Challenge to notice under Section 148 reopening assessment for AY 2005-06 regarding capital gains on a development agreement. Court quashed notice citing reasons to believe requirement not met.
Impugned notice dated 25.3.2010 u/s 148 and order dated 2.12.2010 quashed and set aside.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.552 OF 2011
Amar R. Shanbhag Latif Villa, 129A, Dadasaheb Phalke Road, Dadar, Mumbai – 400 014
..Petitioner.
Versus
The Income Tax Officer 11(2)(1) Aayakar Bhavan, M.K. Road, Mumbai – 400 020
..Respondent.
Mr.K.B. Bhujale for the petitioner. Mr.Vimal Gupta for the respondent.
CORAM : J.P. Devadhar & A.A. Sayed, JJ. DATE : 18th July, 2011.
ORAL JUDGMENT : (Per J.P. Devadhar, J.)
March 2010 issued under Section 148 of the Income Tax Act, 1961 and also the order dated 2nd December 2010 whereby the objections raised by the
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petitioner against reopening of the assessment has been rejected.
2005-2006.
reasons :-
“During the course of re-opening assessment proceedings for A.Y. 2004-05, it was observed that the assessee had entered into development agreement with M/s.Matoshree Properties on 17-09-2004 for development of property situated at No.1, Parel Tank Road, Bhoiwada, Parel, Mumbai – 400 012 known as Bagla Property. Vide this said agreement, the developers agreed to pay the assessee a sum of Rs.4,00,00,000/- (Rupees Four Crores). However, it is observed that, in the return of income filed for A.Y. 2005-06, no capital gain was offered on such transaction. Further, the assessee has shown Rs. 61,00,000/- on a/c. of Bagla Properties under the head sundry loans in the Balance Sheet as at 31-03-2005 i.e. for A.Y. 2005-06.
In view of this, during the relevant year, the assessee should have offered the Capital Gain as there is transfer of rights of above referred property i.e. Bagla Property. As the property was given for development during the year and in view of development agreement, capital gain arisen, ought to have been offered for taxation in the year under consideration i.e. A.Y. 2005-06.
In view of the above, I have reason to believe that capital gain arisen on aforesaid property has escaped assessment within the purview of Section 147 of the Income Tax Act, 1961.”
assessing officer, capital gains has accrued to the assessee in assessment year
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2005-06 on account of transfer of development rights as per the Agreement dated 17th September 2004.
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consent terms filed on 2nd May 2011, the amount of Rs.7.5 crores are to be paid in installments upto 31st December 2011. It is also on record that the commencement certificate in the present case was issued on 29th December 2009. In these circumstances, in our opinion, it cannot be said that there was any reason to believe that income chargeable to tax has escaped assessment in assessment year 2005-06 so as to initiate reassessment proceedings under Section 147 read with Section 148 of the Act. So long as the consent terms filed on 2nd May 2011 hold the field, the question of bringing to tax the capital gains under the Development Agreement dated 17th September 2004 in assessment year 2005-06 does not arise at all.
2 issues framed by the court
Whether the Assessing Officer had valid reason to believe that income chargeable to tax had escaped assessment for AY 2005-06 regarding the development agreement.
Whether the notice issued under Section 148 for reopening assessment was依法 valid in the light of the delay and subsequent settlement.
2 provisions across 1 enactments
Amar R. Shanbhag
The Income Tax Officer
J.P. Devadhar
A.A. Sayed
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
