ABHA VINAYKUMAR JAIN V. INCOME TAX OFFICER WARD 4(1)(4)

SCA/14841/2018

AI Insights

The case involves Abha Vinaykumar Jain, who challenged a notice of reopening issued by the Income Tax Officer for the assessment year 2011-12. The reopening was based on the alleged non-disclosure of short-term capital gains from the sale of non-agricultural land, which the petitioner claimed was sold fraudulently without her consent. The court dismissed the petition, allowing the reopening of the assessment, citing that the original return was accepted without scrutiny, thus giving the Assessing Officer the right to reassess the income.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 751094 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 25-09-2018
• Assessment Year: misc
• Other Referred Cases: Godhra Electricity Co. Ltd vs. Commissioner of Income Tax, Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P.Ltd, Deputy Commissioner of Income Tax and anr vs. Zuari Estate Development and Investment Company Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: DARSHAN PATEL
• Keywords: Capital Gain; Fraudulent Sale Deed; Non-Agricultural Land; Power of attorney; Reopening of assessment
• Section: 147; 148; 143(3); 143(1); 157

Judgement Text

"C/SCA/14841/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14841 of 2018 ========================================================== ABHA VINAYKUMAR JAIN Versus INCOME TAX OFFICER WARD 4(1)(4) ========================================================== Appearance: DARSHAN R PATEL(8486) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 25/09/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged a notice of reopening issued by the respondent-Assessing Officer on 27.03.2018. Petition arises in following background: 2. Petitioner is an individual and is regularly assessed to tax. For the assessment year 2011-12, the petitioner had filed the return of income. Such return was accepted without scrutiny. It appears that a sale deed of non-agriculture land belonging to the petitioner was registered on 26.03.2010 which recorded that the land was sold for a sum of Rs. 20 lacs to one Urmil Gandabhai Patel. Upon coming to know about such transaction, the Assessing Officer made inquiries with the petitioner by issuing notice dated 15.02.2016. Petitioner was asked to produce details of the capital accounts and necessary Page 1 of 7 C/SCA/14841/2018 ORDER supporting evidence concerning the transaction. According to the petitioner, this notice was sent to her old address which she did not receive. Be that as it may, the petitioner did not respond to this notice. Subsequently, the Assessing Officer issued impugned notice for reopening. In order to do so, he had recorded following reasons: “Reasons for reopening of the assessment in case of ABHA VINAYKUMAR JAIN for A.Y. 2011-12 u/s. 147 of the Act. In this case, the assessee has filed her return of income on 29.07.2011 declaring total income at Rs. 20,11,865/-. The same was processed u/s. 143(1) of the act on 08/09/2011 at Rs. 20,25,700/-. The assessee is earning income from salary, house property and income from other sources. 2. In this case, information received from the ITO, Ward- 4(1)(1), Ahmedabad that assessee has sold immovable property (non-agricultural land) situated at Block No. 258/B at Mauje-Ambali village, Taluka-Dascroi Dist. Ahmedabad, for sale consideration of Rs. 20,00,000/- and paid stamp duty of Rs. 7,29,000/- registered on 05.04.2010 at Sr.No. 4779/2010 at Sub-Registrar, Memnagar, Ahmedabad 3. As per the information available on record that market value (Jantri value) assessed by the Sub-Registrar at Rs. 74,37,000/- and stamp duty at Rs. 7,29,000/- which was paid by the assessee. 3. In this regard, the further information i.e. sale deed and valuation details obtained from the Sub-Registrar, Ahmedabad vide notice u/s. 133(6) dated 15/09/2014 by the then ITO, Ward 6(5), Ahmedabad. The assessee was also requested vide letter No. ITO/Wd-4(2)(1)/50C very/2015-16 dtd 15.02.2016 by the then ITO, Ward-4(2)(1), Ahmedabad to furnish details of return filed and tax paid on capital gain on sale of non- agriculture land. In response to that the assessee vide letter Page 2 of 7 C/SCA/14841/2018 ORDER dated 01.03.2018 denied to make transaction of sale of land and stated that the said land was sold by Urmilbhai Gandabhai Patel, Ahmedabad by making fake general power of attorney and documented sale deed in his name. In support of this the assessee has furnished copy of FIR and complaint filed against U.G.Patel in the Court. The contention of the assessee is considered but found not acceptable as the complaint made by the assessee is pending till date and no decision or further details filed by the assessee hence, it is premature to say that there is no transaction. 4. On verification of return of income filed for AY 2011-12 it is noticed that the assessee has not shown any amount of capital gain under the head “Capital Gain”. On further verification of complaint filed by the assessee that the assessee has mentioned in complaint that he has purchased above mentioned property on 06/10/2009 for consideration of Rs. 15,01,000/-. In view of the above it is found that the period of holding of such immovable property is less than 36 month. Therefore, short term capital gain on sale of said property is worked out at Rs. 59,36,000/- (7437000(-)1501000). In view of the above facts, the assessee was require to disclose STCG of Rs. 59,36,000/- in return of income filed and to pay short term capital gain on sale of immovable capital assets. However, he failed to do so. 5. In view of the above and on the basis of information available on record and return of income filed by the assessee it is proved that the assessee not disclosed STCG for tax in her return filed. It is found that the assessee has not disclosed said details truly and fully in her return of income. In view of above, I have reason to believe that income to the extent of Rs. 59,36,000/- has escaped assessment. 