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2020 (2) TMI 122
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....rvant quarter, etc., constructed on it for a consideration of Rs. 30,00,000=00 during the Accounting Year relevant to the Assessment Year 1991-92. The assessee claimed deduction under Sections 53(b), 54(1)(i) and 54E of the Act, 1961 (as amended by the Finance Act, 1992) from the capital gains arising from the sale of the property. The deductions as claimed were allowed. The claim of the assessee was that the sale was of a residential house along with the land appurtenant thereto. Later, it was noticed by the Assessing Officer that the property in question was agricultural land and, therefore, the deduction under Sections 53(b) and 54(1)(i) of the Act had been wrongly allowed. In such circumstances, the Assessing Officer reopened the assessment by issuing a notice under Section 148 of the Act. The reassessment was accordingly completed withdrawing the deductions under Sections 53(b) and 54(1)(i) respectively of the Act. The long term capital gains was determined at Rs. 17,11,363=00. The assessee, being dissatisfied with the assessment order, preferred an appeal before the Commissioner of Income Tax (Appeals) VIII, Ahmedabad. The appeal preferred by the assessee came to be allowe....
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....ssessment in this case was discussed with him and with the Authorised Representative of the appellant. In view of various doubts expressed by the Assessing Officer regarding the failure on the part of the assesee to disclose fully and truly all material facts during the original assessment proceedings, the A.O. was required to make further inquiry with the appellant as to whether it was 'Avanti' bungalow which was sold or whether it was some other farm house on agricultural land which was the property in question. It was clarified by the appellant that the bungalow sold by the assessee was named as 'Avanti' and was situated at block no.518. It is also stated that reference to bungalow situated at block no.518 is made at various places in the Deed of Conveyance. It is also stated that in Form No.37I, there is a specific reference to a farm house along with water tank, servant quarter, etc against column - 'Description and location of the property'. It is further clarified that on page no.16 of the Conveyance Deed, it is specifically stated that there is block no.512 situated on the eastern side of block no.518. The assessee has also clarified that he had constructed a new bungalow o....
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....ent or failed to disclose any of the material facts. Even if a view is subsequently taken that the property sold was agricultural land and not a residential house with the land appurtenant thereto, it could only be inferred that a wrong claim for deduction was made but, it cannot be said that there was a failure on the part of the assessee to disclose all material facts relevant to the assessment. The relevant documents i.e. Conveyance Deed; permission of the Appropriate Authority giving the nature of the property sold, had been filed by the appellant at the time of original assessment proceedings. No new information or document came to the notice of the Assessing Officer so as to now hold that the deductions had been wrongly allowed, because the property sold was agricultural land and not residential house. It was only a change of opinion on the basis of same factual information that the property in question was to be considered as agricultural land and not residential house for the purposes of capital gains. There was however, no failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment. 5.1 In the case of Garden Silk Mi....
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....d with the order passed by the CIT(A), went in appeal before the Income Tax Appellate Tribunal. The appellate tribunal, vide order dated 9th March 2007, allowed the appeal of the Revenue, thereby quashing and setting aside the order passed by the CIT(A). We may quote the relevant part of the order passed by the appellate tribunal thus : "5.1 The reopening in the present case is clearly after the expiry of four years from the end of relevant assessment year, so that the same could only be, in terms of the relevant section (s.147), where the assessee has failed to make a full and true disclosure of all material facts necessary for his assessment for the relevant year. In this regard, the scope and ambit of the words 'full and true' have to be properly appreciated, even as emphasized by the Apex Court in the case of Calcutta Discount Co. Ltd, 41 ITR 191. Further, due regard has also to be given to Explanation I to Section 147 of the Act, which reads as : "Explanation I - Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amo....
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....o the total amount of capital gains realized on the transfer of the capital asset. 5.3 There is no discussion in the assessment order of the nature of the capital gains, or of the deductions claimed there against, and which would necessarily be the case had there been a disclosure on any one or more of the foregoing aspects of the transaction, all of which are unarguably material for the proper assessment of income under the said head (of income) for the relevant year. No doubt, as explained by the Hon'ble jurisdictional High Court, the assessee's obligation is restricted to the disclosure of the primary facts only, with the inferential facts being left to the discretion of the A.O. Each of the aforesaid fact is a primary fact in relation to the assessment of the income arising on the aforesaid fact is a primary fact in relation to the assessment of the income arising on the transfer of the capital asset under question, lead as it does, to the determination of its nature as also the deductions exigible there against. There is no expression of opinion in the original assessment order in the matter, for one to hold that the reason to believe of the escapement of income as be....
