INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - AO categorically stated in reasons recorded for reopening of assessment that assessee did not disclose long-term capital gain/loss incurred by assessee on sale of shares - Assessee provided information in revised return of income

Assessee was an individual and having income from salary and house property. Case of assessee was processed under section 143(1). AO initiated reassessment proceedings on allegation that there was undisclosed capital gains on sale of shares. Assessee assailed validity of reassessment contending that same was done without proper jurisdiction. Held: When AO categorically stated in reasons recorded for reopening of assessment that assessee did not disclose long-term capital gain/loss incurred by assessee on sale of shares, but it was found that assessee gave categorically each item of sale of shares in his revised return of income stating name of company, date of sale of shares, sales price at the time of transaction, the date of acquisition of the shares, the purchase consideration, the indexed cost and the resultant capital loss, it could not be said that assessee did not disclose capital gain in revised return of income. Gujarat High Court in Sagar Enterprises v. ACIT (2002) 257 ITR 335 (Guj) : 2002 TaxPub(DT) 1549 (Guj-HC), held reopening of assessment on 'irrelevant facts' cannot be sustained. In instant case even the facts were not 'irrelevant' but were incorrect. None of facts stated in the reasons for reopening were supported by any evidence. Therefore, despite information available with AO he failed to establish live nexus of that information with the escapement of income and also apply the mind with the relevant facts available before him correctly. There was no 'reason to believe' was demonstrated by AO in reasons recorded for reopening of assessment, therefore, reversing order of lower authorities, action of AO in reopening assessment was quashed.

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