TaxTMI 
TaxTMI 
TaxTMI 
2017 (8) TMI 241
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..... The petitioner sold the said plot of land for a consideration of Rs. 35,44,70,594/during the financial year 20112012. In the return that the petitioner filed for the assessment year 20122013, the petitioner offered sum of Rs. 14,49,48,233/as a long term capital gain. 3. The return of the assessee was taken in scrutiny by the Assessing Officer by issuing notice on 23.9.2013 under section 143(2) of the Income Tax Act, 1961 ("the Act" for short). According to the department, such notice was dispatched through Speed Post on 24.9.2013 and was also served on the assessee before the last date i.e. 30.9.2013. 4. Case of the assessee is that no such notice was served on the assessee at the relevant time. Much later, the Assessing Officer issued a questionnaire to the assessee on 16.3.2015 to explain why the sale consideration should not be taxed as a business income instead of capital gain. In response to the same, the assessee under its letter dated 9.3.2015 contended that no proceedings for assessment can be undertaken since the notice of scrutiny assessment was never served before 30.9.2013. The department thereupon conveyed to the assessee that notice under section 143(2) of the Act....
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....e notice u/s. 143(2) was not served upon the assessee. 2. In this case, the information received from I & CI, Ahmedabad that the assessee has sold non agriculture land. The assessee has declared the long term capital gain in response to sale of transaction. The details of which are as under : Sr. No. Particu lar Qty Sale Date/ cost date Sale value Cost value Index­cost index Index gain Book gain 1 Land 1 30.07.11 ­­­­­­­­­­­­ 28.07.07 35447 0594 70955 697 101089332 ­­­­­­­ 785/551 253338126 2 283514897 2 Land 1 2011­12 31.03.09 0 14000 0 188832 785/582 ­188 832 ­140000 3 Land 1 2011­12 31.03.09 0 97070 0 1205695 ­­­­­­­ 785/632 ­1205695 ­970700 4 Land 1 2011­12 31.03.11 0 23597 520 28040862 ­28040862 ­25397520 5 Land 1 2011­12 30.06.11 0 78997 640 78997640 ­­­­­­ 785/785 ­78997640 ­78997640 35447 0594 17646 1557 144948233 17800 9037 To....
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.... single issue of treatment that the sale proceeds of the land sold by the assessee should receive. 10. In this background, we have heard learned counsel for the parties at length. Learned advocate Shri R.K. Patel for the petitioner raised the following contentions : i) The entire issue of the income being capital gain or business income was examined by the Assessing Officer in the original order of assessment. The same cannot be reexamined by reopening the assessment. ii) The order of assessment dated 30.3.2015 was carried in appeal by the assessee. Commissioner(Appeals) had set aside the order. The assessment order therefore, merged in that of the Commissioner (Appeals) by virtue of proviso to section 147 of the Act. Therefore, no reopening would be permissible. iii) Even otherwise the action of the Assessing Officer is impermissible in law. The original assessment having failed on the ground of non issuance of mandatory notice for scrutiny, the Assessing Officer cannot resort to the process of reopening of the assessment to cure the defect or to save limitation which had already lapsed. iv) In support of his contentions, counsel relied on the following decisions to which we ....
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....ed in (2012) 345 ITR 356 (SC). c) In case of A G Group Corporation v. Harsh Prakash reported in (2013) 353 ITR 158 (Guj). d) In case of Inductotherm (India) P.Ltd. v. M. Gopalan, Deputy Commissioner of Incometax reported in (2013) 356 ITR 481 (Guj). e) In case of Principal Commissioner of Incometax2 Vadodara v. Sagar Developers reported in (2016) 72 taxmann. Com 321 (Gujarat) 12. Facts of the case are simple, undisputed but somewhat peculiar. We may summarise such facts. The Assessing Officer wanted to scrutinise the return for the assessment year 20122013 for which notice under section 143(2) of the Act was issued on 23.9.2013 and dispatched for service on 24.9.2013. The position which is concluded by virtue of the order of the Appellate Commissioner is such notice was not served on the assessee before 30.9.2013. The assessee raised such contention before the Assessing Officer and also participated in the assessment. The Assessing Officer rejected the ground of non service of notice and taxed the proceeds out of sale of land as the business income. In the appeal, CIT(Appeals) held that the assessment was invalid since it was carried out without notice under section 143(2) of t....
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....ority in appeal, reference or revision. For applicability of this proviso and the principle of merger flowing from such proviso, what is necessary is that there has to be income involving the matter which is the subject matter of any appeal, reference or revision and in such a case, it would not be open for the Assessing Officer to make any assessment or reopening with respect to such income. The stress here is on the income involving the matters which are the subject matter of further proceedings. 15. In the case on hand, the assessee had raised two contentions before the Commissioner(Appeals). First was with respect to the validity of the assessment framed by the Assessing Officer without service of notice and second was with respect to merits of additions made by him in such order of assessment. The Commissioner (Appeals) confined his comments only to first of his contentions and declared that the assessment was invalid since it was framed without service of notice. In that view of the matter, he refused to comment on the assessee's contention on merits of the additions. Essentially, therefore, the order of Commissioner (Appeals) dealt with only one part of the assessee'....
