Judgment:
D.A. Mehta, J.
1. This petition challenges notice issued under Section 148 of the Income Tax Act, 1961 (the 'Act') on 22-3-1999 by the respondent assessing officer for assessment year 1992-93.
2. The petitioner, an individual, filed return of income for assessment year 1992--93 declaring total income of Rs. 23,84,550. The assessing officer issued notice under Section 143(1) of the Act. On 20-3-1995 the petitioner assessee filed a detailed reply whereunder in para No. 4 it was stated 'The details of the amount invested in the new house being Rs. 11,36,477 in each case were duly enclosed along with the return of income....'. The assessment order was framed on 23-3-1995 under Section 143(3) of the Act after referring to the working of long-term gains in para No. 3 of the assessment order.
3. The impugned notice dated 22-3-1999 has been assailed by the learned advocate for the petitioner on the ground that the said notice has been issued beyond a period of four years from the end of the relevant assessment year and hence, as per provisions of Section 147 of the Act, more particularly the proviso thereunder, the onus is on the respondent authority to show that there is failure on part of the petitioner assessee as stipulated by the provisions of the proviso to Section 147 of the Act. It was submitted that insofar as the first two conditions are concerned viz. filing of return and responding to the statutory notice, it is not even the case of the revenue that either of the said two conditions is violated. Insofar as the third condition relating to omission to disclose fully and truly all material facts relevant for the assessment of the assessment year in question it was submitted that even in the reasons recorded, no such statement is made by the respondent authority. It was, therefore, urged that the petition is required to be allowed after quashing and setting aside the impugned notice.
4. On behalf of the respondent authority Mrs. M.M. Bhatt, learned-standing counsel, has invited attention to the affidavit in reply dated 27-7-1999 as well as the reasons recorded which have been annexed to the affidavit in reply. It was further submitted that the assessment order was silent in relation to the claim made by the petitioner. That in fact the sum of Rs. 10,46,930 being the cost of improvement on new asset was not an allowable deduction and incorrect exemption had been granted resulting in under-assessment of income.
5. Section 147 of the Act permits reopening of a completed assessment in a case where income liable to tax has escaped assessment. However, proviso under the said Section carves out an exception and shifts the burden on revenue in a case where a period of four years has elapsed from the end of the relevant assessment year. The proviso stipulates three conditions. Revenue is required to show from the record and the facts of the case that any one of the three conditions stands satisfied before the assessing officer can assume jurisdiction to issue notice for reassessment.
6. In the present case, admittedly, the condition regarding non-filing of return and the condition regarding non-responding to statutory notice are not applicable. The third condition requires the revenue to establish that there was any omission or failure on part of the petitioner assessee to disclose fully and truly all material facts relevant for the assessment of the assessment year in question. The reasons recorded read as under:
Reasons recorded for issue of notice under Section 148
Reg.: Shri Nikhil K. Kotak, Ahemdabad
Assessment year: 1992-93
The assessee had claimed exemption under Section 54 of Rs. 11,36,477 i.e., 1/3rd share of Rs. 34,09,430 for investment in new house against the income from long-term capital gain. The details of investment were as under:
(1) Purchase cost of new house Rs. 23,62,500(2) Cost of improvement on new asset Rs. 10,46,930----------------Rs. 34,09,430--------------------------------------------------------The exemption under Section 54 was actually allowable on the cost of purchase of new asset (i.e. residential house) or cost construction of new asset only. Thus, the cost of improvement of the property incurred later on will not be qualify for exemption under Section 54. The incorrect exemption granted resulted in underassessment of income of Rs. 3,48,977.
7. In a plain reading of the aforesaid reasons recorded by the respondent authority it becomes clear that it is not even the case of the revenue that there was any omission or failure on part of the petitioner assessee to disclose fully and truly all material facts relevant for the assessment of the assessment year in question. In fact when one goes through Annexure B, which is the statement showing computation of total income, it becomes clear that all relevant details for computing long-term capital gains have been shown by the petitioner assessee. Not only that, details of exemption claimed under Section 54 of the Act in respect of investment in new house have also been shown on a separate sheet. In fact the figures recorded by the assessing officer, in the reasons reproduced hereinabove, appear only from the details of exemption placed on record by the petitioner assessee.
8. In the aforesaid set of facts and circumstances of the case, it is apparent that there is no omission or failure on part of the petitioner assessee as required by provisions of the proviso to Section 147 of the Act. Hence, the impugned notice dated 22-3-1999 issued under Section 148 of the Act, which is admittedly issued beyond a period of four years i.e. 31-3-1997, is bad in law and without jurisdiction. Accordingly, notice under Section 148 of the Act dated 22-3-1999 is hereby quashed and seta side.
9. The petition is allowed accordingly. Rule made absolute. There shall be no order as to costs.