TaxTMI 
TaxTMI 
2025 (3) TMI 350
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....ome tax Act, 1961 (in short 'the Act') dated 30.03.2016 & 23.12.2016 for respective years. 2. Since the issues involved in two appeals of the revenue and cross objection of the assessee being interconnected of the same assessee having common issues and grounds, were heard together with the agreement of both the parties and are being disposed off by this consolidated order. 3. In this case the appeals of the revenue and the cross objection filed by the assessee were decided by a common order dated 20.02.2020. Against that order both the revenue and the assessee filed the Miscellaneous applications (MAs) wherein the assessee contended that the bench has not considered the various judgement cited by the assessee while deciding the appeal of the revenue. Whereas revenue in their MA contended that while deciding the appeal one of the grounds raised by the revenue was not decided. Considering that aspect of the matter the MA of the revenue and that of the assessee was decided by the bench vide order dated 03.10.2023 and thereby this order. Even in the arguments of this proceeding the revenue has raised the additional ground for A. Y. 2008-09 for which there was no MA filed ....
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.... addition on account of Long Term Capital Gain (LTCG) of Rs. 66,76,744/- by the CIT(A) (added on protective basis). For the A.Y. 2009-10, the Hon'ble ITAT has rightly mentioned that the issue of long term capital gain is common to the issue raised by the Revenue in Ground No. 3 of the appeal for A.Y. 2008-09 and it has relied upon its order for A.Y. 2008- 09 for deciding the same on merits. However, the issue of addition in business income of Rs. 2,06,71,225/- & the long term capital gain of Rs. 66,76,744/- are separate issues (raised vide separate grounds of appeal) and these are different from the issue raised in ground no. 3 of Department appeal for A.Y. 2008-09. 4. In view of the above, as the ground no. 2 for A.Y. 2009-10 has not been adjudicated upon by the Hon. Bench, it is requested that the same may be taken up under section 254(2) of the I.T.Act, 1961 for adjudication by recalling and modifying the order dated 20/02/2020 in the case of DCIT, Circle-2, Jaipur vs. M/s. Man Prakash Talkies Pvt. Ltd. in ITA No. 407/JP/2018(Revenue's appeal) for A.Y. 2009-10.'' Hence, keeping in view the submissions as well as the grounds raised by the respective part....
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....ction 2(47) of the Act while making treatment of its capital asset i.e. land of Cinema Hall into stock in trade of the business of selling of shops u/s 45(2) of the Act. The appellant craves the indulgence to modify, alter, and add any other ground of appeal given above." 7.1 Whereas the assessee preferred cross objections on the following ground in CO11/JP/2018; Grounds of assessee's C.O.: "1. Because the departmental appeal is bad-in-law as well as on facts and is liable to be dismissed. 2. Because the learned CIT(Appeals) erred in not deciding the Ground No. 6 relating to the service of notice u/s 148 and CIT(A) erred in para 3.2.2 page 74 that it is an academic in nature. 3. Because the Learned CIT(Appeals) erred in not deciding the Ground No. 3 relating to not providing the copy of the reasons recorded by AO before issue of notice u/s 148 inspite of the request." 8. The ld. DR appearing on behalf of the revenue has placed their additional grounds of appeal which is extracted in below; "Vide letter dated 07.05.2024 Sub:- Filing of additional grounds of appeal arising out of ITAT, Jaipur's order in ITA No. ....
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....hether on the facts and circumstances of the case, the Ld. CIT(A) is right in quashing the reopening proceedings of AO ignoring the fact that the assessee has converted its capital reopening proceedings of AO ignoring the fact that the assessee has converted its capital asset into stock in trade by converting the land use after demolition of Cinema Hall building and entered into a Development Agreement for construction of multistoried commercial complex, therefore, the provisions of Section 45(2) of the I.T. Act are applicable and the income ought to be taxed as Business Income and not a Capital Gains? & Vide letter dated 06.08.2024 Sub: Filing of additional grounds of appeal arising out of ITAT, Jaipur's order in ITA No. 406/JP/2018 & C.O. No. 11/JP/2018 dated 20/02/2020 in the matter of M/s Man Prakash Talkies Pvt. Ltd., Jaipur, PANAABCM6231F, Upper Ground, 1st Floor, A-8, Golcha Trade Center, M I Road, Jaipur for the AY 2008-09 - regarding - Kindly refer to the subject mentioned above. 2. In this connection it is submitted that in this case, appeal before the Hon'ble Bench had been filed on 28.03.2018 incorporating three groun....
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.... of Income Tax, Range-2, Jaipur and the same was disposed on 29.03.2016. Accordingly the assessment was completed on 30.03.2016. 10. Brief facts as emerges from the records are that the assessee was running a Cinema Hall on MI Road, Jaipur, which was demolished and a commercial complex was developed on it in collaboration with a developer (M/s Golcha Buildtech Pvt Ltd). As per mutual arrangement reduced to a Developer Agreement, the developer was to construct a commercial complex on the land where cinema hall existed at its own cost. The owner (assessee) would retain half portion of the constructed commercial complex, and the developer would get the remaining half portion of the said complex in lieu of the cost incurred in constructing the said complex. The assessee has computed Long Term Capital Gain at Rs. 2,01,69,487/- after deducting indexed cost of land (computed by the Valuer by taking DLC rate of 1973 and increasing it by 20% for each year upto 1981). Ld. AO noted that the assessee was earning Income from Cinema Hall in the past assessment years and had shown its Income under the head Business & Profession, meaning thereby that the use of the impugned capital asset i.e....
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....39;cinema hall' to commercial' was taken and prior to the date of signing the Development Agreement on 12 December 2001, the land had been cleared for commercial use. Thus, the change of land use was done as part of a deliberate, preplanned move to enter into an adventure in the nature of trade in respect of the land situated at good location. Since the assessee's intention was to develop its land into a commercial complex and earn profit by selling shops & offices at the complex, it is apparent that when it got the land use changed from 'cinema hall to commercial, the said land got converted to stock in trade. Hence, the provisions of section 45(2) get invoked. Now, the quantification of income from business and profession as per section 45(2) needs to be done. Ld. AO further noted that the terms of Development Agreement, the assessee received half share of constructed complex (50086.73 sq. feet built up area, Portion A of Golcha Trade Centre, the building constructed on land on which the erstwhile cinema hall stood) in lieu of half portion of land (Le the stock in trade) sold or otherwise transferred by it to the developer in May, 2007. Hence, for the purpose o....
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....ouse land from 'cinema' to 'commercial' in the year 2001. However, the long term capital gain will be charged in the year in which sale consideration thereof was received in the shape of built-up commercial complex. The full value of consideration for the purpose of section 48 read with section 45(2) shall be the Fair Market Value (FMV) on the date of conversion (2001), as computed at Rs. 16,06,14,125/-, Further, the cost of acquisition will be the actual cost as on 1.4.1981, as adjusted for Cost Inflation Index on the date of conversion (2001). The assessee had got its 'Land Only' valued through Registered Valuer, Sh.Govind Singh Bapna on 13.04.2009. According to this valuation Report, the entire land i.e. 4830.50 sq.meters) has been valued as on 1.4.1981 at Rs. 2,99,10,456/-, adopting the Sub-Registrar rate of Rs. 6192/- per sq. meter. Thus, the value as on 1.4.1981, of the half portion of the entire land i.e. 2415.25 sq.meters [which was transferred to (or otherwise rights thereof surrendered to) the developer for constructing their portion of the commercial complex] comes to Rs. 1,49,55,228/-. Thus, adopting the CII of 2001 at 426, the indexed cost of ac....
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.... rest half portion remains with them marked 'B' complete plan and measurement of each shop floorwise are enclosed. The total constructed cost of our half portion is taken for Rs. 184976342/- as per valuers report. Photo copy enclosed. 4. Calculation of Long Term Capital gain on land as under: - (Amount in Rs.) Transfer Considerations 184976342/- Less Cost of Acquisition as on 01.04.1981 Rs. 2,99,10,500/- (photo copy of valuers report dated 13.04.2008 enclosed) Indexed cost of acquisition of land 29910500*551/100 16.48.06.855/- Long term capital gain Rs. 2,01,69,487/- (iii) The original assessment was completed u/s 143(3) of the Act on 03.12.2010 at the returned income. Subsequently, the AO has initiated proceedings u/s 147 of the Act and has issued notice dated 31.03.2015 u/s. 148 of the Act after recording the reasons for initiation of proceedings u/s 147 of the Act as reproduced hereunder: "(a) The assessee M/s Manprakash Talkies Pvt. Ltd. was earning Income from Cinema Hall in the past assessment years and had shown its Income under the head Business & Profession. It got "the land use ....
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....cial complex and earn profit by selling shops & offices at the complex, so the Income from this activity should have been treated as income from business & profession. As per the terms of Development Agreement, the assessee (i.e. the owner) received its half share of constructed complex in lieu of half portion of land surrendered to the developer. This, in effect, was the first instance of reaping the harvest of its 'adventure in the nature of trade' with respect to the prime land it owned and got converted to commercial land. The valuation of assessee's portion of the constructed building (and not the land on which it was constructed) was got done and the value was determined at Rs. 18,49,76,342/-. This value constitutes the 'transfer consideration for commercial land which should have been declared as 'Income from Business and Profession rather than Long Term Capital Gain as declared by the lessee. The assessee has computed Long Term Capital Gain at Rs. 2.01,69,487/- after deducting indexed cost of land (which in itself has been computed by the Valuer on a rough estimate basis by taking DLC rate of 1973 and notionally increasing it by 20% for each year upto 19....
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....sessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment." (v) It is noted from the reasons recorded by the AO for initiating proceedings u/s 147 of the Act that the AO has relied heavily on clause 2 of the development agreement dated 12.12.2001 which is reproduced as under: "2. Whereas looking to the demand for showroom and offices in multistoried buildings situated at good location, Owner herein decided to develop a multist....
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....s Kelvinator of India Ltd. [2002] 123 Taxman 433 (Delhi) (FB), it was held by the Full Bench of Hon'ble High Court of Delhi that an order of assessment can be passed either in terms of subsection (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub- section (3) of section 143, a presumption can be raised that such an order has been passed on application of mind. It is well-known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. (c) The above judgement of Full Bench of Hon'ble High Court of Delhi has been affirmed by the Hon'ble Apex Court in the case of CIT Vs Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC), wherein it was held by the H....
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.... sale of shops in his return of income but as per accounting standards and provisions of Income Tax Act, the act of converting capital asset into stock in trade clearly instruct to show business income and LTCG in the Return of Income which was actually not reflected by assessee at all." (ix) Vide this office letter dated 21.12.2017, the AO was again required to submit its comments on this contention of the appellant. The relevant extracts of the above referred letter are reproduced as under: "Vide the above referred letter, you were required to submit your comments on four issues including the issue 'there was no evidence on record to show failure or omission on the part of the appellant to disclose truly and fully relevant particulars of income in the return of income." (x) However, vide its letter dated 22.12.2017, the AO has submitted a copy of the reasons recorded by the AO for initiating proceedings u/s 147 of the Act but chose not to comment on the contention of the appellant that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration. (xi) It is evi....
