Case Note & Summary
The petitioner, J.B. Amin & Brothers (HUF), owned land at Aurangpura, Aurangabad, purchased by late Balubhai Amin for Rs.1,80,000. After his death in 1968, the property was inherited by the HUF. The land was sold on 27.04.2009 for Rs.18 crores (land value Rs.16 crores). In the return for assessment year 2010-2011, the petitioner computed long-term capital gain by taking the fair market value of the land as on 01.04.1981 at Rs.2,00,63,643 as cost of acquisition under Section 55(2)(b)(ii) of the Income Tax Act, 1961. The Assessing Officer issued a notice under Section 148 on 14.09.2016 proposing to reassess the income on the ground that the cost of acquisition should be the actual cost of Rs.1,80,000. The petitioner filed objections on 11.11.2016, which were rejected by order dated 04.08.2017. The petitioner challenged the notice and the rejection order by way of writ petition. The court considered whether the reassessment notice was valid. The court noted that the petitioner had made full and true disclosure of all material facts, including the sale consideration and the method of computing cost of acquisition. The reasons recorded for reopening showed that the Assessing Officer merely disagreed with the method adopted by the assessee, which amounted to a change of opinion. The court held that in the absence of any failure to disclose material facts, the Assessing Officer cannot reopen the assessment on a mere change of opinion. The court quashed the notice under Section 148 and the order rejecting objections, and directed the respondent to drop the reassessment proceedings.
Headnote
A) Income Tax - Reassessment - Section 147, 148 Income Tax Act, 1961 - Validity of Notice - The assessee sold land and disclosed the transaction in its return, computing long-term capital gain by taking fair market value as on 01.04.1981 as cost of acquisition under Section 55(2)(b)(ii). The Assessing Officer issued notice under Section 148 proposing to reassess on the ground that the cost of acquisition should be the actual cost. The Court held that since the assessee had made full and true disclosure, the reassessment notice was based on a mere change of opinion and was invalid. (Paras 1-10) B) Income Tax - Cost of Acquisition - Section 55(2)(b)(ii) Income Tax Act, 1961 - Computation of Capital Gain - For assets acquired before 01.04.1981, the assessee is entitled to adopt the fair market value as on that date as the cost of acquisition. The Assessing Officer cannot substitute his own opinion without any new material. (Paras 3-8)
Issue of Consideration
Whether the notice issued under Section 148 of the Income Tax Act, 1961 for reassessment of income is valid when the assessee had made full and true disclosure of all material facts and the reassessment is based on a change of opinion regarding the computation of cost of acquisition under Section 55(2)(b)(ii).
Final Decision
The court allowed the writ petition, quashed the notice dated 14.09.2016 under Section 148 and the order dated 04.08.2017 rejecting objections, and directed the respondent to drop the reassessment proceedings.
Law Points
- Reassessment notice under Section 148 must be based on reasons to believe that income has escaped assessment
- not on change of opinion
- Cost of acquisition for pre-1981 assets can be taken as fair market value as on 01.04.1981 under Section 55(2)(b)(ii)
- Full and true disclosure by assessee bars reopening under Section 147 unless there is failure to disclose material facts
