Reassessment Notice Not Complying Section 148 Pre-Conditions Is Beyond Jurisdictional: Bombay High Court
The Bombay High Court at Goa has held that the reassessment notice issued without complying with the pre-conditions mentioned in Section 148 of the Income Tax Act was beyond jurisdiction.The bench of Justice M. S. Karnik and Justice Valmiki Menezes has observed that the substantive rights of the original petitioner were governed by the provisions of the Portuguese Civil Code. The fact that...
The Bombay High Court at Goa has held that the reassessment notice issued without complying with the pre-conditions mentioned in Section 148 of the Income Tax Act was beyond jurisdiction.
The bench of Justice M. S. Karnik and Justice Valmiki Menezes has observed that the substantive rights of the original petitioner were governed by the provisions of the Portuguese Civil Code. The fact that the original petitioner is governed by the Portuguese Civil Code has been duly brought before the respondents.
The bench opined that mere non-mention of the same in the return of income would not give rise to a situation where the tax on the sale of property beyond the share of the original petitioner could be taxed in her hands. The respondent department does not dispute that the original petitioner was indeed governed by the provisions of the Portuguese Civil Code and was already on record with the Revenue. Moreover, the petitioner's husband had passed away way back in the year 1986, and the share of her husband had devolved from the date of his demise equally on his children. The position was also known to the Revenue when their return of income was filed.
The petitioner or assessee filed a Return of Income (ROI) declaring a total income. The petitioner disclosed a sale consideration and arrived at a capital gain after reducing the cost of acquisition with indexation at 2,78,52,800.
On August 14, 2018, a 2018, a survey action under Section 133A of the Income Tax Act was carried out in the case of M/s. Adwalpalkar Constructions & Resorts Pvt. Ltd. In the post-survey proceedings, it was found that by a sale deed cum exchange executed on January 20, 2015, between the petitioners and M/s. Adwalpalkar Constructions & Resorts Pvt. Ltd., the actual payment made by M/s. Adwalpalkar Constructions & Resorts Pvt. Ltd. to the petitioners was Rs. 3,59,50,000.
As per the Assessing Officer, the petitioner has not disclosed the amount in her ROI dated March 31, 2017. Thus, it is the case of the department that the petitioner failed to disclose fully and truly all material facts in her ROI dated March 31, 2017. The reassessment notice was issued to the assessee.
The assessee contended that the petitioner only had a 50% share in the properties since the original petitioner and her late husband were governed by the Portuguese Civil Code applicable to the residents of Goa. Ignoring the registered sale deeds, which are available in the public domain, and the information regarding them, which would have been clearly transmitted to the Income Tax Department, clearly shows that the original petitioner was only a 50% owner of the properties. The sale consideration corresponding to her share of 50% had been duly offered in the Return of Income, and hence there was no escapement of income.
The department contended that from the material, it is clear that the petitioner did not disclose the amount of ₹64,43,000/- in her ROI. Thus, the petitioner had failed to disclose truly and fully all material facts in her return of income. The petitioner did not declare a capital gain on the ground that the capital asset was agricultural land. However, no documentary evidence in support of the contention that the capital land was agricultural was furnished by the petitioner. The order rejecting the objection dated July 16, 2021 is passed as the petitioner did not make available the sale deed wherein she claims a half share of the properties.
The court, while quashing the reassessment proceedings, held that the reason cited by the department for rejecting the explanation, "Copy of the Sale Deed was not available at the time of recording of reasons," is fallacious and not tenable in law. The information from the office of the sub-registrar's for any registration is duly transmitted to the department. The execution of the sale deed was already on record. If the department fails to take note of the document that was available for transmission to the respondents from the sub-registrar's office, the assumption of jurisdiction will have to be regarded as erroneous. At the time of passing the order dated July 16, 2021, the sale deeds (which were available) ought to have been taken into consideration.
Counsel For Petitioner: Rahul Sarda
Counsel For Respondent: Susan Linhares
Case Title: Smt. Sunita Purushottam Virgincar Versus ITO
Case No.: Writ Petition No.496 Of 2023