DINESH SINGLA V. ASSISTANT COMMISSIONER OF INCOME TAX AND ANR

CWP/19667/2021

AI Insights

The case revolves around the reassessment of income tax for the assessment year 2013-14 concerning Dinesh Singla, who had purchased agricultural land and later sold it. Initially, the Income Tax Officer (ITO) did not find any undisclosed income or capital gains during the regular assessment under Section 143(3) of the Income Tax Act, 1961. However, a subsequent notice under Section 148 led to a reassessment, categorizing the income as 'adventure in the nature of trade' and treating it as unexplained investment. The petitioner challenged this reassessment, arguing that it was based on a change of opinion rather than new evidence, and the agricultural land did not qualify as a capital asset under the relevant sections of the Act. The court's decision highlighted the importance of adhering to the principles of natural justice and the specific legal framework governing reassessments.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 749415 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 02-09-2024
• Assessment Year: misc
• Other Referred Cases: Emirates Shipping Line, FZE vs Assistant Director of Income Tax, Vanita Sanjeev Anand vs Income Tax Officer, Banyan Real Estate Fund Mauritius vs Assistant Commissioner of Income Tax Circle International Tax, Raymond Woolen Mills Limited vs Income Tax Officer, Lakhmani Mewal Das vs Income Tax Officer, Chhabil Dass Agarwal vs Commissioner of Income Tax, Mahesh Chander Sharma vs National Faceless Assessment Centre, State of Uttar Pradesh vs Aryaverth Chawal Udyog, Calcutta Discount Company Limited vs Officer, Companies District I, Calcutta, Jeans Knit Private Limited vs Deputy Commissioner of Income Tax Bangalore and others, Greatship (India) Limited vs Income Tax Officer, Phool Chand Bajrang Lal vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SAURABH KAPOOR
• Assessee Lawyers: RADHIKA SURI; PARNIKA SINGLA; ABHINAV NARANG
• Keywords: Agricultural Land; Capital Gain; Draft Assessment Order; Final Assessment Order; Income Tax; Quashing of notice; Reassessment; Unexplained investment
• Section: 147; 148; 144; 143(3); 2(14)(iii)(a); 2(14)(iii)(b)

