No Reason For AO To Believe Income Chargeable To Tax Escaped Assessment: Bombay High Court

The Bombay High Court has held that the development agreement permitted construction on the land only as a licensee, which did not have the effect of transmitting possession in favor of the licensee as per Section 53A of the Transfer of Property Act.

The division bench of Justice Dhiraj Singh Thakur and Justice Kamal Khata has observed that there was neither any tangible material nor any reason for the assessing officer to believe that "any income chargeable to tax had escaped assessment,". The action of the assessing officer, therefore, would be without jurisdiction.

The petitioner has challenged the notice issued under Section 148 of the Income Tax Act, 1961. The assessment for the year 2013-14 was sought to be reopened on the ground that the AO had reason to believe that income chargeable to tax had escaped assessment.

The petitioner stated that Section 2(47)(v), which was invoked for the purpose of reopening, had no application. Granting a license to the developer, who entered into the assessee’s land for the purpose of development, did not amount to "allowing the possession of the land" as per Section 53A of the Transfer of Property Act, 1882. Therefore, Section 2(47)(v) would not apply.

The petitioner urged that the agreement between the petitioner and other owners and developers was a development agreement, according to which the developer was given rights only as a licensee. A licensee could not be said to be in "possession" within the meaning of Section 53A of the T.P. Act, and that "possession" was otherwise necessary and an integral ingredient for purposes of bringing a transaction within the purview of Section 2(47)(v).

The court, while allowing the petition, set aside the notice under Section 148 and the order.

Case Title: Late Bharat Jayantilal Patel Versus Deputy Commissioner of Income Tax

Case No. - Writ Petition No. 1612 Of 2022

Citation: 2023 LiveLaw (Bom) 98

Date: 10.02.2023

Counsel For Petitioner: Vasudev Ginde, Kumar U. Kale

Counsel For Respondent: Suresh Kumar

Click Here To Read The Order