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....section 147 of the Act is clearly applicable to the facts of the instant case under consideration. The AO has neither stated that there was default on the part of the appellant to disclose material facts truly and fully, which are necessary for its assessment nor it is discernible from the reasons recorded by the AO. Further, the AO has not stated in the reasons recorded for reopening the case of the appellant, what material facts were not disclosed by the appellant at the time of original assessment proceedings. (xiii) Therefore, it could be concluded that the reassessment proceedings under consideration were initiated on the basis of reappreciation of the same set of facts available on record and is nothing but merely change of opinion which could not be allowed in view of the various judicial pronouncements as discussed earlier in this order. Further, since original assessment was completed u/s 143(3) of the Act and the reassessment proceedings were initiated after four years from the end of the relevant assessment year, the proviso to Section 147 of the Act is also applicable. Further, there was no failure on the part of the appellant to disclose, truly and fully all m....
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....ited balance sheet for the year under consideration, the value of the constructed area apportioned to the appellant was shown as an "Investment". In its return of income, the appellant has shown long term capital gain of Rs. 2,01,69,487/- after taking sale consideration at Rs. 18,49,76,342/- and indexed cost of acquisition at Rs. 16,48,06,855/- in respect of area of the land beneath the constructed area given to the developer in the commercial complex and short term capital gain of Rs. 10,12,630/- on account of sale of one shop thereof. (ii) However, on the basis of clause 2 of the development agreement and change of use land from "Cinema Hall" to "Commercial", it has been concluded by the AO that the Fixed Asset i.e. capital asset' has been converted into stock in Trade being Commercial use. The AO has invoked the provisions of section 45(2) of the Act and has computed the total capital gains at Rs. 9,59,33,469/- and business income at Rs. 2,79,88,087/- consisting of profit on account of sale of half potion of the plot (Rs. 2,43,62,271) (stock in trade) and on sale of shop (Rs. 36,25,870) as per the following details: Profits and Gains from business and Professions: ....
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.... that the lease for 5720 square yards of land upon which the cinema hall known as "Man Prakash" was built was allotted to Late Seth Shri Radha Krishan Chamaria on 20.01.1935 by the Jaipur Darbar for a lease of 99 years. During the life time of Shri Chamaria, the cinema house was constructed and after the death of Shri Chamaria, the lease was transferred in favour of the appellant company on 23.01.1995. Subsequently, the land use was changed from "cinema Hall" to "Commercial" and the above referred development agreement was executed by the appellant. It would be appropriate to reproduce some of the relevant clauses of the said agreement as under: "2. Whereas looking to the demand for showroom and offices in multistoried buildings situated at good location, owner herein decided to develop a multistoried commercial complex on the said plot of land in accordance with the rules, regulation and building by laws of the local authorities, and the State Government. 1. That it has been agreed to by and between both the parties that the owner and developer shall build a multistoried commercial complex in accordance with the permission given by the local authorities on the af....
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....etion of new building in habitable condition including construction cost, demolition cost of existing structures, digging of earth etc. shall be borne and paid by the developer and day to day expenses during the period of construction and all cost and expenses of litigation, legal expenses and unforeseen expenses shall be borne by the Developer. 11. That the owner and developer will share built up area in the new building and car/ two wheeler parking space and space for putting up hoardings, bill boards etc. floor wise, including the roof and other areas, in the ratio of 50:50 respectively. The Left half of the building will be earmarked for and belong to owners (owner's allocation) and Right half of the building will be for and belong to the Developer (developer's allocation). However, when the final plans are approved by the concerned authorities actual areas will be demarcated according to the above theme by different colours in the approved building plans i.e. owner's allocation shall be marked in Red colour and the developer's allocation shall be marked in Green colour. 13. That all technical persons and / or professionals like architect, engi....
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....loper shall be solely and fully responsible for the construction and the quality thereof as well as the quality of material used therein. The Developer shall build the building exactly as per the building plan structural and architectural designs approved and there shall not be any deviation from the same. Even in future if it is ever found that the construction of the building is deficient in quality or otherwise and any objections raised by the Government or authority, responsibility of the same shall be of the Developer along with structural and architectural designer shall be answerable thereof. The developer hereby imdemnifies and undertake to keep the owner saved harmless and indemnified in this regard. 38. The owner and Developer have entered into this agreement on principal to principal basis only and nothing contained herein shall be deemed or constructed as constituting a service contract or partnership or sale between the owner and the Developer nor shall the owner and the developer in any manner constitute and association of persons. Each shall be strictly responsible for its own income tax liabilities, if any and shall keep the other party indemnified from the....
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.... accruing as a result of the transfer of the capital asset." (vi) Thus, for invoking the provisions of section 45(2) of the Act, it has to be shown that: * the appellant has converted capital asset into stock in trade; or * the appellant has treated such capital assets as stock in trade for the purpose of business carried on by the appellant. (vii) There is no evidence on record which may establish that the land under consideration was converted into stock in trade. In fact, in the Balance Sheet of the appellant relating to FY 2007-08, the shops and offices were shown under the head "Investments". Thus, the appellant has not converted its capital asset into stock in trade. (viii) Now, the question comes, whether the appellant has treated such capital asset as stock in trade for the purposes of its business? It is to be noted that there is no evidence on record which may indicate that the appellant was in the business of real estate and in fact, as noted from the submission of the appellant for AY 2009-10, that to deal in real estate business was not in the objects clause of the Memorandum of Association of the appellant. It would be appr....
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....films, records, tapes, and all other apparatus for recording events by means of sight and sound and all rights to produce, distribute or exhibit any show, entertainment or event by means of films, records or such other apparatus as aforesaid." Thus, it is evident from the above that the appellant was not allowed to engaged itself in real estate activities. (ix) It is also to be noted that it was the responsibility of the Developer to construct commercial complex right from the submitting of the building plans to the concerned authority, demolition of the cinema hall etc. as is evident from the terms of the development agreement as reproduced earlier in this order. There is no evidence that the appellant has performed any positive act which may indicate that the appellant has treated its capital asset as stock in trade. The change in use of land from Cinema Hall to Commercial Complex does not tantamount to conversion of land or fixed asset into stock in trade. Further, maximizing the profit from the sale of capital asset after its development, in isolation, cannot be treated as adventure in the nature of trade, as held by the AO in the assessment order. The AO has ....
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...." 4. In the result, the appeal is allowed." 14. From the above order of the ld. CIT(A), revenue preferred the appeal before the tribunal, whereas the assessee filed a cross objection against that filing of an appeal by the revenue. 15. The revenue in support of the appeal so filed has raised additional ground as discussed herein above. Ld. DR vehemently argued that the contention raised by the ld. AO are detailed discussion along with the reasons so as to compute the correct income in the hands of the assessee and has also justified the reopening of the assessment in this case. In support of the contention raised in the assessment order ld. DR also filed a detailed written submission in support of the grounds so raised vide submission dated 20.06.2024 filed the ground wise submission and decision relied was submitted on 15.07.2024. Subsequently ld. DR submitted a consolidated and revised submission dated 24.07.2024, the written submission reads as follows; 2. In this connection, the submission (ground wise) in respect of AY 2008-09 is as follows: 2.1 "Ground No. 1 : Whether on the facts and circumstances of the case and in law the ld. CIT(A) has err....
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....time of original assessment proceedings. * On the basis of reappreciation of facts already on record, the Assessing officer has initiated proceedings u/s 147 of the Act which tantamount to change of opinion which is not permissible. * In the reasons recorded by the Assessing Officer there is no whisper that the assessee has not disclosed all the material facts for the purpose of assessment * In the reason recorded the Assessing Officer has not stated what material facts were not disclosed truly and fully by the assessee at the time of original assessment order. 2.3 The assessee is Private Limited Company and was earlier engaged in the business of exhibiting films in the Cinema Hall known as ''Man Prakash. In the F.Y. 1999-2000, the assessee decided to dismantle the cinema hall building and to develop a commercial complex on the land. The assessee also obtained the permission from Jaipur Development Authority (for short ''JDA'') for change of use of the land from Cinema Hall to Multistoried Commercial Complex comprising of shops, showrooms and other commercial space. The assessee entered into a Development Agreement dated 1....
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....ssment order on the ground of proper service of notice u/s 148 of the Act was not adjudicated upon by the ld. CIT(A). Thus aggrieved by the order of the ld. CIT(A), the Revenue has filed this appeal and the assessee has filed the C.O. on the issue of validity of service of notice u/s 148 of the Act. 2.4 Comment: 2.4.1 It is submitted that the ld. CIT(A) has quashed the reassessment by holding that the same is hit by the proviso to Section 147 of the Act without considering the relevant facts which were subsequently detected by the Department as well as by the AO by conducting an enquiry and on the basis of outcome of such enquiry and the facts pointed out by the Audit Team/ Department, the AO has formed belief that income assessable to tax being Long Term Capital Gain in pursuance of conversion of capital asset into stock in trade, has escaped assessment. It is pointed out that there was detailed enquiry conducted by the audit team and audit objection, pointing out the fact that the assessee has actually converted its capital asset into stock in trade by converting the land use after demolition of Cinema Hall Building and entered into a Development Agreement for c....
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.... Lal v. National Building Material Supply, Gurgaon, AIR 1969 (SC) 1267, M/s Ganesh Trading Co. V. Moji Ram, AIR 1978 2 (SC) 484: 1978 UJ (SC) 162: 1978 LS (SC) 53: 1978 Rev LR 275: (1978) 2 SC 98. In Collector, Land Acquisition v. Mst. Kattiji, AIR 1987 (SC) 1353: 1987 (1) JT 537: 1987 (1) Scale 413: 1987 (2) SCR 387: 1987 (2) UJ 29: (1987) 2 SCC 107 SC: 1988 (19) ECR 565, wherein the Apex Court mainly observed as under: 'When sustained justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done due to some technical omission' 2.4.3 The Assessee has failed to disclose exact material facts truly and fully before the AO during the original assessment proceedings. As such, the assessee only disclosed LTCG on land and STCG on sale of shops in his return of income but as per accounting standards and provisions of Income Tax Act, the act of converting capital asset into stock in trade clearly instruct to show business income and LTCG in the Return of Income which was actually not reflected by assessee at all. 2.4.4 The observation....
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.... of loans and advances. Therefore, the bare reading of the assessment order dated 3-12-2010 does not reveal that any enquiry was conducted by the AO on the issue of nature of income arising from the arrangement of development of commercial complex after demolition of Cinema Hall Building on the land in question. For ready reference, the assessment order dated 3-12-2010 passed u/s 143(3) is hereby reproduced as under:- ''The assessee e-filed return of income without digital signatures for assessment year 2008-09 on 29.03.2010, which was subsequently physically filed with 'the department on 06.04.2010 declaring income of Rs. 2,00,29,760.00.The return of income was processed u/s 143 (1) and was picked up for scrutiny by issuing notice u/s 143 (2) of the I.T. Act,1961. The jurisdiction over this case has been assigned from the Asstt. Commissioner of Income-tax, Circle-2, Jaipur to the, undersigned (Asstt. Commissioner of Income-tax (OSD), under the administrative central of Addl. CIT, Range-2, Jaipur) by the Commissioner of Income-tax, Jaipur-I in exercise of power conferred by sub-section (1) of section 127 of the Income-tax Act, 1961 vide his order NO. C....