Judgement Text

"CWP No. IN THE HIGH COURT OF PUNJAB AND HARYANA Dinesh Singla Assistant Commissioner of Income Tax and another CORAM: HON’BLE MR. JUSTICE SANJEEV PRAKASH SHARMA HON’BLE MR. JUSTICE Present: SANJEEV PRAKASH SHARMA, J. 1. quashing of notice dated 20.03.2020 issued under Section 148 of the Income Tax Act, 1961 (hereinafter to be referred as “the Act”), draft assessment order under Section 144 read with Section and the order dated 22.09.2021 whereby the objections filed by the assessee were rejected. 2. respondents’ counsel stated th whereafter this Court allowed the petitioner to amend his writ petition and also challenge the final assessment order. up in the Court, s final order of assess CWP No. 19667 of 2021 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CWP No. Dinesh Singla Versus Assistant Commissioner of Income Tax and another CORAM: HON’BLE MR. JUSTICE SANJEEV PRAKASH SHARMA HON’BLE MR. JUSTICE SANJAY VASHISTH Ms. Radhika Suri, Senior Advocate assisted by Ms. Parnika Singla, Advocate, and Mr. Abhinav Narang, Advocate, for the petitioner. Mr. Saurabh Kapoor, Senior Standing Counsel for the respondents. SANJEEV PRAKASH SHARMA, J. The writ petition was originally filed by the petitioner seeking quashing of notice dated 20.03.2020 issued under Section 148 of the Income Tax Act, 1961 (hereinafter to be referred as “the Act”), draft assessment order under Section 144 read with Section 147 of the Act dated 08.09.2021 and the order dated 22.09.2021 whereby the objections filed by the assessee were rejected. The writ petition came up for hearing on 29.09.2021 when the respondents’ counsel stated that final assessment order has been pa whereafter this Court allowed the petitioner to amend his writ petition and also challenge the final assessment order. However, when the case was taken up in the Court, since on that day the statement was found to be false as the final order of assessment had not been passed, an affidavit -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Reserved on : 01.08.2024 Date of Decision : 02.09.2024 CWP No. 19667 of 2021 (O&M) …Petitioner Assistant Commissioner of Income Tax and another …Respondents CORAM: HON’BLE MR. JUSTICE SANJEEV PRAKASH SHARMA SANJAY VASHISTH Ms. Radhika Suri, Senior Advocate assisted by Ms. Parnika Singla, Advocate, and Mr. Abhinav Narang, Advocate, for the petitioner. Mr. Saurabh Kapoor, Senior Standing Counsel The writ petition was originally filed by the petitioner seeking quashing of notice dated 20.03.2020 issued under Section 148 of the Income Tax Act, 1961 (hereinafter to be referred as “the Act”), draft assessment 147 of the Act dated 08.09.2021 and the order dated 22.09.2021 whereby the objections filed by the assessee The writ petition came up for hearing on 29.09.2021 when the final assessment order has been passed whereafter this Court allowed the petitioner to amend his writ petition and However, when the case was taken ince on that day the statement was found to be false as the ment had not been passed, an affidavit has also been (O&M) The writ petition was originally filed by the petitioner seeking quashing of notice dated 20.03.2020 issued under Section 148 of the Income Tax Act, 1961 (hereinafter to be referred as “the Act”), draft assessment 147 of the Act dated 08.09.2021 and the order dated 22.09.2021 whereby the objections filed by the assessee The writ petition came up for hearing on 29.09.2021 when the ssed whereafter this Court allowed the petitioner to amend his writ petition and However, when the case was taken ince on that day the statement was found to be false as the been VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. filed seeking apology by the case finally now. 3. case are as under: The petitioner had purchased 92 kanals 2 marlas of agricultural land from three brothers, namely, Manjit Singh, Karnail Singh and Jarnail Singh on 14.05.2012. He further transferred the same to DSS Mega City projects company on 12.06.2012. As the land was eligible to tax as it was not a capital asset, therefore, no income was taxable either in the hands of the seller or with the petitioner. The fact that the land was agricultural was verified by the ITO Intelligence, Karnal in verification report dated 30.03.2015, which was forwarded to the Director of Income Tax, Intelligence and Criminal Investigation. The petitioner’s assessment proceedings were completed and finalized for the year 2013 under Section 143 (3) of the Act made on account of any undisclosed income of capital gain. was served with a notice dated 20.03.2020 under Section 148 of the Act wherein it was stated that there had been chargeable for A.Y. 2013 Section 147 of the Act. The order was passed Section 147 of the Act petitioner as power of attorn The land was sold by Manjit Singh to petitioner a registered power of attorney and the other two brothers also through him. On the basis of said reasons, it was stated that the income to the extent of Rs. “the source CWP No. 19667 of 2021 filed seeking apology by the Revenue. Be that as it may, we have heard the case finally now. Brief facts which required to be noticed for adjudication of this case are as under:- The petitioner had purchased 92 kanals 2 marlas of agricultural land from three brothers, namely, Manjit Singh, Karnail Singh and Jarnail Singh on 14.05.2012. He further transferred the same to DSS Mega City projects company on 12.06.2012. As the land was to tax as it was not a capital asset, therefore, no income was taxable either in the hands of the seller or with the petitioner. The fact that the land was agricultural was verified by the ITO Intelligence, Karnal in verification report dated 30.03.2015, which was forwarded to the Director of Income Tax, Intelligence and Criminal Investigation. The petitioner’s assessment proceedings were completed and finalized for the year 2013 under Section 143 (3) of the Act on March, 2016 and no additions were made on account of any undisclosed income of capital gain. was served with a notice dated 20.03.2020 under Section 148 of the Act wherein it was stated that there had been reasons to believe that the inc for A.Y. 2013-14 had escaped assessment Section 147 of the Act. The order was passed Section 147 of the Act giving out the reasons of the sale of the land by the petitioner as power of attorney holder. The land was sold by Manjit Singh to petitioner a registered power of attorney and the other two brothers also through him. On the basis of said reasons, it was stated that the income to the extent of Rs. 19,34,10,000/- had escaped assessment. the source and genuineness of investment made as well as short term -2- evenue. Be that as it may, we have heard the Brief facts which required to be noticed for adjudication of this The petitioner had purchased 92 kanals 2 marlas of agricultural land from three brothers, namely, Manjit Singh, Karnail Singh and Jarnail Singh on 14.05.2012. He further transferred the same to DSS Mega City projects company on 12.06.2012. As the land was agricultural land, it was not to tax as it was not a capital asset, therefore, no income was taxable either in the hands of the seller or with the petitioner. The fact that the land was agricultural was verified by the ITO Intelligence, Karnal in its