TaxTMI 
TaxTMI 
2014 (10) TMI 147
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....rder or direction quashing the 148 notice at Exhibit I and the order of the respondent rejecting the objections at Exhibit P. (B) this Hon'ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction asking the respondent not to proceed further in pursuance of the said notice and the order of the respondent rejecting the objections. (C) Pending the hearing and final disposal of this application, this Hon'ble Court be pleased to grant the say of further proceedings in pursuance of Section 148 notice at Exhibit I and the order of the respondent rejecting the objections at Exhibit P. (D) This Hon'ble Court be pleased to grant any further or other relief, as this Hon'ble Court deems just and proper in the interest of justice, and (E) This Hon'ble Court be pleased to allow this application with costs against the respondent." 3. Brief facts necessary for the purpose of deciding this petition are as follows : 3.1 The petitioner is in the business of dealing in formulations of Pesticides and other chemicals. The petitioner filed its return ....
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....ain by Rs. 43,64,203/= after deducting indexed cost of Rs. 14,98,778/= and cost of improvement of Rs. 36,78,639/= from the sales consideration of Rs. 95,41,620/=. Further scrutiny revealed that assessee had shown cost of improvement during 199293 - Rs. 85,000/=; 199394 Rs. 7,74,370/=; 199495 Rs. 1,95,000/=; 199596 Rs. 4,23,605; 199697 Rs. 2,01,455/=; 199899 Rs. 70,406/= and on this expenses assessee is taken indexation benefit of improvement. Further, scrutiny revealed that this property is landed property and permission for non agricultural purpose for industrial use was given on 31.07.1997 by T.D.O, Jambusar and the assessee has claimed cost of improvement even before getting the permission for nonagricultural use which was given in the year 1997. So, the cost of improvement taken on this land is not correct. In the circumstances, Rs. 9,85,140/= is the escapement of income within the meaning of Section 147 of the I.T Act working of which is given as under. In view of the above, I have reason to believe that income of Rs. 9,85,140/= chargeable to tax has escaped assessment within the meaning of section 147 of the I.T Act for the A.Y 200809 and this is a fit c....
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....rs from the end of relevant assessment year, and therefore, Court should be extremely slow in intervening at such notice stage. Facts are hardly in dispute that at the time of processing the return of income filed by the petitioner, the petitioner in the computation of income had furnished statement of long term capital gain. Details furnished by it is the amount of consideration received, indexed cost, the indexed cost of improvement with cost of improvement in both - original return as well as revised return and the statement of LTCG. It also appears that the notice under subsection 143 (2) dated 24th September 2009; a notice under Section 142 dated 8th July 2010 and communication dated 8th July 2010 were sent to the petitioner calling for the details for the purpose of assessment. Yet another notice dated 14th August 2010 under Section 142 (1) also was issued. A chart also has been supplied reflecting the date of purchase of the land, cost of improvement incurred in different years as well as computation of capital gains. Scrutiny assessment came to be passed under subsection (3) of Section 143, after considering all these details. It is also to be noticed that assessment order ....
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....stance in the averments made by the petitioner. 9. In the original file submitted by the department through the learned standing counsel, it emerges that the audit party at the time of carrying out audit has pointed out that there was incorrect computation of capital gain in case of petitioner in the following manner : "As per Section 48 provides that from the full value of consideration received or accruing as a result of the transfer of capital asset, the following amounts should be deducted to arrive at the amount if capital gains : (i) The cost of acquisition of the capital assets; (ii) The expenditure incurred on any improvement to the capital assets; (iii) Expenditure incurred wholly and exclusively in connection with the transfer of the capital assets, such as stamp duty, registration charges, legal fees, brokerage, etc. The assessee has filed its return of income on Dt. 24.09.2008 declaring total income of Rs. 4312940/. Thereafter the case was finalized under section 143 (3) on 30.09.2010 and....
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....s irrelevant whether permission given on later date or before was not the question. The question was whether the expenditure incurred on capital asset or not which the assessee had made. The assessee incurred expenses in each year for the improvement of capital asset. The reply of the A.O was not accepted as the I.T Act does not permit expenses which were violating other Act." 9.2 The Assistant Commissioner of Incometax vide communication dated 22nd October 2012 addressed to the Commissioner of Income tax I, Baroda not only had reproduced the gist of audit party but also reply given by the Assessing Officer to it and thereafter proposed remedial action by stating, thus "Remedial Action proposed - The objection raised by the audit is not acceptable in principle. In this case, order u/s. 143 (3) of the Act was passed on 30.09.2010. However, to verify the issue on the angle of Audit para and as a precautionary measure, the assessment may be reopened u/s. 147 of the Act for which the following remedial action is proposed : (a) To reopen the assessment u/s. 147 of the I.T Act, for which time is available upto 31.03.2....
