AI Drafter 
TaxTMI 
TaxTMI 
2017 (8) TMI 241
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....of land in question came to Rs. 17,64,61,557/. 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 ass....
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....d 08.12.2016 has deleted the addition on the ground that the 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 ....
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....7/( Rs. 5500479329859336). Therefore, the case is also covered under deemed escaped assessment as the income chargeable to tax has also been assessed at too low a rate as per explanation2 of section 147 of the IT Act, 1961. Issue notice u/s. 148 of the Act. 9. Two things can be immediately seen from the record. The notice of reopening has been issued within a period of four years from the end of relevant assessment year and that the same is founded on the 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. T....
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....ormed a bona fide belief that income chargeable to tax had escaped assessment, for which he had tangible material at his command. Notice for reopening of assessment issued within four years from the end of relevant assessment year was therefore valid. Counsel relied on the following decisions : a) In case of Nirma Industries Ltd. v. Deputy Commissioner of Incometax reported in (2006) 283 ITR 402 (Guj). b) In case of Raja Mechanical Co.(P) Ltd. v. Commissioner of Central Excise reported 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 whic....
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....n the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. The essence of this proviso is that the income involving the matters which are the subject matters of appeal, reference or revision, cannot be a subject matter of reopening of the assessment. In other words, on same subject matter, there cannot be parallel consideration by the Assessing Officer in the reopened assessment and by higher officer or authority 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....
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....to reopen the assessment was pending in appeal before the Commissioner. It was in this context, it was observed that there cannot be two separate considerations to the same subject matter relatable to the income, one by the appellate authority or forum and another by the Assessing Officer in fresh assessment. b) In case of United Phosphorus Ltd. v. Additional Commissioner of Incometax (Special Civil Application No.3352/2001 judgment dated 8.3.2011), the Court on facts held that in respect of items for which 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 fi....
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....sess or reassess the income of an assessee after issuing the notice under section 148 of the Act. 20. Nothing contained in the language of section 147 would permit us to hold that even if all the parameters to enable the Assessing Officer to assess or reassess the income by reopening the assessment are present, same may not be permitted in cases where the original assessment framed by the Assessing Officer has failed on any technical ground, such as in the present case i.e. want of service of notice under section 143(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....
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....enge namely, that the power under section 147 of the Act cannot be exercised to circumvent the proceedings under section 143(3) of the Act because the notice under section 143(2) of the Act has become time barred and further that in any case, reasons recorded would not permit the Assessing Officer to reopen the assessment. 11. It is undoubtedly true that proviso to section 143(2) of the Act prescribes a time limit within which such notice could be issued. It is equally well settled that such notice is mandatory and in absence 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 su....
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..... By such application only recovery indicated to be payable in the intimation became permissible. And nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(1)(a), the question of change of opinion, as contended, does not arise.". 13. Despite such difference in the scheme between a return which is accepted under section 143(1) of the Act as compared to a return of which scrutiny assessment under section 143(3) of the Act is framed, the basic requirement of section 147 of 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 reas....
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....ssment proceedings, which have been initiated afresh after recording reasons to believe. In R. Kakkar Glass and Crockery House Vs. Commissioner of Incometax, [2002] 254 ITR 273 (P&H), it has been held: "10. .......When a notice is quashed on some technical ground, it would be in order to issue a fresh notice under Section 148 provided all other legal requirements of law have been complied with. For instance, if a notice under Section 148 is quashed on the ground that no reasons had been recorded, a second notice shall be in order after 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....
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....is Court in case of the Commissioner of Income Tax AhmedabadV v. Sukhini P. Modi (Tax Appeal No.1353/2007 and connected matters judgment dated 10.3.2014) merely reiterates the settled position that notice under section 143(2) of the Act is mandatory before scrutiny assessment can be framed. b) Decision of Madras High Court in case of Tanmac India v. Deputy Commissioner of Incometax, CircleI, Pondicherry, reported in (2017) 78 taxmann.com 155 (Madras) was rendered in a different factual background. The return filed by the assessee was accepted 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 ....