TaxTMI 
TaxTMI 
2025 (6) TMI 1205
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....47 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and not permissible either in law or on fact. The present proceedings, therefore, are required to be quashed being bad in law. 2. That the Hon'ble CIT (Appeals) has erred in fact and in law in confirming the action of the Ld. AO in invoking section 45(2) r.w.s. 2(47) and thereby making addition of Rs. 9,40,27,625/- (8,97,16,439 + 43,11,186) without considering various facts & legal aspects. 3. That the Hon'ble CIT (Appeals) has erred in law and on fact in confirming the addition made by the Ld AO of Rs. 1,62,05,500/- u/s. 69 of the IT Act without considering the fact that through inadvertence advance payment made towards purchase of land having R.S. No. 69 & 72 at Khanpur land was wrongly debited to Investment in Agriculture land during F.Y: 2010-11 which were rectified in subsequent year. 4. That the Hon'ble CIT (Appeals) has erred in law and on fact in confirming the addition made by Ld. AO Rs. 7,05,466/-U/s. 14A r.w.r. 8D of the IT Act. 5. That the Hon'ble CIT (appeals) and learned AO erred in fact and in law in chargin....
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....e, as recorded by the Assessing Officer, are as under:- "ANNEXURE Reasons for reopening of the assessment in case of Shri Navin N. Patel, Vadodara for the AY.2012-13 U/s 147 of the Act. 1. Brief Details of the Assessee: The assessee, an individual is engaged in trading business of land for project developments and in shares & investments activity. The return of income for the asst. year under consideration was filed on 30.09.2012 declaring total income at Rs. 1,71,47,960/-. 2. Brief details of information collected/received by the AO: (i) The. assessee had purchased agriculture land block bearing consolidated R.S. No. 57, 41, 83, 91,36, 72 and 73 at Ankodia, Vadodara admeasuring to 1,14,829 square meter (12,36,919 square feet) at a total cost of Rs. 7,77,23,910/- jointly With Shri Krupesh N. Patel (PAN: ADHPP6422B) during financial years 2007-98 and 2008-09. Out of the above, the assessee's share works out to Rs. 3,88,61,955/- (Rs. 7,77,23,910/-). (ii) Investment of agricultural, land valuing at Rs. 3,19,76,667/- was shown in the balance sheet for the asst, year 2012-13 whereas investment of agricultural land valuing Rs. 1,73....
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.... As per para no. 2 5. Findings of the AO: (1) The assessee had purchased agriculture land block bearing consolidated R.S. No. 57, 41, 83, 91,36, 72 and 73 at Ankhodia, Vadodara admeasuring to 114829 square meter (12,36,019 square feet) at a total cost of Rs. 7,77,23,910/- jointly with Shri Krupesh N. Patel (PAN: ADHPP6422B) during financial years 2007-08 and 2008-09. The assessee is having 50% shares in these pieces of Ankhodia land. The said pieces of land were converted into non-agricultural land on 29.11.2008. The assesses had shown this land in his balance sheet under tire head fixed assets/ investments upto 31.03.2009. Both the owners of the aforesaid land, the assessee alongwith Shri Krupesh N. Patel, inked development agreement with Neptune Reality Private Limited (NRPL) on 03.02.2010. A supplementary agreement was done on 20.02.2010 with respect to the development agreement made on 03.02.2010 in which Neptune Reality Private Limited was authorized to develop the said land and construct one or more units. In consideration, the NRPL agreed to pay to the owners a sum of Rs. 210 per square feet at the time of sale of the units. The assessee has transferred....
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....t to the asst, tear 2012 has earned exempted income of Rs. 19,88,178/- in the form of dividend u/s 10(34) of the Act. On further verification, it was seen that the assessee had not made any disallowance u/s 14A of the Act as prescribed in Rule 8D of the Income-tax Rules, 1962. As per the provisions of section 14A of the Income-tax Act, 1961, no deduction shall be allowed in respect of expenditure incurred by the assessee in respect of income which does not form part of the total income. The method of computing the expenditure relating to exempted income has been prescribed under Rule 8D. Taking into consideration the average value of investments, average total assets in balance sheet, expenditure by way of interest, disallowance u/s 14A of the Act r.w.r 8D amounting to Rs. 706466/- is to be disallowed. 6. Basis of forming reason to believe and details of escapement of income: (i) According to section 2(47)(iv) of the Act, if capital asset is converted into stock-in- trade or treated as stock-in-trade by the owner, such conversion or treatment shall be regarded as transfer. Further, as per sec. 45(2) of the Act, the profits or gains arising from such transfer shall....