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....f not furnishing tax audit report as required u/s 44AB of the Act and filing belated return of income and consequently initiated penalty proceedings u/s 271B and 271F of the Act respectively. Apart from these two issues, the AO has not made any reference to any reply filed by the assessee. Thus it is evident from the said assessment order that the AO has not conducted the bare minimum enquiry on the issue of conversion of capital asset into stock in trade. It is clear that the Assessing Officer has not taken up the issue of conversion of capital asset into stock in trade and thereby, resulting the income of Long Term Capital Gain for the scrutiny assessment or applied his mind on the issue. Thus the said order does not exhibit any thought process of the AO on the issue. 2.4.7 The observation of the Ld. CIT(A) that "reassessment proceedings under consideration were initiated on the basis of re-appreciation of the same set of facts available on record and is nothing but merely change of opinion " is not acceptable. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Offic....
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....of the Act and the reassessment proceedings were initiated after four years from the end of the relevant assessment year, the proviso to section 147 of the Act is also applicable. Further, there was no failure on the part of the appellant to disclose, truly and fully all material facts, which are necessary, for its assessment for the year under consideration at the time of original assessment proceedings, it is held that the conditions required for initiation of reassessment proceedings, as stipulated in the provisio to section 147 of the Act were not satisfied. Hence, in view of above discussions, looking to the facts and circumstances of the case, it is held that the reassessment proceedings initiated by the AO under consideration were bad in law and consequently, the assessment order based on such bad initiation cannot be allowed to be sustained and thus, hereby quashed." The ld. CIT(A) has decided this issue by presuming the fact that reassessment proceedings were initiated on the basis of reappreciation of the same set of facts available on record and is nothing but merely change of opinion. The facts regarding the audit objections pointing out certain facts based on ....
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....nd is hereby submitted that all these undisputed facts establish the conversion of capital asset into stock in trade and therefore, as per provisions of section 45(2) of the Act when the assessee has finally sold the shops and showrooms in the commercial complex then the profit from said transactions of sale shall have two components, one is capital gain in respect of conversion of land from capital asset into stock in trade and another is business income by sale of the stock in trade. Therefore, the AO has rightly assessed the income of the assessee under two heads, one is Long Term Capital Gain and another is business from sale of shops as well as other commercial space. The ld. CIT(A) has given the findings ignoring all these facts emerging from the record that the assessee has decided to stop the business of exhibiting the films and decided to demolish the cinema hall building and thereby converted the capital asset into stock in trade to earn the profit from the activities of development of commercial complex and sale of the same which is nothing but enduring in nature. 2.6.2 The assessee made transfer as per section 2(47) of the Act while making treatment of its capi....
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....eived by the parties. For ready reference, the clause 2 of the said agreement is reproduced as under:- ''2. That the developer has agreed to keep with the owner a sum of Rs. 2.50 crores (Rupees Two Crores and Fifty Lacs) by way of interest free security deposit towards proper commencement and timely completion and development of the plot as per the stipulation made in the agreement and to secure due performance of the Developer's obligations under this agreement. The security deposit shall be refunded on completion of the new building and making over of the owner's allocation to the owner inhabitable condition in the new building or builder will adjust this security amount of Rs. 2.50 crores by way of buy-back of the part of the owner's allocation in the property at the rate mutually settled between parties. Developer has also agreed to pay to Owner a sum of Rs. 2.00 Crores (Rupees Two Crores only) as consideration money (Non adjustable, Non Refundable).'' 2.6.5 The Developer has given a sum of Rs. 2.50 crores to the assessee by way of interest free security deposit as performance security/ guarantee. However, the said security was to b....
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.... conditions of the agreement that commercial complex was developed only for sale / resale purposes. There is no dispute that the said complex was stock in trade in the hands of the Developer. Similarly, the assessee once decided to discontinue the business of exhibiting the films and converted the land use for development of commercial complex and sale the space in the complex then said land was no more remained as business asset or capital asset to be used for business of the assessee or as investment of the assessee. It is not a case of exploitation of the capital asset for carrying out the business but it is a case of selling of the property in question itself after developing it and then selling the shops/offices and other space individually as an independent unit and not the entire share of the assessee in commercial complex as one unit. Therefore, the entire arrangement and exercise of converting the land use for development of commercial complex and sale of the same is nothing but activity in the nature of trade and business involving risks and rewards to be borne by the assessee, as a result of such exercise. Thus entering into such venture of developing commercial complex ....
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....e assessee of not keeping the said land and commercial complex as capital asset but the very purpose of development of the land right from the beginning was to sell the same as there was a demand of shops/ offices at such good location. In view of the above facts and circumstances of the case, it is certain that it was a case of conversion of business asset into stock in trade and thereby the profit on sale of the said land and shops / offices contains two components of income i.e. one is capital gain on account of conversion of capital asset into stock in trade u/s 45(2) of the Act and another is business income on account of sale of stock in trade. The computation of capital gain would be based on the consideration being fair market price as on the date of conversion being in the year 2001 though the same will be assessed to tax in the year under consideration when the assessee has finally sold the stock in trade. Therefore, the said finding of the ld. CIT(A) is contrary to the undisputed material facts of discontinuing the existing business of exhibiting films in the cinema hall, demolition of cinema hall building and conversion of land use to commercial complex for sale constit....
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.... notices vide letter dated 11.03.2016. (3) The contention of the assessee does not hold any ground because there is no such mechanism to provide copy of reasons recorded before issuance of notice u/s 148 or filling of return. The assessee has complied with the notice u/s 148 by fumishing the reply dated nil received on 18-05-2015 by submitting that return filed on 29-03-2010 should be treated as retum of income. Further cognizance of notice u/s 142(1) dated 29.09.2015 may also be taken in respect of service of notice u/s 148 and furnishing of reasons recorded u/s 147 to the assessee. 3. The submission (ground wise) in respect of AY 2009-10 is as follows: 3.1 "Ground No. 1 : Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition made by the AO without appreciating that the assessee made transfer as per section 2(47) of the Act while making treatment of its capital asset i.e. land of Cinema Hall into stock in trade of the business for selling of shops u/s 45(2) of the Act. Ground No. 2: Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in del....
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....Anantnag vs Mst. Katiji & Ors on 19 February, 1987 6. [1980] 4 Taxman 83 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. H.P. Sharma S. RANGANATHAN AND D.R. KHANNA, JJ 7. [2006] 151 Taxman 41 (Delhi) HIGH COURT OF DELHI Consolidated Photo & Finvest Ltd. v. Assistant Commissioner of Income-tax 8. [2009] 315 ITR 84 (Bombay) HIGH COURT OF BOMBAY Yuvraj v. Union of India 9. [2011] 197 Taxman 415 (Delhi) HIGH COURT OF DELHI Honda Siel Power Products Ltd. v. Deputy Commissioner of Income-tax 10. Shri Pravinchandra R Patel, Vadodara vs Dcit, Central Circle-2, Vadodara on 13 January, 2022 11. [2011] 12 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT KanubhaiM. Patel (HUF) v. Hiren Bhatt or His Successors to Office 12. [1999] 236 ITR 34 (SC) SUPREME COURT OF INDIA Raymond Woollen Mills Ltd. v. Income-tax Officer 13 [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd. v. Assistant Commissioner of Income-tax 14 [1999] 103 TAXMAN 562 (PAT.) HIGH COURT OF PATNA P.K. Haldar & Co. v. Commissioner of Income-tax 15 [2002] 123 Taxman 756 (Calcutta) HIGH COURT OF CALCUTTA Ispat Industries Ltd. v. De....
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....Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) 35 [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer 36 [2021] 129 taxmann.com 68 (Gujarat) HIGH COURT OF GUJARAT Vilas Vrajlal Parekh HUF v.Income-tax Officer, Ward(1)3 37 [2021] 133 taxmann.com 397 (Gujarat) HIGH COURT OF GUJARAT Zaveri & Company (P.) Ltd.v.Deputy Commissioner of Income-tax 16. As is evident from the cross objections filed that the grounds which are of the technical in nature was not decided by the ld. CIT(A). Therefore, assessee filed cross objections. So far as the appeal filed by the revenue, ld. AR of the assessee heavily relied upon the finding recorded in the order of the ld. CIT(A). The ld. AR in support of the cross objection and to support the order of the ld. CIT(A) has relied upon the following written submission: "The humble Assessee-Respondent above named MOST RESPECTFULLY SHEWETH: 1. That the brief facts of the case as emerging from the records are as under: 1.1. That the assessee is a Private Limited Company and was earlier engaged in the business of exhibiting films in the Cinema Hall k....
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....he assessee in its books of accounts. The indexed gain arrived at was shown as Long Term Capital Gains. There was sale of shops by the assessee and subsequent gain earned on sale of shops was shown as Short Term Capital Gains. The assessee after getting its books of accounts audited filed its return of income on 29.03.2010 and declared therein total income at Rs. 2,00,29,760/- wherein primary income from Long Term Capital Gains was shown and on which due income-tax was also paid. Copy of Income Tax Return [PB 12], Computation of Income [PB 13-15] & Final Accounts as at 31.03.2008 [PB 16-24]. 2.1. That the Assessing Officer selected the case for detailed scrutiny and issued query notice dated 23.09.2010 [PB 25, 26-28] to which the assessee replied from time to time vide letters dated 04.10.2010 [PB 29-30], 08.10.2010 [PB 57], 13.10.2010 [PB 58-61] & 18.11.2010 [PB 62] and submitted relevant documents in support thereto. 2.2. That the Assessing Officer after being satisfied & after due verification of submissions made vide assessment order dated 03.12.2010 passed u/s. 143(3) accepted the returned income [PB 63- 64]. 3. That subsequently the Audit Wing of th....
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....never provided to the assessee). The Assessing Officer issued show cause notice dated 08.03.2016 [PB 79-82] to the assessee on which the assessee filed objections vide letter dated 11.03.2016 [PB 83] and again highlighted that notice dated 31.03.2015 was not served upon the assessee. The Assessing Officer vide letter dated 14.03.2016 [PB 84-86] intimated that notice dated 31.03.2015 was served through affixture and through postal department and provided copy of report of affixture dated 31.03.2015. The assessee filed an application dated 21.03.2016 u/s. 144A of the Act with the ld. JCIT [PB 87-91]. The assessee filed furnished the reply on merits vide letter dated 22.03.2016 [PB 92-95]. 5. That the Assessing Officer ultimately passed re-assessment order dated 30.03.2016 whereby he has treated the conversion of capital asset into stock in trade at the time of entering into Development Agreement by the assessee with the Builder by invoking the provisions of section 45(2) of the Act. It held that where assessee has finally sold the shops and showrooms in the commercial complex then the profit from said transactions of sale shall have two components, one is capital gain in res....