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....assessment is sought to be reopened has merged with the order of Commissioner (Appeals) and as such there is no independent existence of the assessment, the assessment therefore could not be reopened in respect of such items. c) In case of National Dairy Development Board v. Deputy Commissioner of Income Tax Anand Circle (Special Civil Application No.14449/2010 judgment dated 24.3.2011), on facts, the Court applied the principle of merger to prevent the Assessing Officer from carrying out reassessment. d) In case of State of Gujarat v. Doshi Printing Press (Tax Appeal No.87/2015 and connected matters judgment dated 9.2.2015), the Court applied the principle of merger finding that against the order of assessment, the assessee had filed appeal and the appellate authority had modified the order of assessment. 18. This brings us to the last contention of the counsel for the assessee that the Assessing Officer could not have issued notice of reopening to bypass or circumvent the statutory period for issuance of notice under section 143(2) of the Act. The argument was that power of reopening the assessment cannot be exercised to overcome the situation where scrutiny assessment is not ....
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....2) of the Act. Once the original assessment is declared as invalid as having been completed without the service of notice on the assessee within the statutory period, there would be thereafter no assessment in the eye of law. The situation therefore, be akin to where return of the assessee has been accepted without a scrutiny. Reopening of the assessment, if the Assessing Officer has the reason to believe that income chargeable to tax has escaped assessment, would be entirely permissible under section 147 of the Act. Merely on the ground that the reasons recorded by the Assessing Officer proceeded on the same basis on which the Assessing Officer initially desired to make additions but which failed on account of setting aside the order of assessment, would not preclude the Assessing Officer from carrying out the exercise of reopening of the assessment. In the present case, facts are peculiar. It is not as if the Assessing Officer after noticing certain discrepancies in the return of the assessee, slept over his right to undertake the scrutiny assessment. The scrutiny assessment was initiated by issuance of notice under section 143(2) of the Act on 23.9.2013. It was also dispatched f....
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....e of notice under section 143(2) of the Act within the time permitted, scrutiny assessment under section 143(3) cannot be framed. However, merely because no such notice was issued, to contend that the assessment cannot be reopened, is not backed by any statutory provisions. Counsel for the petitioner did not even stretch his contention to that extent. The case of the petitioner as we understand is that in guise of reopening of an assessment, the Assessing Officer cannot try to scrutinize the return. This aspect substantially overlaps with the later contention of the petitioner that the reasons recorded by the Assessing Officer were not germane and were not sufficient to permit reopening. 12. We must recall that the return filed by the petitioner was not taken in scrutiny. No assessment, thus, took place. The Assessing Officer without any assessment, merely issued an intimation under section 143(1) of the Act accepting such return. In that view of the matter, it cannot be stated that the Assessing Officer formed any opinion with respect to any of the aspects arising in such return. In such a case, scope for reopening such assessment under section 147 of the Act as compared to an a....
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.... the Act that the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment is not done away with. Section 147 of the Act permits the Assessing Officer to assess, reassess the income or recompute the loss or depreciation if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. This power to reopen assessment is available in either case, namely, while a return has been either accepted under section 143(1) of the Act or a scrutiny assessment has been framed under section 143(3) of the Act. A common requirement in both of cases is that the Assessing Officer should have reason to believe that any income chargeable to tax has escaped assessment." 23. In case of Commissioner of IncometaxIII v. Kiranbhai Jamnadas Sheth (HUF) reported in (2013) 39 taxmann. Com 116, this issue directly came up for consideration. Relying on the judgment in case of Inductotherm (India) P.Ltd.(supra), the view of the Tribunal that notice under section 148 could not have been issued without previously having issued notice under section 143(2) of the Act within the time available for framing the original assessment was reve....
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....er recording the reasons. Similarly, if a notice is quashed on the ground that it has been issued without the requisite sanction of the higher authority, fresh notice can be issued after obtaining the necessary sanction. Such instances can be multiplied. However, if a notice under Section 148 is quashed after examination of the material relied on by the Assessing Officer and after recording a finding that on the basis of such material the additional income cannot be said to have escaped assessment, then it shall not be permissible for the Assessing Officer to issue a fresh notice on the basis of the same material in respect of the same item of income. However, in case some fresh material comes into the possession of the Assessing Officer subsequently suggesting escapement of income under the same head or some other head, we see no fetters on his power to issue a fresh notice under Section 148. Needless to emphasise that all such subsequent notices have to conform to the parameters prescribed under the law including the provision regarding limitation." 25. Similar issue came once again before the Delhi High Court in case of Biotech International Ltd. v. Assistant Commissioner of I....
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....d under section 143(1) of the Act without scrutiny. Later on notice for reopening was issued on the basis of material already on record. The Court considered the question whether the Assessing Officer could have, having taken cognizance of the return but not having scrutinised it, could thereafter, issue the notice for reopening based on the same material that had been available to him. The Court answered the question in the negative placing heavy reliance on the decision in case of CIT v. Orient Craft Ltd. reported in (2013) 354 ITR 536. This issue directly does not arise in the present case. In any case, we are not in agreement with the view expressed in the judgment. In our view, such a proposition would be opposed to the decision of Supreme Court in case of Rajesh Jhaveri Stock Brokers (P) Ltd.(supra) as reiterated in later judgment in case of Deputy Commissioner of Incometax and another v. Zuari Estate Development and Investment Company Ltd. reported in (2015) 373 ITR 661 (SC). It would also be opposed to the logic adopted by the Court in case of Inductotherm (India) P.Ltd.(supra). This decision of Delhi High Court in case of Orient Craft Ltd. (supra) came up for consideratio....