TaxTMI 
TaxTMI 
2016 (11) TMI 597
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.... acre for development of flats as per the pre agreed terms & conditions Further, the assessee firm was also entitled to retain the sale proceeds of land over and above the guideline value of sub-registrar in as much as the additional amount represented the value of amenities provided by the assessee firm. The assessee firm has received a sum of Rs. 5,61,60,203/- being the surplus over the guideline value of the subregistrar from out of total receipts of Rs. 6,95,00,000/-. A survey was taken place at the business premises of the assessee firm on 12.3.2005 and note book was found wherein the details of the receipts by way of sale of flats and the details of the expenditure incurred were recorded. As per the said note book, the total receipts were Rs. 6,12,26,833/- up to the date of survey. Thereafter, the assessee had filed a return of income by admitting total income of Rs. 11,39,850/-. The return of income filed by the assessee was belated one, to regularize the same, a notice u/s 148 of the Act was issued to the assessee on 2.11.2007. In response to the said notice, the assessee filed a letter dated 5.11.2007 stating that the return filed by the assessee originally be treated as i....
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....mitted before the Ld. CIT(A) that the notice issued u/s 148 of the Act by the assessing officer is invalid and liable to be quashed. It was also submitted that the reopening is done by the A.O. based on the change of opinion and it is not permissible under the law. The Ld. CIT(A) after considering the explanation of the assessee has observed that the A.O. on perusal of the information available to him found that the assessee had shown sale of only 203 flats, whereas the Managing Partner admitted in the course of survey of as many as 330 flats had been sold. Based on the above information, A.O. has a reason to believe that income chargeable to tax has escaped assessment. With the Ld. Commissioner's approval the assessment was reopened by issuing a notice u/s 148 on 25.3.2011 and upheld the re-opening of the assessment done by the A.O. The Ld. CIT(A) further observed that there is nothing on the record to show that income tax statement filed by the land owner has been considered by the A.O. in the course of original assessment proceedings. To that extent of it, it cannot be said that the re-assessment proceedings were initiated by the present A.O. based solely on change of opinion on....
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....proviso the A.O. has to allege that there is a failure on the part of the assessee to disclose all the true particulars before the A.O. if the A.O. has not raised any allegation in the reasons recorded, the re-opening is bad and notice has to be quashed. To support his argument, he has relied on the following judgements: 1. General Motors India (P) Ltd. Vs. DCIT (2014) 360 ITR 527 (Guj) 2. Dynacraft Air Controls Vs. Smt. Sneha Joshi and others (2013) 355 ITR 102 (Bom) 3. Mahalakshmi Motors Ltd. Vs. DCIT 265 ITR 53. 4. Sri Sena Vaibagh Sahakari Vs. DCIT (2016) 69 Taxman.com 245 (Gujarat) 5. Sadhbhavana Engineering Ltd. Vs. DCIT (2011) 333 ITR 483 (Gujarat) 6. Grindwell Norton Ltd. Vs. Jagadish Prasad Jangid, ACIT & others 267 ITR 673 (Bom.) 7. Pennar India Ltd. Vs. DCIT 241 ITR 672 (Mad.) 8. Hindustan Lever Ltd. Vs. RB Wadekar 268 ITR 332 (Bom.) 7. The Ld. Counsel for the assessee has raised a further legal issue that the assessee has filed all the details before the A.O., in the course of original assessment proceedings, the A.O. after considering the entire details, he has estimated the income of the assess....