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....was quashed by the ld. CIT(A) on merits, therefore, other grounds raised by the assessee against the validity of the reassessment order on the ground of proper service of notice u/s 148 & 143(2), reasons not provided, etc., etc., were not adjudicated upon by the ld. CIT(A). 6.6. That the ld. CIT(A) also decided the issue of assessment of Long Term Capital Gain u/s 45(2) of the Act in favour of the assessee by holding that there was no conversion of capital asset into stock in trade by virtue of demolition of Cinema Hall Building and conversion of land use as well as entering into Development Agreement dated 12.12.2001 with the Developer on the following grounds: * There is no evidence that land under consideration was converted into stock in trade. In fact the shops were shown under the head "Investments". [Page 88 CIT(A) para 3.3.2. (vii)]; * The assessee has not converted its capital asset into stock in trade. [Page 88 CIT(A) para 3.3.2. (vii)]; * There is no evidence that assessee was under the business of real estate. In fact 'to deal in real estate' is not part of object clause of the assessee. [Page 88 CIT(A) para 3.3.2. (viii)]; *....
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.... 9. That none of the aforesaid ground no. (i) & (ii) raised by the revenue remotely arise from the order passed by the CIT(A) and in fact the grounds on which the ld. CIT(A) has quashed the reassessment proceedings have not been challenged by the Revenue. The CIT(A) has not quashed the reassessment proceedings for mere omission of some words, in fact which words are omitted is not spelt out. The Assessing Officer does not dispute the fact that (i) All material facts were before the Assessing Officer at the time of original assessment proceedings, (ii) The Assessing Officer has initiated proceedings u/s. 147 of the Act which tantamounts to change of opinion since it is reappreciation of facts already available on record, (iii) The reasons recorded by the Assessing Officer do not allege that the assessee has not disclosed all the material facts & (iv) In the reasons recorded the Assessing Officer has not stated what material facts were not disclosed truly and fully by the assessee. Thus this appeal deserves to be dismissed in limine itself. 10. For ready reference 1st proviso to section 147 of the Act is reproduced as hereunder: Income escaping assessment. ....
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..... ACIT 2023 (10) TMI 136 (Gujarat High Court) * Amrit Corp. Ltd v. Addl. CIT 2014 (5) TMI 19 (Allahabad High Court) * PCIT v. Light Carts Pvt. Ltd. (2017) 85 taxmann.com 331 (Allahabad High Court) * Madras Suspensions Ltd. v. DCIT (2017) 88 taxmann.com 256 (Madras High Court) * Cadila Healthcare Ltd. v. ACIT (2017) 85 taxmann.com 257 (Gujarat High Court) * Oracle India Pvt. Ltd. v. ACIT (2017) 83 taxmann.com 368 (Delhi High Court) * Sitara Diamonds Pvt. Ltd. v. DCIT (345 ITR 91) (Bombay High Court) 12. That it is settled law that it is not necessary that reasons for accepting the return income have to be captured in the assessment order what is important is query raised. The assessee wishes to rely upon: * ACIT v. Marico Ltd. (2020) 6 TMI 436 (Supreme Court) * ITO v. Techspan India Pvt. Ltd. (2018) 4 TMI 1376 (Supreme Court) * JCIT v. Cognizant Technology Solutions India Pvt. Ltd. (2023) 1 TMI 1233 (Supreme Court) * Aroni Commercials Ltd. v. DCIT (2014) 2 TMI 659 (Bombay High Court) 13. That it is settled law that proceedings u/s. 148 are not permissible on Audit Objection. I....
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....the intention of the assessee is to carry out business. The intention is not the necessary criteria for invoking section 45(2) of the Act but entries in books of accounts is relevant. The object clause of the assessee has been referred by the CIT(A) in detail. The assessee was not in the business of real estate nor did it had any object clause for carrying out business of real estate. Entire responsibility of construction, demolition of existing structure, approval of maps, etc., etc. was of the Developer and that the assessee had simply handed over the Land owned by it for the purpose of construction of commercial complex. There is no positive act which indicates that assessee has treated capital asset as stock-in-trade. If the argument of the Assessing Officer were to be accepted then in all cases wherein Development Agreement is entered into by and between a LAND OWNER & DEVELOPER, the gains realized by the LAND OWNER on sale of developed property (whether commercial or residential) will always be treated as Business Income. Nature of income earned by the DEVELOPER will be BUSINESS income because it is carrying out construction, putting funds towards construction, seeking approv....
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.... the normal sale of assets attracting long term capital gain? - Held that:- No material from records to suggest that at the time of acquisition of the properties such acquisition was for the purpose of undertaking a business venture. What we are to look at now is as to whether there was a business venture simultaneously with the development agreement. Major portion of the developed building was to remain with the assessee after construction. Sale of one unit therefrom per se would not have constituted an adventure in the nature of trade. Materials available on record do not show that building construction formed part of normal activity of the Assessee. Determining factor in this appeal, as urged by Revenue, becomes the intervening arrangement of agreement for sale and its subsequent cancellation when the property fetched better price. Revenue's stand is that pursuit of higher profit by itself would confer on the transaction the character of business venture. We are, however, unable to agree with this submission. It might be natural for a person, who is not undertaking any business venture, to seek higher return from sale of his assets. That would be a rational pursuit and in our vi....
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....n of execution of work. Even the assessee was debarred from interfering in the working of the developer. On the contrary, no funds of the assessee were deployed rather he received security deposit from the developer. Therefore, after considering the terms and conditions as contained in Development Agreement and following the decisions referred above, we are also of the view that the gains in the present case is to be chargeable to tax under the head "capital gains". In the present case, it has no where been shown that the land was purchased by the assessee with the intention to sell at a profit or with requisite intention to bring it within the parameters of "stock-in-trade". Therefore, after considering the factual position as enumerated hereinabove, we found that the ld. CIT(A) has rightly concluded that the gains are to be charged to tax under the head "capital gains". No new facts or circumstances have been brought before us by the ld. DR in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we find no reason to interfere into or deviate from the findings of the ld. CIT(A). Accordingly, we uphold the same. In light of above, the present....
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....15 Copy of written submissions filed before the CIT(A) for A.Y. 2008-2009. 96 103 109 102 108 112 Case laws relied upon: COMPENDIUM INDEX S. No. DESCRIPTION PB PB Reassessment proceedings on change of opinion & failure to disclose truly all material facts 1. New Delhi Television Ltd. v. DCIT 2020 (4) TMI 133 (Supreme Court): Whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts? - Extension of limitation period - HELD THAT:- Assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuineness of the tran....
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....ssessment - the assessee had already tabulated necessary details as were required by the Assessing Officer at the time of original assessment - there was no failure on the part of the assessee to disclose fully and truly any material facts which were necessary for assessment - Held that:- No reason to interfere in the matter. The special leave petition is, accordingly, dismissed. 14 14 4. ACIT v. CEAT Ltd. 2023 (1) TMI 73 (Supreme Court): Reopening of assessment u/s 147 - Notice beyond four years - conditions precedent for reopening - HELD THAT:- Having gone through the reasons recorded for reopening, we are of the opinion that the conditions precedent for reopening of the assessment beyond four years are not satisfied. The re-assessment was on change of opinion. There are no allegations of suppression of material fact. Under the circumstances, no error has been committed by the High Court in setting aside the re-opening notice under Section 148 - We are in complete agreement with the view taken by the High Court. The Special Leave Petition stands dismissed. 15 15 5. ITO v. Sanjeev Ghei [2019] 104 taxmann.com 81 (SC) (Supreme Court): Reopening of assessment ....
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....eading of the impugned order would show that the original assessment order was framed under Section 143 (3) i.e. after scrutiny of all the claim by the assessee. It is thus apparent that the declarations and claims made, received careful consideration by the A.O.. In terms of Calcutta Discount Ltd. Co. Vs. I.T.O., (1961) 41 ITR 191 (SC) the job of the A.O. essentially is to consider the claims in accordance with law and not in accordance with what an assessee states. Likewise, that an assessee might not claim a benefit would not deny it that relief, conversely, since the A.O is bound to administer the law in its correct interpretation. The impugned judgment took into account the binding decision of the Supreme Court in Commissioner of Income - Tax, Delhi Vs. Kelvinator of India Ltd., (2010) 187 Taxman 312 (SC) where the Court after reviewing the entire law, including the decision in Raymond Woolen held that for a valid reopening of an assessment completed under Section 143 (3), the revenue must be in possession of tangible material outside of the record. In other words, a second opinion or a review on the existing material is impermissible. Having considered the conspectus of the c....
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....o in respect of claim for grant of deduction under Section 80 IA. A separate audit report in the prescribed form 10CCB in support of the claim for deduction under Section 80IA/80IB was also duly submitted. The assessee had also submitted reply pursuant to all queries made by AO during the assessment proceedings under Section 143(3) of the Act. In this view of the matter, the contention sought to be raised by the Revenue about non-disclosure on the basis of the failure on the part of the assessee in mentioned bifurcated amount of additional depreciation allowable in the depreciation chart is absolutely baseless. It is to be noticed that all that has been said by the AO is that after scrutiny assessment, it was observed that assessee has made incorrect claim of additional depreciation on CPP whereas, the claim for additional depreciation on CPP was allowed by the AO while framing the assessment under Section 143(3) after conscious consideration of the material on record. It is not even the case of the Revenue that the formation of the belief regarding the escapement of the assessment by the AO is based on any new material coming on record. Apparently, the formation of the belief by t....
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....T v. Manish Ajmera 2010 (11) TMI 686 (Rajasthan High Court): Assessment u/s 143(3) read with section 148 of the Act - the assessment was reopened essentially not because of escapement of income, but because of change of opinion, which was not permissible even in the amended provisions under section 147 - The sole basis on which the assessment has been reopened is that while framing the original assessment order, the Assessing Officer has accepted the system of accounting adopted by the assessee as valid, whereas in the re-assessment made under section 147, the system of accounting adopted by the assessee has not been considered to be appropriate - It is therefore change of opinion on the basis of which re-assessment is made - The learned Tribunal has relied on the law laid down by the Supreme Court in CIT v. Foramer France ([2003 (1) TMI 101 - SUPREME Court] - to hold that reopening of assessment on mere change of opinion especially when there is no nondisclosure of material fact by assessee, is not permissible - Hence, the appeal is dismissed accordingly. 45 46 12. Akum Drugs and Pharmaceuticals Ltd. v. DCIT 2024 (1) TMI 289 (Delhi High Court): AO while triggering the ....
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....n in the matter of Aroni Commercials Limited [2014 (2) TMI 659 - BOMBAY HIGH COURT] has expounded the law in this regard. In the present case, the queries raised by the AO in the course of the original assessing proceedings followed by replies given by the Petitioner clearly show that the entire material was before the AO and applying his mind to the said material, the AO has passed the Assessment Order dated 20th July 2018. The statement of accounts regarding details of expenses and investment relating to earning of exempt income was accepted by the AO. The letter dated 4th August 2017 issued by Petitioner alongwith the financial statements, on record indicates that all queries raised by the AO by its letter dated 19th July 2017 were answered. In the Assessment Orders u/s 143(3) of the Income Tax Act, 1961 for AY 2012-13, AY 2013-14 & AY 2014-15 the returned income was accepted as assessed income and there were no disallowances. Thus the 'reasons to believe' forming part of Section 147 of the Act in this case, clearly points to the fact that the reopening of assessment was based on the information accessible by the AO. There is no tangible material available with the AO to justify....
