Reason to believe — Reopening of the assessment is unsustainable if no reason exists to believe that the income chargeable to tax has escaped assessment, as held by MumHC in Amar R Shanbhag v ITO –- In favour of: The assessee; Writ Petition No 552 of 2011.
There was an inordinate delay in obtaining the commencement certificate and, therefore, the petitioner once again terminated the Development Agreement dated 17 September 2004. Thereupon, Matoshree Properties filed a suit in the High Court, being Suit No 2863 of 2010, which was ultimately settled on 2 May 2011, wherein the consideration was enhanced from Rs 4 crores to Rs 7.5 crores.
As per the consent terms filed on 2 May 2011, the amount of Rs 7.5 crores is to be paid in instalments upto 31 December 2011. It is also on record that the commencement certificate in the present case was issued on 29 December 2009. In these circumstances, it cannot be said that there was any reason to believe that the income chargeable to tax has escaped assessment in AY 2005–2006 so as to initiate reassessment proceedings under s 147 read with s 148 of the Act. So long as the consent terms filed on 2 May 2011 hold the field, the question of bringing to tax the capital gains under the Development Agreement dated 17 September 2004 in AY 2005–2006 does not arise at all.
Decided on: 18 July 2011.
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