INCOME TAX : Where Assessing Officer issued on assessee-buyer a reopening notice on ground that there was violation of provisions of section 50C in case of property purchased by assessee, since Section 50C applied to seller and not to buyer, reopening notice was to be quashed and set aside

HIGH COURT OF BOMBAY

Aruna Surulkar

v.

Income Tax Officer, Ward-19(2)(4)

K.R. SHRIRAM AND DR. NEELA GOKHALE, JJ.

WRIT PETITION NO. 3503 OF 2023

JANUARY  22, 2024 

Section 50C, read with section 148, of the Income-tax Act, 1961 – Capital gains – Special provision for computation of full value consideration (Illustrations) – Assessment year 2018-19 – Assessing Officer issued on assessee a notice under section 148A(b) seeking approval for reopening of assessment – Subsequently, Assessing Officer passed order under section 148A(d) and issued on assessee a notice under section 148 seeking to reopen assessment – Mr. Basu, learned counsel for assessee submitted that there had been total non-application of mind while issuing order under section 148A(d) inasmuch as in said order it was mentioned that assessee was buyer of property and if only sanctioning authority had read order, he would not have granted sanction because section 50C did not apply to buyers – Whether Assessing Officer before issuing a notice must have satisfied himself that what he wrote made sense and even Principal Commissioner, who granted sanction should have also applied his mind and satisfied himself that order passed under section 148A(d) was being issued correctly by applying mind – Held, yes – Whether since there was nothing in notice to explain as to how, if transaction amount was less than stamp duty value, there could be escapement of any income particularly in hands of a buyer, impugned notices and order were to be set aside – Held, yes [Paras 6 and 7] [In favour of assessee]

FACTS

  • The Assessing Officer issued reopening notice on ground that the assessee had violated provisions of section 50C.
  • In instant petition, the assessee had challenged the impugned reopening notice.

HELD

  • The assessee states, and rightly so, that provisions of Section 50C would apply only to a seller and not the assessee in this case, who is the buyer of the property. Therefore, it is assessee’s case that there has been total non application of mind while issuing this order under Section 148A(d). The assessee states that in the order also it is mentioned that the assessee is buyer of the property and if only the sanctioning authority had read the order, he would not have granted the sanction because section 50C does not apply to buyers. [Para 4]
  • The revenue relies on an affidavit-in-reply filed by one M and submits that it was a human error. It is viewed that the said Manish is incompetent to make the statement because it is not the said Manish, who had passed the impugned order. There is also nothing to indicate in the affidavit that Manish made inquiries with the officer, who passed the impugned order seeking an explanation for reliance on section 50C .Therefore, this explanation of revenue is not accepted. [Para 5]
  • The assessee further submitted that the reopening was to provide an opportunity to the assessee of being heard and thus, thoroughly analyze the facts of the case with documentary evidence and the sufficiency or correctness of the material cannot be considered at the stage of reopening. The questions of fact and law are left open to be investigated and decided by the Assessing Officer and therefore, reopening is valid. This stand of Respondents in as much as the Assessing Officer before issuing a notice must have satisfied himself that what he writes makes sense. Even the Principal Commissioner, who granted sanction should have also applied his mind and satisfied himself that the order passed under Section 148A(d) of the Act was being issued correctly by applying mind. It cannot be a mechanical sanction. On these grounds alone, the petition should be allowed. [Para 6]
  • There is nothing in the notice to explain as to how, if the transaction amount is less than the stamp duty value, there can be escapement of any income particularly in the hands of a buyer. [Para 7]
  • In the circumstances, the petition is allowed. [Para 8]