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....e that his duty ends - It is for the Income-tax Officer to draw the correct inference from the primary facts - It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts - If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment - under Section 147, the assessing authority has no power to review and the proceeding cannot be taken on account of change of opinion. There is no failure on the part of the assessee to disclose fully and truly all material facts, in the assessment of the relevant assessment year, exception to proviso to Section 148 is not applicable - The limitation to take action is four years from the end of the relevant assessment year - The four years' period for the assessment year 2003-04 expired on 31st March, 2008, while notice u/s 148 has been issued on 8.7.2009, that is, after expiry of four years' period, which is barred by limitation - Relying upon Anil Radhakrishna Wani Vs. Income-tax Officer and others [2010 (3) TMI 316....
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....as raised the query dated 25 September2017 during the assessment proceedings and the Petitioner had responded to the same by its letters date d 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. No reason to interfere in the matter. This special leave petition is, accordingly, dismissed. 92 93 18. ITO v. Techspan India Pvt. Ltd. (2018) 4 TMI 1376 (Supreme Court): Reopening of assessment - deduction u/s 10A has been allowed in excess - change of opinion - Held that:- The very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details filed do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocati....
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.... him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. The notice dated 28 March2013 under Section 148 of the Act seeking to reopen the assessment for A.Y.2008-09 and the order dated 20 November 2013 rejecting the petitioner's objection to reopen the assessment for A.Y. 2008-09 are not sustainable in law- The entire proceeding for reopening the assessment for A.Y. 2008-09 had emanated only on account of change of opinion on the part of the Assessing Officer - thus, the assessment order set aside - there was no reason for the Assessing Officer to have had a reasonable belief that income chargeable to tax has escaped assessment -thus, the Notice issued u/s 148 of the Act also set aside. 100 108 Reassessment not permissible on Audit Objection 21. CIT v. Rajan N. Aswani (2018) 403 ITR 30 (Bombay): Time gap between the AO's response to the audit objection contesting that any income chargeable to tax has escaped audit and his issuing the reopening notice - Held that:-....
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.... of assessment - reasons for reopening the case - reassessment notice is solely based on an audit opinion - Held that:- This Court is of the opinion that Carlton [2009 (8) TMI 57 - DELHI HIGH COURT] concludes the issue in the present case; the audit objection merely is an information. As reiterated in Kelvinator [2010 (1) TMI 11 - SUPREME COURT OF INDIA] by the Supreme Court, change of opinion is impermissible. The Revenue was clearly barred by provisions of Section 147/148 of the Act. In the present case, the reassessment notice is solely based on an audit opinion. Having regard to the fact that the assessee's challenge to the previous year's re-assessment orders was successful - in FIS Global Business Solutions India Pvt. Ltd. v. ACIT [2018 (11) TMI 601 - DELHI HIGH COURT] the reassessment proceedings are unsustainable - the impugned re-assessment notice dated 31.03.2018, cannot be sustained. 113 116 23. Mobis India Ltd. v. DCIT (2022) 11 TMI 893 (Madras High Court): Reopening of assessment u/s 147 - reason to believe - change of opinion - information was obtained under the RTI Act comprising of the Audit point/objection relating to the claim of depreciation on DVN, t....
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.... reassessment being usurped by external agency and abdication of its quasi-judicial function/power by the assessing officer, both of which are impermissible and would prove fatal to the validity of any proceedings which suffers from the above vice. 117 135 24. Himachal Aluminum and Conductors v. State of Himachal Pradesh (2021) 2 TMI 481 (Himachal Pradesh High Court): Re-assessment of tax - demand of tax - HELD THAT:- The power of re-assessment, of, under-assessed or escaped assessment, of, tax as borne in the apposite returns, filed by the taxable unit, becomes visibly vested in the assessing authority, through statutory empowerment, becoming conferred, upon the assessing authority. In sequel thereto, the latter through an order borne in Annexure P-12A, anvilled its reassessment, of, the initially assessed tax qua the petitioner- Unit, upon, an audit observation - The apposite order of reassessment, as, embodied in Annexure P- 12-A, displays qua an allusion being made to the audit observations, appertaining to the purported under-assessed or escaped tax, and, further reveals qua theirs arising from purported breaches being visited, to, the provisions of Section 11(1) a....
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....e submission placed before him. We also take note of the fact that in the reasons recorded in this case is that assessee has paid interest payment of TCS and claim on higher rate of depreciation is already decided based on the submission made by the assessee. Therefore, reopening is done merely based on the same material already on record. 141 145 Treatment of capital asset u/s 45(2) of the Act 26. CIT v. Sohan Khan (2008) 304 ITR 194 (Raj.) (Rajasthan High Court): AO holding transaction of disposal of large extent of land under site plan, in nature of trade - nothing to show, that the land was purchased with intention to sale it at a profit, or with requisite intention, to bring it within the parameters of "stock in trade" - not shown, that assessee is a regular dealer in real estate - transaction was of capital asset only and not a transaction of any stock-in-trade - therefore, it is liable to be taxed only, as the capital gain - revenue appeal dismissed. 146 149 27. CIT v. Hazari Lal Goyal (2017) 9 TMI 1696 (Rajasthan High Court): Capital gain computation - Value of sale consideration - Held that:- The assessee has sold the land to 32 persons as stated....
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....essee. Determining factor in this appeal, as urged by Revenue, becomes the intervening arrangement of agreement for sale and its subsequent cancellation when the property fetched better price. Revenue's stand is that pursuit of higher profit by itself would confer on the transaction the character of business venture. We are, however, unable to agree with this submission. It might be natural for a person, who is not undertaking any business venture, to seek higher return from sale of his assets. That would be a rational pursuit and in our view reflects normal human behaviour and not a special attribute for a trader or a businessman. Just because for a particular unit, an intervening transaction is aborted for the reason that the property would fetch a better price, if sold to another person, grievance may be caused to the person with whom the earlier arrangement was entered into. But such an exercise would not transform the nature of activity from normal sale of capital asset to a business venture. There is substantial gap in time between the day of acquisition of the asset and its development and part-sale. The original assessee was not a property dealer but a member of the Indian ....
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....or with requisite intention to bring it within the parameters of "stock-in-trade". Therefore, after considering the factual position as enumerated hereinabove, we found that the ld. CIT(A) has rightly concluded that the gains are to be charged to tax under the head "capital gains". No new facts or circumstances have been brought before us by the ld. DR in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we find no reason to interfere into or deviate from the findings of the ld. CIT(A). Accordingly, we uphold the same. 174 180 Mechanical Sanction by the Sanctioning Authority invalidates the reassessment 31. Ram Niranjan Tibra v. ITO (2020) 4 TMI 283 (ITAT Jaipur Bench): Sanction accorded by the ld. CIT for issuing the notice under section 148 in the case of the assessee is hyper mechanical. In a series of decisions as relied upon the assessee, the Coordinate Benches of the Tribunal have taken a consistent view that mere signing against a particular column of the format is nothing but a mechanical approval without application of mind. Hence in view of the above facts and circumstances of the case, we hold that the reopening of the ass....
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....we do not find anything to the effect that the assessee had not disclosed fully and truly all material facts or that the assessee had not disclosed the fact that he was a developer. In fact the assessment for the assessment year 2010-11 was made on the basis that the respondent/assessee was a developer. If that was so, the impugned proceeding initiated on the premise that the assessee was a works contractor and not the developer is only a change of opinion and therefore does not fulfill the essential requirements of Sections 147/148 of the Act. As speaking through the Hon'ble Chief Justice, opined that the concept of 'change of opinion' must be treated as an inbuilt limitation on the power of the Assessing Officer; that 'mere change of opinion' on consideration of the very same material does not give any ground to invoke Section 147 of the Act. In order to reopen the concluded assessment, there must be tangible material to come to the conclusion that there is escapement of income from assessment. These are the tests, which have to be satisfied before issuance of notice under Section 147/148 of the Act. Having regard to the aforesaid observations and considering ....
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....d in the facts and circumstances of the case. It is obvious that the respondent alleges that the material facts are detected in scrutiny and survey proceedings under the relevant provisions of the I.T. Act. This Court must opine that the opening statement as extracted would satisfy the requirement of an allegation, and hence the petitioner cannot succeed on the ground that there is no allegation. As such, the petitioner is not granted any indulgence on the first ground. 213 216 5. CIT v. City Union Bank Ltd. (2019) 5 TMI 1206 (Madras High Court): Reopening of assessment u/s 147 - Income escaping assessment - disallowance made u/s 14A - HELD THAT:- In this case, there is no failure on the part of the assessee. On the other hand, there appears to be a failure on the part of the assessing officer to make an appropriate determination of the amount of expenditure in terms of Section 14A. In such a case, the remedy for the Revenue is elsewhere and not in assuming jurisdiction under Section 147 of the Act. That would amount to exercising the power of review which the statute has not conferred on the authority. This is particularly because the attempt to reopen is mad....
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....e audit objection. Petitioner is right that this very aspect concerning claim of deduction under Section 80-IC of the Act was examined in the scrutiny proceedings and it was only when the AO was satisfied that the assessment order dated 30.01.2014 was framed. The logical sequitur of this assessment order was that the petitioner obviously had truly and fairly disclosed all material facts. There is not a whisper in the reasons to believe which would point in the direction that the petitioner had failed to disclose truly and fairly all material facts. Since the reassessment proceedings were triggered after four years, the AO ought to have indicated as to what were those material facts which the petitioner had failed to disclose. Thus, the impugned proceedings are flawed on various grounds, i.e., borrowed satisfaction, reasons to believe not adverting to the failure on the part of the petitioner to disclose truly and fairly all material facts, and also the change of opinion. Thus, for the foregoing reasons, we are inclined to allow the writ petition. Consequently, the impugned notice and the order whereby, the petitioner's objections were rejected, are quashed. 239 243 ....
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....on India [2015 (1) TMI 831 - DELHI HIGH COURT] as the reasons herein also vaguely refer to the expression "on perusal of records", rather than disclosing the foundation of "reasons to believe". A plain reading of the aforesaid extract of the order of the CIT(A), which has sustained the reopening of assessment on the basis of revenue audit report, in juxtaposition with the reasons to believe would manifest that there is apparently no live link between the reasons recorded and the formation of belief to take action u/s 147 of the Act. Interestingly, while deleting the additions on merits, CIT(A) has upheld the action of reassessment by the Revenue on the ground that the factum of giving away of 75 vehicles to dealers for achieving sale targets under the guise of incentives was not disclosed in the original assessment proceedings. However, according to the CIT(A), the said fact came to the light only after the proceedings in this regard were initiated u/s 201/201 (1A) of the Act. Evidently, the proceedings u/s 201 of the Act, which have been the bedrock for reaching the conclusion that there was no full and true disclosure by the respondent-assessee, were initiated vide letter dated 0....
