TaxTMI 
TaxTMI 
2023 (12) TMI 284
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....O correctly triggered the reassessment proceeding qua SIPL. For adjudication, the following broad facts are noticed: 4.1. SIPL is in the real estate business, including constructing, buying, and selling immovable properties. SIPL was incorporated in 2006. Upon the petitioner filing its Return of Income (ROI) for the AY in issue, the AO took it up for scrutiny under Section 143(3) of the Act. 4.2. SIPL was issued various notices, which were accompanied by questionnaires. These notices are dated 02.09.2013, 14.10.2013 and 23.10.2013. Via these notices, among other things, information was sought concerning, broadly, the following aspects: (i) The nature of the business in which SIPL was engaged. (ii) The main objects of the business. (iii) Information about the land sold and the amount received as consideration. (iv) Details of directors. (v) Copies of balance sheets and extracts from accounts. 4.3. SIPL was required to furnish information about the aforesaid aspects, including a transaction relating to the sale of land, qua which it had received consideration of Rs. 1,51,00,000/-. 4.4. SIPL indicated to the AO that although it had purchased the land, the funds were prov....
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....s served on the AO. Via this communication, besides asking for a copy of the reasons recorded for reopening the assessment, SIPL also asked for a copy of the approval given by the specified authority, as mandated under Section 151 of the Act. 10. The record shows that the AO furnished the reasons recorded [which were penned on 30.03.2018] to SIPL, along with a communication dated 12.09.2018. 11. The reasons recorded by the AO, based on which the reassessment proceeding was triggered qua SIPL, broadly touched upon the following aspects: 11.1. Firstly, information had been received from the Income Tax Officer .(Investigation), OCM (Operation Clean Money) Cell-2, New Delhi, to the effect that SIPL had sold immovable properties for a value that was below the market value/value calculated at the circle rate which was applicable for the determination of stamp duty, by the valuation authority. Accordingly, the AO had pegged the value based on the circle rate of the subject land i.e., Rs. 2,08,30,000/-. 11.2. Secondly, the AO triggered the provisions of Section 50C of the Act based on his reasoning that SIPL was not in the business of trading in land. In this context, he referred to th....
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....d development business. The projects it executed were located in and around Noida and Ghaziabad. (iv) To comply with the land-ceiling provisions in the state of UP and other States, the incorporation of SPVs was necessary to facilitate land purchase. (vi) Since STPL was not able to execute any project on the subject parcels of land within two or three years of its purchase due to commercial nonviability, the SPV, i.e., SIPL, sold such parcels of land, in pursuance of the MoU/agreement dated 02.03.2007 executed between itself and STPL. 16. Under the said MoU/agreement, upon sale of land which SIPL purchased from funds made available by STPL, SIPL was entitled to receive, out of the sale consideration, an amount calculated at the rate of Rs. 1,00,000/- per acre, which was declared as its profit earned on the sale transaction. The balance amount was to be remitted to STPL, treating it as the cost of land in the hands of SIPL and profit in the hands of STPL. 17. In the FY in issue, i.e., FY 2010-11, SIPL declared a profit of Rs. 1,73,002 upon the sale of land, and the balance amount, i.e., Rs. 46,93,536/-, was transferred to STPL. 18. Thus, according to SIPL, since the aforement....
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.... CIT v. S. Goyanka Lime Chemicals Ltd. (2015) 64 taxmann.com 313 (SC). It was highlighted that in S. Goyanka Lime, the approving authority had merely used the expression "Yes, I am satisfied". 24. As noticed right at the outset, the objections filed by SIPL did not find favour with the AO, which led to the issuance of the impugned order, whereby SIPL's objections were dismissed. Submissions of Counsel 25. Given this backdrop, arguments for SIPL were advanced by Mr Ruchesh Sinha, Advocate, while Mr Vipul Agrawal, Senior Standing Counsel, advanced submissions on behalf of the respondents/revenue. 26. Mr Sinha re-emphasized the assertions made in the objections filed on behalf of SIPL, which we have broadly captured hereinabove. Therefore, for the sake of brevity, we do not intend to put them down once again. 27. As far as Mr Agrawal is concerned, according to him, the initiation of the reassessment proceeding against SIPL was in order, and in support of this stand, he made the following submissions: (i) The arrangement between SIPL and STPL constituted a sham transaction. SIPL had sold the land and remitted almost the entire consideration to its flagship company, i.e., STPL. S....