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....te material on record to support the assessee's claims. Further, the permission from the Appropriate Authority, for the sale of the capital asset(s) under reference, and which stands sought by the assessee himself, state of the same as an agricultural land, i.e. as described in the conveyance deed, which being a part of the original return; it was held by him that there has been a full & true disclosure, with no new information or document coming to the notice of the A.O. for initiation of re-assessment proceedings. We find that to be a contradiction in terms. Firstly, the assessee has not pleaded of the submission of the said permission at the time of the original assessment proceedings before the A.O. Secondly, even so, the same stating the subject-matter of the purported transfer to be an agricultural land, in agreement with the conveyance deed, the primary document transferring the title, while the assessee contends it to be only a residential house, an explanation for this contrary view is incumbent on the assessee, being a primary and material factual matter, i.e. if it were to be stated, as contended, that there is a full & true disclosure of all material facts, and which ha....
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....ssee has come up with the present appeal. On 29th April 2009, this Court admitted the appeal on the following two substantial questions of law : "(i) Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the reopening of the assessment was rightly made ? (ii) Whether in the facts and in the circumstances of the case, the ITAT was right in holding that the Assessee had not made full and true disclosure of all material facts necessary for his assessment ?" Mr.Soparkar, the learned counsel appearing for the appellant, vehemently submitted that the appellate tribunal committed a serious error in passing the impugned order. He would submit that the appellate tribunal ought not to have disturbed the well-reasoned order passed by the CIT(A). According to Mr.Soparkar, it cannot be said by any stretch of imagination that there was no full and true disclosure. According to Mr.Soparkar, there was no tangible material before the Assessing Officer for the purpose of reopening the assessment. The case is one of mere 'change of opinion'. In such circumstances referred to above, Mr.Soparkar prays that there being merit in his appea....
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....ed in writing immediately to the appropriate authority to whom this statement of transfer has been furnished." Section 53 of the Act reads thus : "53. Exemption of capital gains from a residential house. Notwithstanding anything contained in section 45, where in the case of an assessee being an individual [or a Hindu undivided family], the capital gain arises from the transfer of [long-term capital asset], being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property", the capital gain arising from such transfer shall be dealt with in accordance with the following provisions of this section, that is to say,- (a) in a case where the full value of the consideration-received or accruing as a result of the transfer of such capital asset does not exceed two hundred thousand rupees the whole of the capital gain shall not be charged under section 45; (b) in a case where the full value of such consideration exceeds two hundred thousand rupees, so much of the capital gain as bears to the whole of the capital gain the same proportion as the amount of two hundred thousand ....
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....e considered at that stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied - a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise,....
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....nter affidavit filed during the writ proceedings before the Court cannot be substituted for the "reasons to believe". (xiv) The decision to reopen the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression "reason to believe" appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a "bona fide" belief upon the definite information presented before him. Power under this section cann....
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....r the material available on record must have nexus to the subjective opinion formed by the Assessing Officer regarding the escapement of the income but then, while recording the reasons for the belief formed, the Assessing Officer is not required to finally ascertain the factum of escapement of the tax and it is sufficient that the Assessing Officer had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. Mr.Soparkar seeks to rely upon a decision of this Court in the case of Nilamben Sandipbhai Parikh v. Assistant Commissioner of Income Tax, Circle-4(2) [2019]109 taxmann.com 336 (Gujarat). We quote the relevant observations relied upon by Mr.Soparkar thus : "6.1 Short question which arises for determination in this petition is, whether the concept of "change of opinion" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the....
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.... for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)." 6.3 Considering the above, the Apex Court in the case of Kelvinator of India Ltd. (supra) observed and held in para 4 as under :- "4. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, ....
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.... on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." 6.4 Even this Court in the case of Giriraj Steel (supra) has held that reopening of assessment being based on a mere change of opinion, the assumption of jurisdiction on the part of the A.O. lacks validity and the notice u/s 148 of the Act cannot be sustained. 6.5 The Assessing Officer has power to reopen the assessment, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment and the reasons must have a live link with the formation of belief. In the present case, there is no tangible material. The issuance of the impugned notice u/s.148 is nothing but mere change of opinion. In absence of any new tangible material available with the A.O., it is not ope....