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....postulated that the expostulations of law, borne in a judgment rendered in case title as Carlton Overseas Pvt. Ltd. v. Income Tax Officer & Ors [2009 (8) TMI 57 - DELHI HIGH COURT] (ii) inasmuch as the reassessment of the completely assessed tax, upon, apposite tax returns, filed by the taxable unit, being valid, only upon, tangible material being made available to the revenue, and, also that hence an audit objection or an audit report issued by the revenue rather not constituting potent material - The afore expostulations of law borne in the judgment, for all the hereinabove reasons, is pointedly and squarely applicable to the factual matrix available here at, and, in consonance therewith, this Court proceeds to set aside the impugned Annexures, through its invoking the power of judicial review, invested under Article 226 of the Constitution. 258 273 Mechanical Sanction by the Sanctioning Authority invalidates the reassessment 11. PCIT v. Pioneer Town Planners Pvt. Ltd. (2024) 3 TMI 828 (Delhi High Court): Validity of reopening of assessment - Sanction for issue of notice u/s 151 - manner of recording the approval granted by the prescribed author....
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....le to tax had escaped assessment for any assessment year, the income tax officer could reopen an assessment. But with effect from 01.04.1989, the requirement of law underwent a change. Section 147 as it stood at the relevant point of time provides that if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or re-assess such income and such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings u/s 147. Section 148 says that before making an assessment, re-assessment etc. under Section 147, the assessing officer is required to issue and serve a notice on the assessee calling upon the assessee to file a return of his income in the prescribed form etc., setting forth such particulars as may be called upon. Such a notice is subject to the time limit prescribed u/s 149. Under sub-Section (1)(b), no notice under Section 148 shall be issued in a case where an assessment under sub-section (3) of Section 143 or Section 147 has been made for such assessment year if seven years but not more than 10 years have elapsed from the end of the re....
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....position, the assessing officer could not have placed reliance on such balance sheet submitted by the assessee allegedly for the assessment year 1989-90 to the South Indian Bank for obtaining credit. Dehors such balance sheet, there were no other material in the possession of the assessing officer to come to the conclusion that income of the assessee for the three assessment years had escaped assessment. Once the primary facts are disclosed by the assessee, the burden shifts onto the assessing officer. It is not the case of the revenue that the assessee had made a false declaration. On the basis of the "balance sheet" submitted by the assessee before the South Indian Bank for obtaining credit which was discarded by the CIT(A) in an earlier appellate proceeding of the assessee itself, the assessing officer upon a comparison of the same with a subsequent balance sheet of the assessee for the assessment year 1993-94 which was filed by the assessee and was on record, erroneously concluded that there was escapement of income and initiated reassessment proceedings. Change of opinion - While framing the initial assessment orders of the assessee for the three assessment years in ques....
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....e Department, then, in the garb of re-opening the assessment, review would take place to reopen an assessment tangible material should be there. - Decided in favour of assessee. 295 301 3. PCIT v. Onkareshwar Properties Pvt. Ltd. 2016 (5) TMI 1484 (Delhi High Court): Correct head of income - sale of land - business income or capital gain - Held that:- A small portion of the land was sold and the loss therefrom was declared as a capital loss and was not set off against any other income. The ITAT held that a mere fact that a development agreement was entered into by the Assessee with Vatika Ltd. would not change the nature and character of the land since in terms of the agreement it was the developer who would undertake the work of development upon being paid a fee by the Assessee. It was also observed that although the main object of the Assessee may be to carry on the business of real estate, that would not prevent the Assessee from holding the land in question as a capital asset. Therefore the income generated through the sale of land would be chargeable to tax under the head capital gains and not as business income. - No substantial question of law. 302 ....
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....rs. 2 Temple of Thakurji 22. In view of the above, I reach the following unescapable conclusions: I. The petitioner-temple was shown as Khatedar of the land in dispute and the Khatedari rights accrued in favour of Sri Mangha Ram Pujari would not be legal because of the application of the provisions of Section 46 of the 1955 Act. II. The provisions of Section 46 of the 1955 Act are based on public policy and have been enacted to secure a laudable object. The provisions of any other act cannot override the special protection accorded to the class of persons mentioned therein. Thus, the protection/ exemption granted to deity a perpetual minor/ permanently disabled/infirm person cannot be taken away by the provisions of any other Act. III. It is the solemn duty of and legal obligation on the State Administrative Authorities and Courts to protect the interest of minor, disabled person and the deity being perpetual minor, physically disabled and infirm, is entitled to special protection of law. IV. The entry recorded in favour of Mangha Ram Pujari as Khatedar, was an outcome of fraud played by him on the statute as well as on petitioner-deity and thus, has to be trea....
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....ase where the ld. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars. 3 Jai Jai Ram Manohar lal Power to grant amendment of the pleadings - Held that:- Appeal allowed. The power to grant amendment of the pleadings is intended to serve the ends of justice and is not governed by any such narrow or technical limitations. Since the name in which the action was instituted was merely a misdescription of the original plaintiff, no question of limitation arises the plaint must be deemed on amendment to have been instituted in the name of the real plaintiff, on the date on which it was originally instituted the order passed by the Trial Court in granting the amendment was clearly right. The order passed by the High Court cannot be sustained. Rules of procedure are intended to, be a handmaid to the administration of justice. A party cannot be refused just relief merely because of some mistake, negligence, inadvertence or even infraction of the rules of procedure. The Court always gives leave to amend the pleading of a party, unless it is satisfied that the party applyi....
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....ersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note-making, file- pushing, and passing-on-the-buck ethos, delay on its part is less difficult to understand though more difficult to approve. In any event, the State which represents the collective cause of the community, does not deserve a litigant non grata status. The courts, therefore, have to be informed of the spirit and philosophy of the provision in the course of the interpretation of the expression "sufficient cause". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even-handed justice on merits in preference to the approach which scuttles a decision on merits. * The Hon'ble Court was dealing with the terminology 'sufficient cause' * In such cases, justice on merits should be decided rather than technicalities * Hence, not applicable in the instant case where the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all mat....
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....n be seen from the assessment order/assessment record. * In the instant case assessment record reveals that due disclosure with regards to the transactions were made by the assessee appellant. * On the contrary the judgment is in favour of the assessee's contention. 7 Consolidated photo & Finvest Ltd. In view of these facts, I have reason to believe that expenses of Rs. 16,55,50,292 require disallowance and the same has escaped the assessment in terms of clause (c) of Explanation 2 to section 147 of the Income-tax Act, the assessee has failed to disclose fully and truly all material facts necessary for assessment." By its letters dated April 25, 2005 and September 15, 2005, the petitioner objected to the initiation of reassessment proceedings, inter alia, on the ground that the reopening of the assessment was bad in law inasmuch as the proposed reassessment was based on a mere change of opinion. Respondent No. 1 rejected the said objection in terms of an order dated October 21, 2005, in which the respondent observed that the reassessment had become necessary as the assessee had failed to disclose fully and truly all the material facts necessary for the assessm....
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....ounting to Rs. 98.46 lakhs on account of the amount not offered for tax under section 41 of the Income-tax Act, 1961. Further, the assessee has reduced the gross dividend income from its income for computing the taxable income instead of reducing the net dividend income after accounting for the expenses related to earning the dividend income and, therefore, the income of the assessee is also underassessed on this account. The above income has escaped taxation by reasons of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 2000- 01. It is therefore, proposed to reopen the assessment by issue of notice under section 148 after seeking necessary sanction." 10. Thus, the petitioner has accepted and admitted that he had not given details with regard to proportionate expenses relatable to tax-free or exempt income, which were claimed as a deduction under the cumulative head "expenditure". It is pleaded and stated that the petitioner was not required to disclose the said fact as when they had filed the return, section 14A was not in the statute book. Sequitur there was no omission and failure on th....
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....in the assessment proceedings and there was no omission or failure on the part of the petitioner * Hence, not applicable in the instant case where the ld. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 10 Shri Pravinchandra R Patel 3. The first issue raised by the assessee is that learned CIT(A) erred in holding the reopening under section 147 of the Act as valid. 4. At the outset, the learned AR for the assessee at the time of hearing submitted that he has been instructed by the appellant not to press this ground of appeal. Hence, the ground of appeal raised by the assessee is dismissed being not pressed. * Not relevant since, the legal issue was not pressed by the A/R 11 Kanubhai M Patel (HUF) Reopening - Validity of notice - That section 149 of the Act speaks of time limit for issue of notice and categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed - It is submitted that in the facts of the present case, it is apparent that the notices have been dispatched by registered post....
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....re left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs. * Matter was not decided on the ground of alternate remedy * No opinion expressed on assessee's submission qua suppression of material facts by the assessee * Hence, not relevant in the instant case * The Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 13 Saif II Mauritius Company Ltd. Reopening notice within four years - eligibility of reason to believe - HELD THAT:- Section 148 notices have been issued within four years from the end of the relevant Assessment Years. Also no scrutiny assessment has been taken place in the present cases. Consequently, the test to be applied for re-assessment in the present cases is whether there is 'reason to believe' that income chargeable to tax has escaped assessment. * Reassessment initiated within 4 years * No scrutiny assessment had taken place * 1st Proviso to secti....
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....be filed on behalf of the said firm before respondent No. 2 at Mumbai who has the jurisdiction in the matter. There cannot be any reason to accept the contention that the Assessing Officer of the petitioners shall have the jurisdiction. Therefore, it cannot be said that any integral part of the cause of action has arisen within the jurisdiction of this High Court. * The Hon'ble Court was dealing with challenge by the Assessee primarily to the jurisdiction of the Assessing Officer. * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 16 Akshat Pramodkumar Chaudhary 3.1 The assessee received income from business and profession and interest income for the year 2012-13. The assessee also received proceeds from sale from share of Twenty First Century (I) Limited. The assessee filed its return of income for the assessment year 2012-13, by declaring gross total income at Rs. 16,56,922/-. 3.2 On 26.03.2....
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.... be said that there is a there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing. AO could be said to have applied his mind to the same. AO could not be said to have merely concluded without verifying the facts that it is the case of reopening of the assessment. We have examined the belief of the AO to a limited extent to look into whether there was sufficient material available on record for the Assessing Officer to form a reasonable belief and whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. Writ application dismissed. Reasons 4. The reasons assigned by the Assessing Officer for the purpose of reopening are as under; "Brief details of the Assessee. The assessee com....
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....ntaining the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s.147 of the Act. * Reassessment initiated after 4 years after material gathered during survey at third person * The survey material was not before the Assessing Officer * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 18 Amit Polyprints P. Ltd. Reopening of assessment information received from Investigation Wing of Kolkata making reference of shell companies which had given accommodation entries for share premium as as....
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....re-opened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assessee's concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to entire original assessment, of course at the hands of the revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that ....
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.... Delhi High Court Affirmed by Supreme Court: 1. Present writ petition, being W.P. (C) 15828 of 2022, has been filed by Mr. Ajay Gupta, who is the Karta of the Petitioner's Hindu Undivided Family ('HUF'), seeking quashing of the order dated 18th July, 2022 passed under Section 148A(d) ('impugned order') of the Income Tax Act, 1961 (the Act') and the notice dated 18th July, 2022 passed under Section 148 (impugned notice) of the Act, by the Income Tax Officer, Ward 54(1), Delhi, for the Assessment Year ('AY") 2016-17. 2. The brief facts giving rise to the present case are that the Petitioner Assessee was served with a Show Cause Notice ('SCN') dated 23rd May, 2022 under Section 148A(b) of the Act by the Assessing Officer ('AO') wherein it was stated that a search was conducted by the Investigation Wing, Rohtak on Tradenext Securities Ltd. (Earlier known as Lifeline Securities Limited) and the said entity is involved in providing accommodation entries through the modus operandi set out in the notice. It was stated that the said Tradenext Securities Ltd. ('Tradenext Securities') operates several dummy demat accounts to provide....
