The Madras High Court has held that the assessment was reopened on the basis of the error pointed out by the revenue audit, but it was done after the period prescribed under Section 147 of the Income Tax Act.The bench of Justice R. Mahadevan and Justice Mohammed Shaffiq has observed that reopening the assessment in light of factual errors pointed out by the audit party is permissible under...
The Madras High Court has held that the assessment was reopened on the basis of the error pointed out by the revenue audit, but it was done after the period prescribed under Section 147 of the Income Tax Act.
The bench of Justice R. Mahadevan and Justice Mohammed Shaffiq has observed that reopening the assessment in light of factual errors pointed out by the audit party is permissible under the law.
The respondent/assessee is a hereditary of the Raja of Pudukottai, and he is assessed to pay tax in the status of a HUF and an individual. One of the properties of the assessee at Cenotaph Road, Chennai, was given to M/s. Doshi Housing Limited by entering into a development agreement on January 30, 2006, through a power of attorney.
According to the assessee, the sale proceeds derived from the transaction have been invested in purchasing an apartment, and documents evidencing such a transaction have been produced by the assessee. On the basis of the transaction, the assessee filed a return of income for the assessment year 2010-2011 on March 28, 2011, admitting the total income. The return filed by the assessee was scrutinized under Section 143(1) of the Income Tax Act and completed the assessment of income.
Subsequently, the revenue audit pointed out that the deduction claimed by the assessee under Section 54F is not in order as the assessee had not deposited the sale consideration in the notified capital gain scheme before the due date of filing the return of income.
Therefore, the Assessing Officer reopened the assessment under Section 147 by issuing a notice under Section 148 of the Act. The Assessing Officer completed the re-assessment by assessing the capital gain at Rs. 74,13,095 and disallowing the claim of deduction under Section 54F.
The assessee challenged the re-assessment dated December 29, 2016. The assessee filed an appeal before the Tribunal, contending that the reassessment notice dated March 7, 2016, was issued under Section 148 of the Act more than four years after the end of the assessment year. The assessee had fully and truly furnished all the material particulars necessary to complete the assessment, and the assessing officer did not show that there was a failure on the part of the assessee to disclose all the material particulars.
The tribunal held that the mere escape of income is insufficient to justify the initiation of action under Section 147 of the Act after the expiry of four years from the end of the assessment year.
The appellant/department contended that the Tribunal failed to take note of the fact that, on the basis of certain factual errors pointed out by the audit party, the Assessing Officer is wholly justified in re-opening the assessment.
The court upheld the order of the tribunal and set aside the reassessment, which was initiated beyond the prescribed time.
Case Title: Commissioner of Income Tax Versus Sri. R. Rajagopal Tondaiman
Citation: 2023 LiveLaw (Mad) 114
Case No: Tax Case Appeal No. 54 of 2023
Date: 09.02.2023
Counsel For Appellant: M. Swaminathan
Counsel For Respondent: None