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....re is a survey took place at the business premises of the assessee firm on 12.3.2005 and a note book was found wherein the details of the receipts by way of sale of flats and the details of expenditure incurred were recorded. As per said note book, the total receipts are of Rs. 6,12,26,833/- upto the date of survey. Thereafter, the assessee has filed a return of income for A.Y. 2005-06 admitting total income of Rs. 11,39,850/-. In the assessment order, the A.O. has observed that though the gross receipts of the assessee are at Rs. 6.9 crores, the return of income filed is not accompanied with the audit report u/s 44AB of the Act. The assessee neither filed profit & loss account nor balance sheet. Only a receipt and expenditure statement is enclosed to the return of income. It is submitted before the A.O. that no complete and regular books of accounts were maintained by the assessee, hence no audit is required u/s 44AB of the Act would be conducted. He further stated that on the basis of the register maintained by the assessee with regard to the sale of flats and amount of consideration received, expenditure incurred and other information available the assessee filed a return of inc....
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....with a total area of 16741 sq.yards. With an average extent of each plot working out to 240 sq.yards, the extent of land suppressed is [240x89] 21360 sq.yards and assessee's share consideration at Rs. 876/- per sq.yard comes to Rs. 1,87,11,360/- [21360x876]. Thus, the entire suppressed receipts of Rs. 3,35,07,876/- [Rs.147965156 + 18711360] have to be brought to tax for the Asst. year 2005-06. In view of the above, income chargeable to tax has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. This is for your kind information. Yours faithfully, Sd/- (D. SUNDARA RAO) Income Tax Officer, Ward-3, Rajahmundry" 10. In so far as first objection raised by the Ld. Counsel for the assessee is that the notice was issued beyond 4 years and submitted that the proviso to section 147 of the Act will come into play. 11. For the sake of convenience, proviso to section 147 of the Act is extracted as under: "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years fro....
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....onal High Court has held that the petitioner assessee furnished all the material facts truly and fully before the assessing authority at the relevant point of time when once all the information is furnished to the assessing authority, it is for the assessing authority to decide what inference can be reasonably be drawn and what legal inferences to be drawn ultimately. It is to be noted whether full and true disclosure of the facts was done by the assessee, the department cannot re-open the assessment even after there is a loss of revenue or even after legal inference drawn by the assessing authority was erroneous in the first place. Even mere change of opinion by the assessing authority is not enough to re-open the assessment in view of the various decisions of the Hon'ble Supreme Court. 16. In the case of Sri Sena Vaibagh Sahakari Vs. DCIT (supra) the Hon'ble Gujarat High Court has considered the similar issue and has held that in the absence of any failure on the part of the assessee to disclose all the material facts necessary for assessment, assessing officer could not initiate re-assessment proceedings after expiry of 4 years from the relevant assessment year. 17. In the....
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....t or section 148 of the Act or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for that assessment year. Unless the condition in the proviso is satisfied, the A.O. does not acquire jurisdiction to initiate any proceedings u/s 147 of the Act after the expiry of 4 years from the end of the assessment. The A.O. must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate notice and the entire proceedings. Whenever a notice is issued by the A.O. beyond a period of 4 years from the end of the relevant assessment year, such a notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose all material facts. The reasons referred to in the main part of section 147 of the Act would, in cases where the proviso is attracted, including reasons referred to in the proviso and it is necessary for the A.O. to reco....
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....ns recorded. In the present case, by considering facts and circumstances and also reasons recorded by the A.O. and by following the judicial precedents, we hold that the notice issued by the A.O. by recording the reasons not in accordance with the proviso to section 147 of the Act, thus, the notice is quashed and consequently held that the assessment is invalid. 22. So far as another legal issue raised by the assessee is that the assessee has filed all the details and the A.O. after considering all the details he has estimated the income of the assessee. Subsequently on the basis of same material, the A.O. after issuing a notice u/s 148 of the Act re-assessed the income and submitted that it is a change of opinion which is not permissible in accordance with law. So far as this issue is concerned in the course of assessment proceedings, the A.O. has called various details i.e. joint development agreement, what are the flats sold, what are the flats unsold and lay out, and all other details and also A.O. inspected personally the lay out and also considered the other assessees i.e. Bijapuri Township, Rajahmundry and M/s. Suma Enclave carrying similar lines of business, he has estim....