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....sessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 22 Expeerion Developers Pvt. Ltd. Validity of reopening of assessment - funds received by the assessee from a foreign entity information has been received from DIT (Intell. & Cr. Inv.) valid "reasons to believe" - Assessment after merger of company - scope of section 170 - No separate notice issued for the amalgamated company - HELD THAT:- In the present case, new facts, material or information have come to the knowledge of the Assessing Officer by way of the report of DIT (Intelligence and Criminal Investigation) with regards to the doubtful source of the investments made into the petitioner companies. At the time of original assessment, the AO was not aware of or in possession of information which could have indicated that the introduction of share capital from outside India has been routed through a doubtful entity. DIT (I&CI) Delhi had also made detailed enquiries regarding origin of funds which were used for introduction of share capital and premium. This information was received much later after the original assessment had been completed, and is germane and relevant to the subjective ....
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....posed to be initiated in the case of Experion Developers Private Limited, for funds received by it as an independent entity as well as the successor in interest of amalgamated company Experion Developers International Private Limited, which in AY 2012-13 was a separate entity. * Reassessment initiated after 4 years * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * The disclosure made by the assessee was subsequently found to be untrue. * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars * There is no allegation that the disclosure made by the assessee was untrue 23 Jayant Securities & Finance Ltd. The reasons recorded show that the Assessing Officer had received information from the Investigating Wing in connection with advances of Rs. 10.25 Crores [rounded off] received by the assessee from M/s. East West Finvest India Limited during the FY 2009-10 which is relevant to AY 2010-11. M/s. East West Finvest India Limited works as an entry operat....
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....d assessment, for which your case for A.Y 2010-11 has been reopened under Section 147 of the Income-tax Act." * Reassessment initiated after 4 years * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * The disclosure made by the assessee was subsequently found to be untrue. * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars * There is no allegation that the disclosure made by the assessee was untrue 24 Ms. Rainee Singh This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC)). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the ....
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.... to issue a notice under section 148 of the Act. Moreover, the stand taken by the assessee that capital gain arising from sale of shares were disclosed under the Voluntary Disclosure of Income Scheme is sufficient to hold that capital gain was not disclosed in the regular return filed by the assessee and thus the question of forming any opinion on that matter for the Assessing Officer did or could not otherwise arise. We, therefore, reject this contention of the assessee. * No scrutiny assessment had taken place * 1st Proviso to section 147 does not apply if reassessment was initiated within 4 years or if the case was not covered u/s. 143(3) * Hence, not relevant in the instant case since, reassessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 25 Panchugurumurty This is a case where, as noticed earlier, against the perfunctory order passed assessing the petitioner on his own return filed under section 143 of the Act, the authorities have initiated action for reassessment. The petitioner also apparently to keep the authorities bill (sic) have waited for nearly three years before making the claim for return. The materials furnished i....
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....al, bogus billing entries pertaining and bogus long term capital gains to various beneficiaries across the country and it has been revealed in the said information that this very assessee i.e. present petitioner is also a beneficiary of such entry operation of Kayans to the extent of Rs. 127.94 lacs (accommodating co. Agnes Bruno Ltd.) pertaining to A.Y.2008-09 and based upon this material, the authority has issued notice under Section 148 of the Act for reopening of assessment as from the material, the authority found that there is a reasonable belief that income of the petitioner assessee has escaped assessment and therefore, it is justified to reopen the assessment. It is also emerging from the order passed by the authority rejecting the objections submitted by the petitioner dated 21.1.2016 that each and every material submitted by the petitioner has been extensively dealt with and a detailed order came to be passed and the said order is supported by cogent reasons, the decision arrived at to reopen the assessment appears to be just and proper. From the material available, the authority prima facie found that petitioner assessee is also the beneficiary of those Kayans bro....
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....ma Komalkant Sharma 8. Thus, from the reasons recorded, it emerges that the material, which formed the basis for the formation of belief that income chargeable to tax has escaped assessment is the evidence found during the course of search in the case of SCS and the appraisal report. The search had been conducted in the case of Barter Group and Shri Pradip Birewar. Search had also been conducted in case of the main beneficiaries of accommodation entries, one being SCS [Shirish Chandrakant Shah]. The material on record shows that Shri Pradip Birewar had paid Rs. 70 crores in cash to SCS. Such cash payment was made to arrange LTCG/Loss entries in the scrip of (i) Shri Ganesh Spinners Ltd. and (ii) Praneta Industries Ltd. The modus operandi is discussed in detail in the appraisal report. The material on record shows that bogus LTCG entries were made to the beneficiaries to whom shares were allotted through private placement of convertible shares recorded as "PHY" in the "pradeep abad sheet". "PHY" refers to the transactions where shares of SGSL (Shri Ganesh Spinners Ltd.) have been acquired by the beneficiary clients in physical certificate form. That in this case, the shares are n....
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....ssessing Officer from the investigation wing * 1st Proviso to section 147 does not apply if reassessment was initiated within 4 years or if the case was not covered u/s. 143(3) * Hence, not relevant in the instant case since, reassessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 29 Tarasafe International Pvt. Ltd. 6.2. Brief facts of the case are that the assessee has filed its return of income on 26.09.2011 declaring total income of Rs. 1,21,426/-. This return of the assessee was processed under section 143(1). The assessment was reopened by issuance of a notice under section 148 of the Income Tax Act on 05.11.2015, which was duly served upon the assessee. The Id. Assessing Officer has issued the notice on the ground that an information was received from the Director (Investigation), Kolkata vide letter No. 75/2015 dated 05.10.2015, in which it has been pointed out that assessee is a beneficiary of bogus donation. The Id. Assessing Officer found that assessee has given a donation of Rs. 3,00,000/- to M/s. Horticulture Harbal Healthcare Bio-Harbal Research Foundation (in short 'HHBRF') and it claimed weighted deduction of Rs.....
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....r Section 143(1) of the Act and no scrutiny assessment was made under Section 143 (3) of the Act. 3. The Assessing Officer, reopened the assessment under Section 147 of the Act by issuing impugned notice dated 28.03.2019 under Section 148 of the Act. The writ applicant filed his return of income in response to the notice and requested the respondent to supply the copy of the reasons for reopening and same was supplied vide communication dated 25.04.2019. The writ applicant vide letter dated 25.06.2019 raised objections and the same came to be disposed of by the revenue vide order dated 14.11.2019. 8. Applicability of the provision of section 147/151 to the fats of the case: In this case, return of income was filed for the year under consideration but all the material facts have not been disclosed, accordingly, in this case, the only requirement to intimate proceedings u/s. 147 is reason to believe which has been recorded above in paras 6 & 7. It is pertinent to mention here that in this case the assessee has chosen not to disclose all material facts truly and fully during her assessment for the year under consideration. In view of the above, the provisions of clause (a) of Ex....
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....eration received on sale of such shares by way of entering into dubious transactions in penny stock scrip. In view of the facts discussed above, I have reason to believe that income of Rs. 3540000/- chargeable to tax has escaped assessment, within the meaning of section 147 of the I.T. Act, 1961 for A. Y. 2012-13 by reason of failure on the part of the assessee to disclose fully and truly all material facts relevant to the assessment. * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 33 34 Sameer Gulabchand Shah HUF 2. The writ applicant being individual assessee, filed return of income on 14.10.2013, declaring total income of Rs. 14,000/-. The assessee sold 20,000/-. shares of Tuni Textiles Limited and earned long term capital gain of 40,37,009/- and claimed it as 'exempt income' under Section 10(38) of the Act. The return was processed under Section 143(1) of the Act and no scrutiny assess....
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.... dated 26.04.2019. The writ applicant vide letter dated 25.03.2019, raised objections and same came to be disposed of by the revenue vide order dated 11.10.2019. * No scrutiny assessment had taken place * 1st Proviso to section 147 does not apply if reassessment was initiated within 4 years or if the case was not covered u/s. 143(3) * Hence, not relevant in the instant case since, reassessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 37 Zaveri & Company 7. At the outset, it may be noted that as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment under section 147 of the said Act after the expiry of four years from the end of the relevant assessment year firstly, that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment for the concerned assessment year, and secondly, such escapement of assessment was by reason of failure on the part of the assessee to make the return under section 139, or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose....
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....that the respondent could not have reopened the assessment of the petitioner under section 147/148 of the said Act after the scrutiny assessment having been undertaken by the Assessing Officer under section 143(3) of the said Act for the A.Y. 2012-13. The Assessing Officer having arrived at his subjective satisfaction based on additional fresh material placed before him that the petitioner had not fully and truly disclosed all the material facts necessary for his assessment for the relevant assessment year and prima facie his income chargeable to tax had escaped assessment, he was fully justified in initiating the proceedings under section 147/148 of the said Act. * Reassessment initiated on the basis of evidence gathered during the course of search at a third persons premises * The search material was not before the Assessing Officer * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 37 Alapati *....
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....y the transfer of furniture valued at Rs. 18,805 is assessable." 38 Honda Siel SC In our view, the re-opening of assessment is fully justified on the facts and circumstances of the case. However, on the merits of the case, it would be open to the assessee to raise all contentions with regard to the amount of Rs.98.46 lakhs being offered for tax as well as it's contention on Section 14A of the Income Tax Act, 1961. * Supreme Court order in respect of Item No. 9 39 Larsen & Toubro 16) In the instant case, an audit team of the Auditor General, audited assessment order dated 24.01.1996 and found that the dealer was allowed an exemption of Rs. 3,12,47,916/- being the amount for goods consumed by the appellant-Company during the course of execution of works contract. It is the claim of the appellant- Company that those goods were purchased on payment of tax but no declaration in Form IX-C along with other evidence was submitted. The same fact was brought to the notice of the assessing authority which in furtherance thereof issued a show cause notice to the appellant-Company. The production of Form IX-C was held to be mandatory and the claim of the appel....
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....ction is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated. * Audit Information was from CAG * The language used u/s. 19 of Jharkhand VAT is different from Income Tax Act * Hon'ble Court has emphasized upon the terminology 'Information' which would include information from Audit Wing, the said terminology is not there under the Income Tax Act. * The Hon'ble Court has observed: We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute 'information' for the purposes of the State Act. 40 Distributors (India) 26. The reasons recorded by the A.O. for initiating the process of re-assessment state that on examination of the documents on record and 26 AS, it was noticed that the petitioner has received payments under Section 194 J also, but it has not shown the said receipts in his P&L ac....
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....here is suppression of material facts by the assessee or not as the sufficiency or correctness of the material cannot a thing to be considered at this stage. In the instant case, the notice under Section 148 of the Act has been issued by the assessing officer after conducting an investigation and going through the income tax return and other related documents of the petitioner and after forming reason to believe that the petitioner did not truly and fully disclose all the material facts, because of which income amounting to Rs. 1,07,24,386/- has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148. The order dated 23-03-2022 passed by the National Faceless Assessment Centre rejecting the petitioner's objections against issuance of the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction, * Receipts were not reflected in P&L A/c. * Reimbursement details were not submitted by the assessee * Assessee had not produced any ledger, bills and vouchers of expenses in....
