Senior Officers Expected to Exercise Due Diligence in Initiating Reassessment for Concluded Assessment.

Shourya Infrastructure Pvt. Ltd. Vs ITO (Delhi High Court)

Conclusion: Reopening of the concluded scrutiny assessment was a serious business, therefore, senior officers like ACIT and PCIT were expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings.

Held: SIPL was in the real estate business, including constructing, buying, and selling immovable properties. Upon the assessee filing its Return of Income (ROI) for the AY in issue, AO took it up for scrutiny under Section 143(3). SIPL indicated to AO that although it had purchased the land, the funds were provided by a group company named STPL. According to SIPL, this arrangement was the subject matter of a Memorandum of Understanding (MoU)/agreement dated 02.03.2007 entered between itself and STPL. SIPL had also emphasized that under the MoU/agreement, it was empowered to sell the land if it was not used for any project for two to three years. Thus, as per SIPL, once the sale took place, it claimed as profit an amount calculated at the rate of Rs. 1,00,000/- per acre and remitted the balance to STPL. SIPL conveyed to AO that the amount remitted to STPL was claimed as expenditure, and the resultant profit earned, i.e., Rs. 1,73,002/-, was offered for levy of tax. AO framed the assessment order under Section 143(3) of the Act, without making any addition concerning the sale of the subject land; which had fetched a price of Rs. 1,51,00,000/-. AO, within barely a day’s gap, i.e., on 31.03.2018, issued a notice under Section 148 to SIPL, on the ground that he had reasons to believe that income chargeable to tax had escaped assessment. Accordingly, SIPL was asked to file a return in the prescribed form within 30 days of service of the said notice. AO’s view was that there was collusion between SIPL and STPL; therefore, the provisions of Section 50C were applicable. AO concluded that SIPL had earned income by way of capital gains amounting to Rs. 57,30,000/-. AO arrived at this figure by adjusting the sale consideration, i.e., Rs.1,51,00,000/-, against the value of the land arrived at based on the circle rate, i.e., Rs.2,08,30,000/-. It was held that it was no one’s case, not even the AO’s case, that SIPL had not executed the MOU/agreement with STPL. The burden of the AO’s order was that the sale of the subject land was a capital account transaction and, therefore, Section 50C of the Act was applicable. The Court observed that it was not a case where the AO sought to draw fresh inference, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information in that case, as observed by the Court, exposed the falsity of the statement made on behalf of assessee when the original assessment order was framed.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. This writ petition concerns Assessment Year (AY) 2011-12.

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