DEVENDRASINH CHHATRASINH VAGHELA V. JOINT COMMISSIONER OF INCOME TAX(OSD),

SCA/3507/2018

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The case involves Devendrasinh Chhatrasinh Vaghela, the petitioner, who challenged a notice issued by the Joint Commissioner of Income Tax (OSD), the respondent, to reopen his income tax assessment for the year 2011-12. The original assessment was completed under Section 143(3) of the Income-tax Act, 1963, where minor additions were made to the declared income. The reopening notice was based on the grounds that the petitioner had not declared capital gains from the sale of two lands, which was contested in this petition. The court examined the records and found that the capital gains had indeed been declared and scrutinized in the original assessment, leading to the conclusion that the reopening was unwarranted.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 764391 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 20-08-2018
• Assessment Year: misc
• Laws Referred To: Income-tax Act, 1963
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Capital Gain; Notice of reopening; Reopening of assessment; Scrutiny assessment
• Section: 147; 148; 143(3)

Judgement Text

"C/SCA/3507/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 3507 of 2018 ========================================================== DEVENDRASINH CHHATRASINH VAGHELA Versus JOINT COMMISSIONER OF INCOME TAX(OSD), ========================================================== Appearance: MR TUSHAR HEMANI with MS VAIBHAVI K PARIKH(3238) for the PETITIONER(s) No. 1 MRS MAUNA M BHATT(174) for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 20/08/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Petitioner has challenged a notice dated 17.9.2017 issued by the respondent Assessing Officer to reopen petitioner’s assessment for the assessment year 2011­12. 2. Brief facts are as under :­ 2.1 The petitioner is an individual. He earns income from investment including immovable properties and agriculture. For the assessment year 2011­12, the petitioner had filed the return of income on 31.3.2012 declaring total income of Rs.33.29 lacs (rounded off). Such return was taken in Page 1 of 5 C/SCA/3507/2018 ORDER scrutiny by the Assessing Officer who passed order under Section 143(3) of the Income­tax Act, 1963 (‘the Act’for short) on 28.3.2014 making minor additions in the returned income. To reopen such assessment, he issued impugned notice. He had recorded following reasons for such purpose. Reasons for the belief that income has escaped assessment : Assessment u/s.143(3) of the Act was completed on 28/03/2014 at Rs.36,30,420/­ against returned income of Rs.33,29,760/­. Subsequently, it was noticed that assessee had sold a land at village Makarba, Ahmedabad (Sur. No.648/2 3010 sq.Mtr. For a value of 91,00,000 vide sale deed no.6215 dt. 20/04/2010 and also sold a land at village Makarba, Ahmedabad (Sur. No.548 Hissa No.28, 2580 sq.Mtr. For a value of 46,44,000/­ vide sale deed no.15017 dt. 20/11/2010. Village Makarba covered as capital assets as per provisions of section 2(14) of the IT Act. However on verification of the records it is found that the assessee has not shown any income under the head capital gain in respect of sale of above two properties. In view of the above facts, I have reason to believe that the income chargeable to tax has escaped assessment more than Rs.1,00,000/­ for the A.Y. 2011­12. Therefore, I am satisfied that it is a fit case for re­opening the assessment u/s.147 of the IT Act. Thus the case needs to be re­opened by issuing notice u/s.148 of the I.T. Act, 1961. 2.2 Upon being supplied the reasons, the petitioner raised objections for notice of Page 2 of 5 C/SCA/3507/2018 ORDER reopening under letter dated 1.2.2018. Such objections were rejected by the Assessing Officer by an order dated 16.1.2018. Hence this petition. 3. Having heard learned counsel for the parties and having perused documents on record we may recall the Assessing Officer had in the reasons referred to two sales affected by the petitioner during the relevant period; one was a land situated at Village : Makarba for a consideration of Rs.91 lacs, the other one was also a land of Makarba which was sold for Rs.46.44 lacs. According to the Assessing Officer, these sales would invite capital gain in terms of the provisions of the Act. According to him however the verification would show that the assessee had not shown any income under the head ‘capital gain’ in respect of sale of these two lands. Thus the very basis for issuing the notice of reopening of a scrutinized assessment beyond the period of four years from the end of relevant assessment year was that the assessee though had earned capital gain, had not offered to tax in the return filed. 4. This foundation of the Assessing Officer is completely erroneous and goes against the Page 3 of 5 C/SCA/3507/2018 ORDER documents on record. In the return filed, the assessee had declared long term capital gain of Rs.6.88 lacs (rounded off). During scrutiny assessment the Assessing Officer had raised queries, inter alia, with respect to such capital gain. In letter dated 24.7.2013, the Assessing Officer asked the assessee to clarify various sales and purchases of the properties which the assessee had undertaken during the relevant period. Additionally, the assessee also asked him to supply the purchase deed, sale deed, mode of payment alongwith supporting evidence. In particular, the Assessing Officer wanted information about the sale of the said two properties. These were the only two properties sold by the assessee during the relevant period. Rest of the details asked by the Assessing Officer under this sub­head pertain to purchase of properties. The petitioner replied to such letter of the Assessing Officer under communication dated 12.3.2014. He pointed out that one of the land was sold on 20.4.2010 for Rs.91 lacs and the other land was sold on 26.10.2010 for Rs.46.44 lacs. It was after such examination of the issue, the Assessing Officer passed an order of the assessment in which he made no addition on this score. In other words, he accepted the assessee’s Page 4 of 5 C/SCA/3507/2018 ORDER computation of capital gain arising out of sale of these two lands. In the objections that he raised the assessee also pointed out that the capital gain was not only declared, it was worked out to the detriment of the assessee, there was no thereafter scope for reopening the assessment in any case. 5. The assertion of the Assessing Officer in the reasons recorded that the assessee had not offered the gain arising out of sale of two lands in the return, is thus palpably wrong. The assessee had not only made a necessary disclosure, the Assessing Officer during the course of scrutiny assessment had occasion to visit such claim. It is simply not open for the Assessing Officer now to reopen assessment that too on the professed grounds. 6. In the result impugned notice is set aside. Petition is allowed. (AKIL KURESHI, J) (B.N. KARIA, J) K.K. SAIYED Page 5 of 5 "