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....to modify the terms with relation to security deposit by way of deed for modification dated 15.05.2004 by which it was decided that the assessee were to receive a total sum of Rs. 1.68 crores as interest free refundable security deposit instead of earlier agreed Rs. 2.50 crores as interest free refundable security deposit and Rs. 2.00 crores as non-refundable security deposit. Between Financial Year 2001-02 and FY 2007-08, the developer demolished the Cinema Hall and constructed a commercial complex thereon. During the financial year 2007-2008, i.e., assessment year 2008-2009 the commercial complex was completed, and assessee's share was handed over to it on 14.04.2007. The assessee got the cost of shops & offices valued from registered valuer who valued it at Rs. 18,49,76,342/- and the same was shown under the head Investment in the Balance Sheet. The Gain earned on revaluation has been shown under the head Capital Reserve in the Balance Sheet. The indexed gain arrived at the time of receipt of constructed complex was shown as Long Term Capital Gains. Subsequent sale of shops and gain earned on the same was shown as Short Term Capital Gains. 20. The return of income was selecte....
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....greement with M/s Golcha Buildtech Pvt Ltd (developer) for construction of commercial complex. Between FY 2001-02 and FY 2007-08, the developer demolished the Cinema Hall and constructed a commercial complex (over the land earlier held as Cinema Hall) and in May, 2007 it transferred 50% share of the constructed portion of the commercial building named Golcha Business Centre (GTC) to the assessee company in lieu of halt portion of land (on which the Cinema Hall existed earlier). As per Development Agreement, all the expenses regarding approvals from competent authorities etc were to be borne by the developer from the time of signing of agreement upto handing over of assessee's portion of commercial complex. If the assessee company had sold the entire land of cinema hall as such, then the assessee company could be said to have earned income from capital gain. In the present case, it got the land use changed from 'cinema hall' to 'commercial' with a deliberate intent to enjoy the benefits of the said land through construction and subsequent sale of shops and showrooms thereon. Clause 2 of the Development Agreement dated 12 December, 2001 states as follows: ....
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....erved that the assessee had sold a shop no. GF 8A and had shown short term capital gain of Rs. 10, 12,630/-. The assessee company had been handed over the constructed commercial complex including the aforesaid shop by M/s Golcha Buildtech Pvt. Ltd. (developer). It did not make any expenditure on its own because as per development agreement whole expenditure to develop the building was to be incurred by the developer company. Thus, purchase price of the shop for the assessee company was Nil. Further, since the said property is a commercial complex, profit arising out of sale of shops situated in the complex should have been declared as business income rather than Short Term Capital Gain. Hence, the business income that would arises from selling the shop will be Rs. 36,25,870/- not Rs. 10, 12.630/- as shown by the assessee, and this income would be treated as business income and not income from short term capital gain as claimed by the assessee. Hence, I have reason to believe that income of Rs. 16,48,06,855/- +Rs.36.25.870/- Rs. 16,84,32,725/- has escaped assessment. Thus It is a fit case for issue of notice u/s 148 of the Act." 24. Based on the reasons so recorded the l....
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.... whatsoever that there was any failure on the part of the assessee that it had failed to disclose fully and truly all material facts necessary for its assessment. As is decided in various judicial precedent cited wherein it has been decided that in absence of that allegations it would make entire reassessment proceedings as bad in law and is a change of opinion. There must be some finality in the legal proceeding and change of the opinion on the same material the re-opening of the assessment is not permitted. He further stated that even if the said allegation was recorded, then too, the Assessing Officer would have to demonstrate as to what was a failure on the part of the assessee. He further submitted that the reason that no such allegation was recorded by the Assessing Officer was that all material particulars and documents were indeed submitted by the assessee. He further submitted that it is settled law that the reasons are required to be read as they are recorded by the Assessing Officer and that no substitution or deletion is permissible thereto; no addition can be made to those reasons and no inference can be allowed to be drawn based on these reasons which is not recorded.....
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....ed by the predecessor. Ld. AR heavily argued that reassessment cannot be initiated based on information received from Audit wing. The information received from Audit Wing has been given statutory recognition for the first time by Finance Act, 2021 and he placed reliance on Explanation 1(ii) to section 148 in this regard. The ld. AR has submitted written submission as well has relied upon several case laws in support which are referred to hereinabove. The ld. AR has also controverted & distinguished the case law relied upon by the ld. DR and submitted that the same are inapplicable in the instant case. 26. When was a query paused to the parties that whether the assessee had in past ever shown the impugned asset as stock in trade? In response the ld. AR denied that it is since beginning capital assets of the assessee. Ld. DR did not controvert this fact. Secondly the assessee was questioned whether the demolition of Cinema Building was undertaken by the Developer or by the assessee. Ld. AR submitted that the same was done by the developer & not by the assessee. Ld. DR did not controvert this fact also but stated that demolition of cinema hall by the assessee or by the developer is....
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....ions of the assessee were accepted or as to what all he considered during the course of assessment proceedings in the assessment order, does not mean that no opinion was formed by him, more particularly when the relevant documents and information was duly disclosed by the assessee, (iv) as per 1st proviso to section 147, after lapse of 4 years and where scrutiny assessment has already been resorted to, in absence of any allegation that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the limitation for reassessment proceedings would be restricted to 4 years and benefit of 6 years which is ordinarily available to initiate reassessment proceedings as per section 149(1)(b) would not be available to the ld. Assessing Officer, (v) non-allegation by the Assessing Officer of any failure on the part of assessee to disclose fully & truly all material facts is a 'jurisdictional fact' and in absence of same, entire reassessment proceeding would be vitiated, (vi) reasons are required to be read as they are recorded by the Assessing Officer and that no substitution or deletion is permissible ther....
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....who has after detailed deliberations of the contentions has given his finding based on the provision of section 147 of the Act, persuaded the reasons recorded and various clauses of development agreement entered by the assessee with the developer way back in 2001 and assessment order passed in the first round. After ascertaining all factum he considered the judicial precedent based on the facts and thereby ordered to quash the reassessment proceeding as bad because review of the order on the same set of fact is not permitted. To drive home to his contention, he has relied upon various decisions including that of our jurisdictional high court in the case of CIT vs. Hindustan Zinc Ltd. [2016] 70 taxmann.com 262 (Rajasthan), it has been held by our Hon'ble jurisdictional High Court of Rajasthan that: 12. In the backdrop of the settled position of law noticed hereinabove adverting to the facts of the present case, it is to be noticed that the assessee had made true and full disclosure of all relevant facts relating to the claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA. A separate audit report in the prescribed form 10CC....
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....essee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. It was the contention of the appellant that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment. Even though he called the remand report in the interest of the justice wherein the ld. AO reported that: "In this regard, the A/R has completely misunderstood the concept of "disclosing truly and fully relevant particulars of income in the Return of Income". As such, the assessee only disclosed LTCG on land and STCG on sale of shops in his return of income but as per accounting standards and provisions of Income Tax Act, the act of converting capital asset into stock in trade clearly instruct to show business income and LTCG in the Return of Income which was actually not reflected by assessee at all." As the explanation of the ld. AO was not sufficient ld. CIT(A) again given him an opportunity vide letter dated 21.12.2017 to submit its comments on the contention of the assessee wherein he has just relied upon the reasons recorded for opening the case but chose not to comment on the contention of the assessee tha....
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....m of the case ld. CIT(A) hold a view that the initiation of proceedings u/s. 147 of the Act was not in conformity with the provision of section 147 of the Act, after 4 years when the assessment in the first round was completed as per provisions of section 143(3) of the Act. Thus, we do not find any infirmity in the finding so recorded by the ld. CIT(A). As regards the judicial precedent cited by the rival parties, we are not referring to all the judgments but after considering those which were consider relevant to decide the issue have been discussed. The decision discussed has direct bearing based on the facts of the case of the assessee. All the decision relied upon by the ld. DR were distinguished by ld. AR and has filed his comments on each of the decision. We have also gone through the said comments and have also gone through the judgments and orders and found that they are distinguishable on facts and in law and they do not help the cause of the revenue in the instant case supporting the re-opening of the case of the assessee. Accordingly the Ground No. 1, 2, 4, 5, & 6 raised by the Revenue is devoid of any merits and we do not see any infirmity in the detailed finding of the....
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.... principle of tax jurisprudence that the Assessing Officer cannot decide what is to could have been done by the assessee and is evident from the facts on record that the intention of assessee is not the necessary criteria for invoking section 45(2) of the Act corroborate the intention along with the passing off necessary entries in books of accounts which is absent. Even on the aspect of the charging the capital assets or business assets the CBDT vide circular dated also at the help of the assessee and directed the revenue officers vide circular no. 4/2007, issued by the Central Board of Direct Taxes (CBDT) on June 15, 2007, provides guidelines to distinguish between shares held as stock-in-trade and shares held as investments. This distinction is crucial because it affects how the income from the sale of these shares is taxed. Shares held as stock-in-trade are considered business income, while shares held as investments are treated as capital gain. The Calcutta high court in the case of Gyan Traders Ltd. Vs. CIT [ 143 taxmann.com 42 (Calcutta) ] while referring to the circular held that ; 9. As pointed out above, the second principle is a guide for determining the natu....
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....9;s claim of capital gains on sale of shares held as investment was to be allowed. To further support even the object clause of the assessee has been referred to by the ld. CIT(A) in detailed while supporting his view on the issue on merits as to whether the assessee has converted his capital assets into stock in trade or not. The terms of the development agreement entered into by and between the assessee and developer has been referred by the ld. CIT(A) in detail. The assessee was not in the business of real estate, nor did it have any object clause for carrying out business of real estate. Entire responsibility of construction, demolition of existing structure, approval of maps, etc., was of the Developer and the assessee had simply handed over the Land owned by it for the purpose of construction of commercial complex. There is no positive act which indicates that the assessee has treated capital asset as stock-in-trade. As discussed herein above if that version of the revenue is accepted then no one would be in a position to enter into Development Agreement, since it would amount to carrying on the business, which otherwise it is not permitted to do so to the even based on....
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.... no. 407/JP/2018. In this appeal the revenue has taken effective two grounds as reiterated here in below : "(i) Whether on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition made by the AO without appreciating that the assessee made transfer as per section 2(47) of the Act while making treatment of its capital asset i.e. land of Cinema Hall into stock in trade of the business for selling of shops u/s 45(2) of the Act?" (ii) Whether on the facts and in the circumstance of the case and in law the Ld. CIT(A) has erred in deleting the additions of Rs. 2,06,71,225/- on account of business income and Rs. 66,76,744/- on account of LTCG without deciding it on merit?" 36. Ground no. (i) raised by the Revenue is similar as to the Ground No. (iii) as raised by the Revenue in A.Y. 2008-2009. In light of our detailed findings given in A.Y. 2008-2009 in Ground No. (iii) we do not see any infirmity in the findings of the ld. CIT(A) whereby he had held that provisions of section 45(2) are not applicable, and which have been upheld by us in A. Y. 2008-09 and that finding shall apply mutatis mutandis and accordingly the Gr....