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.... off against losses incurred by it. 29. There is nothing on record to suggest or, at least, no information was furnished to us, about when the reassessment proceeding qua this transaction was triggered against STPL. 30. Undoubtedly, it is this very transaction that triggered reassessment vis-à-vis the petitioner/assessee. This is evident on a perusal of the reasons recorded by the AO on 30.03.2018. 31. The AO, however, among other things, took a view that this was a capital account transaction and, therefore, the provisions of Section 50C of the Act were applicable. Thus, keeping this in the backdrop, the AO concluded that the difference between the consideration received by SIPL against the sale of the subject parcel of land and its value calculated based on the then prevailing circle rate was the income that had escaped assessment. 32. As indicated above, the AO pegged the escaped income at Rs. 57,30,000/-. 33. Although Mr Agrawal vehemently argued that the provisions of Section 50C of the Act were not the foundation of the reasons that were recorded, the plain text reads otherwise. 34. Quite obviously, Mr Agrawal wanted to move away from this aspect of the matter, a....
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....nd date of incorporation. File relevant resolution in case the main objects as indicated above has changed. 2. Copy of Memorandum & Article of Association. xxx xxx xxx 7. Party wise details sale of land with name, address, PAN, amount received and property which was sold. xxx xxx xxx Yours faithfully -s/d- Income Tax Officer Ward 8(2), New Delhi." "Date: 18.11.2013 To The Assessing Officer Ward 8(2) Room No.197A CR Building New Delhi-110001 Dear Sir, RE : SHOURYA INFRASTRUCTURE PRIVATE LIMITED, PAN: AAJCS9570M SUB : YOUR NOTICE U/S 142(1) OF THE INCOME TAX ACT, 1961 DATED 23.10.2013 FOR THE AY 2011-12. In the matter of the assessment proceedings of the above-named assessee, we are submitting replies to the remaining queries from the questionnaire dated 23.10.2013 as follows: 1. The assessee sold some of its project and as follows: S.No Land Details Sold to / Date of sale / PAN Consideration 1. Land situated at Morti, Ghaziabad, khata no.130, khasra no.146, admeasuring 7001.668 mtrs (1.73002 acres) S.S. Buildcon Pvt. Ltd./20.05.2010/ AAJCS0645K Rs. 1,51,00,000/- We are enclosing a copy of the relevant sale deed as above for you kind p....
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....of SIPL attended the proceedings and furnished the necessary details. (ii) Based on oral and written submissions made by the authorized representative of SIPL, the case was discussed. (iii) Significantly, a categoric finding was recorded that the assessee company is engaged in the business of real estate and land development. (iii) During the assessment proceeding, the assessee produced the books of accounts with bills and vouchers which were checked on a test basis. (iv) Pertinently, it ended with the following statement: "returned income of the assessee was accepted". 36. Therefore, it cannot be said that the subject transaction was not scrutinized by the AO. 37. Mr Agrawal did attempt to argue that the assessment order dated 28.02.2014 did not disclose any reasoning. According to us, this submission is untenable in law, as an assessee has no control over how the assessment order is framed. In this context, we may quote the following apposite observations of the judgment rendered by the Supreme Court in Joint Commissioner of Income Tax and Anr v Cognizant Technology Solutions India Pvt Ltd (2023) SCC Online SC 465: "The assessee has no role to play and is not the au....
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.... since SIPL was not being assessed for the first time, the information sought against Sr. No. 9 had to be filled in, i.e., the AO had to indicate, firstly, the income at which SIPL was assessed initially and, secondly, whether it was a case of under-assessment at "too low a rate, assessment which has been made the subject of excess relief of allowing of excessive loss or depreciation". 42.1. In other words, Mr Sinha submitted that since the AO's assertion was that this was a case of under-assessment, in terms of clause (c) sub-clause (i) of Explanation 2 appended to Section 147 of the Act, it had, according to him, resulted in deemed escapement of income chargeable to tax. The relevant part of the said provision is extracted hereafter: "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment 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....
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....orm for obtaining approval is what appears to have been placed before the ACIT and PCIT. The mandatory entries were not made. Therefore, the weight of the evidence seems to suggest that the ACIT cleared the path without delving into the aspect that this was, indeed, a case of under-assessment and, likewise, the PCIT rubberstamped the request made by the AO for initiating the reassessment proceeding qua SIPL without applying his mind to the requisite aspects. 50. According to us, the reopening of the concluded scrutiny assessment is a serious business. The Act provides for a layered approach precisely for this reason. Senior officers like ACIT and PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings. Several pitfalls that the Court's notice can be avoided if the concerned authorities were to look closely at the request made for re-opening. 51. In this context, it was brought to our attention by Mr Sinha that a similar request for initiating reassessment proceedings qua another group company, i.e., Shourya Builders was declined. 52. This is evident from the extract of the office note placed before us, ....