6. In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s. 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s. 147 is reason to believe which has been recorded above in para 5 above. Page 3 of 7 C/SCA/14841/2018 ORDER 7. It is pertinent to mention here that in this case the assessee has filed return of income for the year under consideration but no assessment u/s. 2(40) of the Act was made and the return of income was only processed u/s. 143(1) of the Act. In view of the above, provisions of clause (b) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 8. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s. 148 has been obtained separately from Principal Commissioner of Income Tax-1, Ahmedabad as per the provisions of section 157 of the Act.” 3. The petitioner raised objections to the notice of reopening under a communication dated 28.08.2018. Hence, this petition. 4. Material on record would show that the return filed by the petitioner for the assessment in question was accepted without scrutiny. In such return, the petitioner had not disclosed the capital gain arising out of the sale transaction in question. According to the petitioner, however, she had never executed such sale deed and the sale document was fraudulently created. 5. On the premise of such facts, learned counsel for the petitioner vehemently contended that the petitioner has never sold the land in question. The sale deed was fraudulently Page 4 of 7 C/SCA/14841/2018 ORDER executed on the basis of the power of attorney which was forged. The petitioner had never given any such power to anyone. Secondly, the power of attorney holder himself was the purchaser of the land. The sale consideration is stated to have been paid in cash. The petitioner's sale continues to be in possession of the land in question. The petitioner has therefore, filed a Civil Suit No. 349 of 2010 before the learned Senior Civil Judge, Ahmedabad (Rural). In his opinion therefore, the reasons lacked validity. His contention for suggesting that capital gain under such circumstances cannot be levied from the petitioner were as under: (i) The transaction in question was bogus. The petitioner has not received any sale consideration; (ii) The petitioner continued to be in possession of the land and therefore for the purpose of Income Tax Act, should be treated to be the owner thereof; (iii) Since litigation is pending, in any case, capital gain cannot be stated to have agreed. The principal of real income theory should be applied. Reliance was placed on the decision of Supreme Court in case of Godhra Electricity Co. Ltd vs. Commissioner of Income Tax reported in 225 ITR 746. 6. At this stage of reopening of assessment, we are not inclined to interfere for the following reasons: Page 5 of 7 C/SCA/14841/2018 ORDER The return filed by the petitioner was accepted without scrutiny. It is by now well settled that in such a situation, the Assessing Officer would have much wider latitude to reopen the assessment. Since in the original assessment no scrutiny was undertaken, the Assessing Officer cannot be stated to have formed an opinion. The principle of change of opinion therefore would not apply. Reference in this respect can be made to the decision of Supreme Court in case of Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P.Ltd reported in 291 ITR 500 which was later on reiterated in case of Deputy Commissioner of Income Tax and anr vs. Zuari Estate Development and Investment Company Ltd. reported in 373 ITR 661. 7. Whether there is prima facie evidence suggesting transfer of capital asset or whether the petitioner is correct in contending that the entire transaction was fraudulent and no sale actually took place, are the issues we are not inclined to go into in the present petition. The petitioner must submit to the jurisdiction of the Assessing Officer who alone can ask relevant questions in this respect and take a final decision while framing re-assessment. If the Assessing Officer is prevented from carrying out assessment, the serious question of such assessment getting time barred by the time the petitioner's litigation before the Civil Court achieves finality. This is not a case where the very liability or in the present case, the question of gain is under litigation. What is under Page 6 of 7 C/SCA/14841/2018 ORDER litigation is the factum of the transfer of capital asset. If eventually the petitioner losses in her challenge to the sale deed, the situation would be that the sale of the land by virtue of such deed, did actually take place as is recorded in the document, in which case, the petitioner must surrender the capital gain arising out of such transaction of capital asset to tax during the assessment year relevant to financial year when the transaction took place. 8. For such reasons, petition is dismissed. We clarify that we have expressed no opinion on the taxability of the amount in question. All contentions of the petitioner are kept open and may be raised before the Assessing Officer. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 7 of 7 "