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....e assessment and such reopening of the assessment is clearly at the behest of the audit party objections. This Court, on number of occasions has held and observed that any issuance of notice of reopening at the best of the audit party sans satisfaction of the Assessing Officer himself, such notice must be quashed. What is important while issuing the notice for reopening within four years from the end of relevant assessment year or beyond four years must have a reason to believe that the income chargeable to tax has escaped the assessment. 13. Relevant would be also to refer to a decision of this Court rendered in case of J.V Agrawal v. Income-tax Officer, reported in 200 Taxmann.com 8 wherein the assessee, as a consortium of companies, was engaged in the civil construction business which was in the nature of construction of infrastructure facilities which claimed deduction u/s. 80IA of the Act, which was allowed in assessment completed under section 143 (3) of the Act. The Assessing Officer reopened the assessment on the ground that during the assessment proceedings, it was remained to be verified whether the assessee was owner of the infrastructure facility for which the deduct....
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....duction under Section 80IB (10) of the Act was not sustainable. Therefore, this Court concluded that where the Assessing Officer relied upon, on the material already on the record, to contend that the claim for deduction under Section 80IB (10) of the Act was not valid, and during the scrutiny such claim was not examined for valid reasons, within four years from the original assessment, it may be open for the Assessing Officer to examine the same even on the basis of material on record. Apt would be, to refer to the observations made in this respect ".... In case of Gujarat Power Corporation Limited v. Asstt. CIT [2013] 250 ITR 266/[2012] Taxman 63 (Guj), this Court had an occasion to examine at considerable length, the parameters for reopening of assessment within four years. The contention of the counsel for the assessee, that even in such case, the reason to reopen must be based on material extraneous to the record, was rejected. It was held that the Assessing Officer must have some tangible material to form a belief that income chargeable to tax had escaped assessment. Such tangible material need not be alien to record. It was observed that reopening of as....
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.... at the time of original assessment proceedings." 14. In the instant case, as can be noticed from the material on record that at the time of filing of the return of income, the petitioner had in computation of income, claimed long term capital gain after showing the profit on sale of land. The statement of long term capital gain also specifies the particulars, the sale price and the year, indexed cost of the year, indexed cost of improvement and the capital gain. Again, in the computation of tax in the total income, the statement of long term capital gain is making it very clear as to what is indexed cost of improvement. The profit and loss account for the year ending 31st March 2008 shows the profit on sale of land, the balance sheet as on 31.3.2008 also in partners capital account has reflected land as an asset and the value has been quantified. In the notice issued on 8th July 2009 under subsection (2) of Section 143 of the Act, the query raised is as follow : "3. You have shown income of Rs. 22,08,863/= in your revised return of income under the Head Profit on sale of Fixed assets. Please furnish details of sale of fixed assets, date of purchase, WDV am....
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....xamination of the said issue, the Assessing Officer did not find any reason to reject the ground of the assessee or making any addition on the basis thereof, and therefore, to now reopen the assessment only with a view to examine the different angle or to verify the angle posed by the audit party, such reopening is not permissible. 18. It is to be noted at this stage that our attention is drawn to the decision of this Court rendered in case of Ranchhodbhai Bhaijibhai Patel v. Commissioner of Incometax, Gujarat-II, Ahmedabad wherein, the assessee who owned large areas of agricultural land, entered into agreements of sale with two building companies. He obtained the cost of acquisition of the capital assets permission of the Collector to put the land to nonagricultural use on 23rd January 1963 and in April and July of the same year, completed th sales. He claimed that the lands sold were agricultural lands and so the profits were not assessable as capital gains. Even if they were, he was entitled to deduct from the sale proceeds the "cost of acquisition of the capital assets" ie., the market value of the land as on 21st January 1963 on which date they became capital assets. The Co....
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....ich would be the inevitable result if we read the section as referring to the cost to which the assessee was put to acquiring the property. But this is a wholly erroneous approach in construing a statutory provision. The intention of the legislature must be gathered from the words use; it is well settled that what is unexpressed by the legislature must be taken as unintended. We cannot presume a certain intention on the part of the legislature and then bend the language of the section with a view to making it accord with such presumed intention." 19. This Court in case of Surat Textile Mills Limited v. Incometax Officer, reported in [2014] 46 Taxmann.com 419 (Guj) was considering the issue of reopening of the assessment by the Assessing Officer under Section 148 of the Act wherein original assessment was not made after scrutiny and it was a case of acceptance of return under section 143 (1) of the Act and in such a case, the review would have considerable latitude in reopening the assessment. The Court held, thus- "We are conscious that the original assessment was not made after scrutiny. It was a case of acceptance of return under section 143(1) of the Act....
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....g Officer." As per the Assessing Officer, the petitioner was required to first claim the depreciation of the current year before claiming set off of the unabsorbed depreciation of business loss of the earlier period. The Supreme Court in the case of CIT v. Mahendra Mills, 243 ITR 56 held that language of section 32 and 34 of the Act is specific and admits of no ambiguity. It does not place any mandatory duty on the Assessing Officer to allow depreciation if the assessee does not want to claim that. The provision for claim of depreciation is certainly for the benefit of the assessee. If he does not wish to avail of that benefit for some reason, the benefit cannot be forced upon him. Explanation 5 to section 32(1) introduced with effect from 1.4.2002 now provides that for removal of doubts, it is declared that the provisions of the said subsection shall apply whether or not the assessee has claimed the deduction in respect of depreciation in computing his total income. Thus, the compulsion of claiming depreciation arose with introduction of the said explanation. 11. Reverting back to the facts of the case, we may recal....