BUNDY INDIA LIMITED V. ASSITANT COMMISSIONER OF INCOME TAX OFFICER

SCA/22492/2017

AI Insights

Bundy India Limited challenged a notice issued by the Assistant Commissioner of Income Tax to reopen its assessment for the Assessment Year 2011-2012. The original assessment had been completed after scrutiny, and the reopening was based on the alleged failure to disclose the transfer of leasehold land to a related party, which was purportedly not reported in the income return. The petitioner argued that the notice was issued beyond the permissible period and that the transfer did not occur in the relevant financial year. The court examined the reasons for reopening and found discrepancies in the Assessing Officer's claims regarding the timing and financial details of the property transfer, leading to the quashing of the notice.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 771699 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 26-03-2018
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: VARUN PATEL
• Assessee Lawyers: B S SOPARKAR
• Keywords: Assessment Year 2011-2012; Income tax reassessment; Reopening of assessment; Scrutiny assessment; Leasehold Land Transfer
• Section: 147; 143(3); 115JB; 144C(3)

Judgement Text

"C/SCA/22492/2017 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION No. 22492 of 2017 ============================================================= BUNDY INDIA LIMITED Versus ASSITANT COMMISSIONER OF INCOME TAX OFFICER ============================================================= Appearance : Mr B S SOPARKAR, Advocate for the PETITIONER(s) No. 1 Mr VARUN K.PATEL, Advocate for the RESPONDENT(s) No. 1 ============================================================= CORAM: HONOURABLE Mr. JUSTICE AKIL KURESHI and HONOURABLE Mr. JUSTICE B.N. KARIA 26th March 2018 ORAL ORDER (PER : HONOURABLE Mr. JUSTICE AKIL KURESHI) Petitioner has challenged a notice dated 25th March 2017 issued by the respondent-Assessing Officer to reopen the petitioner’s assessment for Assessment Year 2011-2012. Brief facts of the case are - the petitioner is a company registered under the Companies Act. For the Assessment Year 2011-2012, the petitioner had filed return of income on 29th November 2011 declaring total income at Rs. 2.96 Crores [rounded off]. The return was taken in scrutiny. Assessing Officer passed an order of assessment on 7th April 2015 assessing total income of the assessee at Rs. 10.95 Crores [rounded off]. To reopen such assessment, he issued the impugned notice. In order to do so, he had recorded the following reasons : Page 1 of 7 C/SCA/22492/2017 ORDER “1. In this case, the assessee e-filed rerun of income on 29.11.2011, declaring total income as Rs. 2,96,83,690/- after setting off of business loss/depreciation of Rs. 4,21,20,515/- Book profit u/s. 115JB was of Rs. 7,35,82,357/-. The assessment was finalized under Section 143(3) r.w.s. 144C(3) of the Act on 07.04.2015 at assessed income of Rs. 10,95,54,156/-. 2. During the course of assessment proceedings for A.Y. 2012-13, it was seen from the audited annual report of the assessee that the leasehold land at SIPCOT, Tamilnadu (Small Industries Promotion Corporation of Tamil Nadu Limited) was transferred by the assessee to its related party during the year. On further verification and enquiry, the office of undersigned was in possession of information that the SPICOT Ltd. has allotted Plot No. B-75, measuring 2.66 acres at SIPCOT Industrial Park, Irungattukottai to the assessee-company vide allotment order dated 16.02.2006 and amendment letter dated 23.03.2006, after remitting the plot cost of Rs. 53.20 Lacs. After that the said land under consideration was transferred to M/s. Hanil Tube India Private Limited [related party] on 23rd September 2010 for a consideration of Rs. 117.04 lakhs. The assessee shown net of leasehold land, in its balance sheet, under the head of tangible fixed assets, as under: F.Y. A.Y. Amount shown in B/s 2009-10 2010-11 59,36,385/- 2010-11 2011-12 59,01,854/- 2011-12 2012-13 NIL Page 2 of 7 C/SCA/22492/2017 ORDER It is clear from the records and information received by this office that assessee has sold the impugned land to related party. However no income on account of sale/transfer of property has been shown by the assessee in its return of income. Since the transfer of leasehold land happened on 23.09.2010 ie., in F.Y. 2010-11 related to A.Y. 2011-12, the scrutiny assessment for A.Y. 2011-12 is required to be reopened, as the assessee did not show this transfer of property in its books of account for F.Y. 2010-11 i.e, relevant to A.Y. 2011-12. 