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....e from capital gain (the amount is not earned by way sale of land). Therefore, I have a reason to believe that an amount of Rs. 43,11,1816/- has escaped assessment under the head capital gain. (ii) Scrutiny of records, it was noticed from the assets of the balance sheet for AY 2012- 13 that there was an agricultural land amounting to Rs. 1,73,25,167 (including land purchased during the year R.S. no. 665/P/1 for Rs. 15,54,000) under the head investment. However, the balance sheet of the previous year's i.e. A.Y. 2011-12, the investment in agricultural land were valued at Rs. 3,19,76,667. Thus, the assessee has understated the value of agriculture land to the extent of Rs.1,62,05,500/- Which attracts the provisions, of section 69B of the Act. (iii) The assessee during the financial year 2011-12 relevant to the asst. year 2012-13 has earned exempted income of Rs. 19,88,178/- in the form of dividend u/s 10(34) of the Act. On further verification, it was seen that the assessee had not made any disallowance u/s 14A of the Act as prescribed in Rule 8D of the Income-tax Rules, 1962. As per the provisions of section 14A of the Income-tax Act, 1961, no deduction shall be al....
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....fered Rs. 210 per square feet out of the above short term capital gain of Rs. 355.17 square feet as his business income and brought to tax. In view of the above, the actual implication works out to Rs. 1794.33 lakh (difference amount of Rs. 145.17 per square feet was required to be levied on 12,36,019 square feet). The proportionate under assessment of income in the hands of the assessee works out to Rs. 897.16 lakh (Rs. 1794.32 lakh /2) on potential basis. Taking into consideration the assessment year-wise summary of proportionate stock (@ 50%) sale of land and chargeability of short term capital in the hands of the assessee, tire actual impact on account of short term capital gain of Rs. 43,11,186/- was chargeable to tax in the asst, year under consideration. On verification of the case records, it is seen that the assessee has offered an income of Rs. 248/- under the head income from capital gain (the amount is not earned by way sale of land). Therefore, I have a reason to believe that an amount of Rs. 43,11,186/- has escaped assessment under the head capital gain. (ii) Scrutiny of records, it was noticed from the assets of the balance sheet for AY 2012- 13 tha....
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....facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s 147 of the Act. It is true that the assessee has filed a copy of the annual report and audited P&L A/c and balance sheet along with the return of income where various information/ material were disclosed. However, the requisite full and true disclosure of all material facts necessary for assessment has not been made as noted above. It is pertinent to mention here that even though the assessee has produced books of accounts, annual report, audited P&L A/c and balance sheet or other evidences as mentioned above; the requisite material facts as noted above in the reasons for reopening were embedded di such a mariner that material evidence could not be discovered by the AO and could have been discovered with due diligence, accordingly attracting provisions of explanation 1 of section 147 of the Act. In this case more than four year's have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income-tax as per the provisions of section 151 of the Act....
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....s regarding sale of land and the said fact also mentioned in the Trading & Profit & Loss Account of the Audited Books of Accounts. The reasons are mere change of opinion and the assessee can be found to have made true and fair disclosure of facts and furnished the details in the original assessment proceedings and also there is no lapse on the part of the assessee. The provisions of Section 147 of the Act r.w. Explanation 1 which is as under: "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the....
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....id conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-bu....
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....g its earlier order suo motu irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier." iv. CIT Vs. Usha International Ltd, I.T.A. No. 2026/2010 (Del.) (HC); "4. The Supreme Court has affirmed the judgment of the Full Bench of this court in Kelvinator (supra). The controversy should end there and can admit of no debate. The Full Bench has unequivocally held that when the assessing officer completes an assessment under section 143(3) of the Act, he is presumed to have accepted the contentions of the assessee even if there is no express reference to them in the assessment order; and if within 2 years he issues a notice to reopen the assessment, it is nothing but a change of opinion. The Supreme Court has held that a change of opinion cannot be introduced in the garb of reopening the assessment, which would be nothing but a review, which power the assessing officer does not possess. I demur to the proposition that the observations of the Full Bench of this court vis-as-vis section 114(e) of the Evidence Act and its applicability to an assessment order passed under section 143(....