No reassessment u/s 148 merely on information without verification

Short Conclusion :

AO cannot reopen an assessment u/s 148 merely based on an information revealing that there is an escapement of income on account of LTCG without even verifying such information as to how much capital gains has escaped assessment.

Reassessment—Income escaping assessment—Assessee filed return of income which was assessed accordingly—Thereafter, AO received AIR information revealing that during FY 2008-09 relevant to AY 2009-10, assessee had sold immovable property—Hence, proceedings u/s 148 were initiated and notices were issued—Since, there was no compliance, AO proceeded to pass order u/s 144—AO noted that during relevant AY, assessee sold ancestral agricultural land but, no capital gain was offered for taxation—As per Purchase Deed, land was purchased on 09.01.2009—Since, assessee had purchased agricultural land within prescribed period, he was entitled for deduction u/s 54B towards his share of land and balance amount was liable to be taxed as LTCG—AO computed LTCG and made addition to assessee’s income—CIT(A) confirmed reopening of assessment however, addition made by AO was modified—Held, validity of reopening of assessment should have to be judged with reference to reasons recorded for reopening of assessment—In present case, AO had mentioned in reasons that assessee sold property—Since, no compliance was made by assessee, AO, therefore, presumed that there was an escapement of income on account of LTCG—Therefore, AO recorded reasons to believe that capital gains on sale consideration chargeable to tax had escaped assessment—AO did not verify information and even did not compute as to how much capital gain had escaped assessment in facts of present case—Reasons were thus, vague and did not show any application of mind on AO’s part—AO in case of co-owner of same property, Shri I had accepted LTCG on same set of facts—It would show that AO did not verify information as to how much capital gains had escaped assessment—AO, therefore, acted only on basis of suspicion and it could not be said that it was based on belief that income chargeable to tax had escaped assessment—AO had to act on basis of reasons to believe and not on reasons to suspect—Assessee’s appeal allowed.

MOHD YAMEEN MUNNA vs. INCOME TAX OFFICER

(2019) 56 CCH 0004 DelTrib