3. In view of the above facts, and keeping in view that this is failure on the part of the assessee, I have reasons to believe that in this case, income of Rs. 63.84 lacs has escaped assessment within the meaning of clause (c) of explanation-2 to Section 147 of the I.T. Act, 1961. Considering the factual backdrop of the case, this is a fit case for the proceedings u/s. 147 of the I.T. Act, 1961.” The petitioner raised objections to the notice of reopening on 14th August 2017. Such objections were rejected by an Order dated 9th September 2017. Hence, this petition. Taking us through the reasons recorded by the Assessing Officer, counsel for the petitioner submitted that [a] the notice has been issued beyond the period of four years from the end of relevant assessment year. There was no failure on the part of the Page 3 of 7 C/SCA/22492/2017 ORDER assessee to disclose truly and fully all material facts. [b] The transfer of the lease-hold plot did not take place during the period relevant to Assessment Year 2011-2012, but took place during the period relevant to AY 2012-2013 since the relinquishment deed was executed by the assessee in favour of the transferee company M/s. Hanil Tubes India Private Limited on 2nd April 2011. [c] The assessee-company had not received consideration of Rs. 117.04 Crores as stated by the Assessing Officer in the reasons recorded, but only a sum of Rs. 51.50 lacs; as referred to in the Relinquishment Deed. Thus, the reasons lack validity. There was no basis for the Assessing Officer to believe that the property was actually transferred on 23rd September 2010; as alleged or that the assessee received consideration of Rs. 117.04 lacs for such transfer. On the other hand, learned counsel Shri Varun K Patel opposing the petition contended that there was sufficient material to show that the assessee transferred the lease held property in favour of the sister concern on 23rd September 2010 for a consideration of Rs. 117.04 lacs. Notice for reopening was, therefore, valid. It can be noted that the notice of reopening has been issued beyond the period of four years from the end of relevant assessment year. The original assessment was framed after scrutiny. Page 4 of 7 C/SCA/22492/2017 ORDER The reasons recored by the Assessing Officer suggests that contrary to what the assessee was canvassing, the property in question was transferred during the period relevant to Assessment Year 2011- 2012 and that the sale consideration was Rs. 117.04 lacs. It was not clear from what sources and for what reasons, the Assessing Officer was asserting these two facts. We, therefore, requested learned counsel for the Revenue to provide such details. Today, he has produced before us, a copy of the notice dated 4th March 2016 issued by Assessing Officer to the Small Industrial Promotion Council of Tamil Nadu Limited [“SIPCOT” for short] where the plot in question is situated, calling upon certain details with respect to the said plot – one of them being copies of the Deed or Agreement; if any, as mentioned in relinquishment deed. In response to such notice, SIPCOT under its communication dated 21st March 2016 conveyed to the Assessing Officer that SIPCOT has accorded approval for transfer of leasehold rights of the said plot in favour of M/s. Hanil Tubes India Private Limited. On remittance of differential land cost of Rs. 63.84 lacs, the Modified Lease Deed was executed/registered on 23rd September 2010 in favour of M/s. Hanil Tubes India Private Limited and since then, as per the records of SIPCOT, the plot is registered in the name of said M/s. Hanil Tubes India Private Limited. It was further stated that, “...We Page 5 of 7 C/SCA/22492/2017 ORDER would like to add that the then prevailing cost of land at SIPCOT Industrial Park, Irungattukottai during execution of Modified Leased Deed was Rs. 60.00 lakhs per acre ie., Rs. 1,59,60,000/= as indicated in the Modified Lease Deed. However, the company has actually remitted 60% of differential plot cost amounting to Rs. 1,17,04,000/= as per the policy of SIPCOT.” It is from this communication that the Assessing Officer picked up two relevant details – one was regarding transfer of plot on 23rd September 2010 and another, stating sale consideration of Rs. 117.04 lakhs received by the assessee for such transfer. For the purpose of this petition, we are not required to go into the details of transfer of leasehold rights. Nevertheless, when it comes to consideration for such purpose, the Assessing Officer is totally off the mark. He has mechanically picked up the said figure of Rs. 117.04 lakhs from the communication dated 21st March 2016 addressed by SIPCOT to the Assessing Officer. There is no indication that this is an amount received by the assessee from M/s. Hanil Tubes India Private Limited. In fact, indication is to the contrary ie., such amount is deposited by M/s. Hanil Tubes Private Limited. In either case, there was no information available with the Assessing Officer that the assessee had received sale consideration of Rs. 117.04 lakhs from the transferee company. Page 6 of 7 C/SCA/22492/2017 ORDER In the result, impugned notice 25th March 2017 issued by the respondent-Assessing Officer is hereby quashed. Petition is allowed and disposed of. [Akil Kureshi, J.] [B.N Karia, J.] Prakash Page 7 of 7 "