6,27,04,000/-. The Assessing Officer was supposed to apply mind to the TDS statement filed by the petitioner which as per the statute is 1% and it comes to the amount of Rs.39,190/- of Rs.39,19,000/-. Thus, the Assessing Officer while invoking any action on the statutory provisions against an assessee, is supposed to know and follow the implications of his action and whether the same reconciles with the statutory provisions or not. Even if the assessee has not responded to the initial notices, the same would not absolve the Assessing Officer in following the statutory provisions and the statute obligates the Assessing Officer to examine the case of the assessee in light of the facts presented before him/her.
12. In the present case, indubitably when it was noticed by the Assessing Officer that the escapement of the income is below the threshold limit of Rs.50 Lakh, he would have stopped at that stage and ought not have issued notice to the petitioner. Hence, since the action of the Assessing Officer is in direct conflict to the provision of section 149 of the Act, we set aside the impugned notice as well as the impugned order dated 23.03.2023. The present writ petition is allowed, accordingly. Rule is made absolute. No order as to costs.