verification report dated 30.03.2015, which was forwarded to the Director of Income Tax, Intelligence and Criminal Investigation. The petitioner’s assessment proceedings were completed and finalized for the year 2013-14 on March, 2016 and no additions were made on account of any undisclosed income of capital gain. The petitioner was served with a notice dated 20.03.2020 under Section 148 of the Act reasons to believe that the income assessment within the meaning of Section 147 of the Act. The order was passed under Section 144 read with giving out the reasons of the sale of the land by the The land was sold by Manjit Singh to petitioner- Dinesh Singla allegedly by a registered power of attorney and the other two brothers also sold their land through him. On the basis of said reasons, it was stated that the income to had escaped assessment. It was stated that and genuineness of investment made as well as short term evenue. Be that as it may, we have heard the Brief facts which required to be noticed for adjudication of this The petitioner had purchased 92 kanals 2 marlas of agricultural land from three brothers, namely, Manjit Singh, Karnail Singh and Jarnail Singh on 14.05.2012. He further transferred the same to DSS Mega City projects agricultural land, it was not to tax as it was not a capital asset, therefore, no income was taxable either in the hands of the seller or with the petitioner. The fact that the land its verification report dated 30.03.2015, which was forwarded to the Director of Income Tax, Intelligence and Criminal Investigation. The petitioner’s 14 on March, 2016 and no additions were The petitioner was served with a notice dated 20.03.2020 under Section 148 of the Act ome within the meaning of Section 144 read with giving out the reasons of the sale of the land by the allegedly by sold their land through him. On the basis of said reasons, it was stated that the income to It was stated that and genuineness of investment made as well as short term VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. capital gain recei failed to submit the supporting evidence as to whether this investment is from disclosed sources of income was prepared 24,69,09,300/ and Rs.3,75,75,000/ The petitioner submitted his objections and stated that he had already submitted his complete bank statement property sold and purchased during the relevant that he was engaged in the business of sale and purchase of propert submitted that merely have been issued. statement which was part of the tangible material. The petitioner thereafter preferred the writ petition assailing the said proceedings within the municipal limits Panchkula and 20 kms the agricultural land was not a capital asset within the meaning of Sec 2(14)(iii)(b) agricultural land. 4. final assessment order, which was allowed to be challenged by this Court by amending the believe to initiate proceedings under Section 148 of the Act document which had come on record as all the bank statements and material was already filed at the time of final assessment of the Act. CWP No. 19667 of 2021 capital gain received by the assesee remained unexplained. failed to submit the supporting evidence as to whether this investment is from disclosed sources of income” and accordingly draft assessment order prepared rounding off the total income of 24,69,09,300/- by adding the short term capital gain Rs.3,75,75,000/- as unexplained investment. The petitioner submitted his objections and stated that he had already his complete bank statements with narrations and details of property sold and purchased during the relevant that he was engaged in the business of sale and purchase of propert submitted that merely because of change of opinion have been issued. It was also stated that the amount was part of the financial statement which was part of the A.O’s record and there was no fresh tangible material. The petitioner thereafter preferred the writ petition assailing the said proceedings. It has been submitted that the land did not fall within the municipal limits of Panchkula Panchkula and 20 kms far from municipal limits of Naraingarh, therefore, the agricultural land was not a capital asset within the meaning of Sec of the Act and no capital gain would arise on the sale of the agricultural land. Learned counsel for the petitioner has further challenged the final assessment order, which was allowed to be challenged by this Court by ing the writ petition. It was submitted that there was no reason to to initiate proceedings under Section 148 of the Act document which had come on record as all the bank statements and material was already filed at the time of final assessment -3- ved by the assesee remained unexplained. The assessee failed to submit the supporting evidence as to whether this investment is and accordingly draft assessment order rounding off the total income of the petitioner as Rs. by adding the short term capital gain of Rs. 15,58,35,000/- as unexplained investment. The petitioner submitted his objections and stated that he had already with narrations and details of property sold and purchased during the relevant financial year. It was stated that he was engaged in the business of sale and purchase of property and change of opinion fresh notice could not It was also stated that the amount was part of the financial A.O’s record and there was no fresh tangible material. The petitioner thereafter preferred the writ petition has been submitted that the land did not fall of Panchkula and was 15 kms far from far from municipal limits of Naraingarh, therefore, the agricultural land was not a capital asset within the meaning of Section capital gain would arise on the sale of the Learned counsel for the petitioner has further challenged the final assessment order, which was allowed to be challenged by this Court by writ petition. It was submitted that there was no reason to to initiate proceedings under Section 148 of the Act and there was no document which had come on record as all the bank statements and material was already filed at the time of final assessment done under Section 143 (3) The assessee failed to submit the supporting evidence as to whether this investment is and accordingly draft assessment order Rs. - The petitioner submitted his objections and stated that he had already with narrations and details of It was stated and fresh notice could not It was also stated that the amount was part of the financial A.O’s record and there was no fresh tangible material. The petitioner thereafter preferred the writ petition has been submitted that the land did not fall 15 kms far from far from municipal limits of Naraingarh, therefore, tion capital gain would arise on the sale of the Learned counsel for the petitioner has further challenged the final assessment order, which was allowed to be challenged by this Court by writ petition. It was submitted that there was no reason to and there was no document which had come on record as all the bank statements and material done under Section 143 (3) VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 5. assessment order dated 08.09.20 investment as the source of of the reply, the respondents proceeded to pass the order dated 29.09.2021 wherein the assessing officer chan the reasons recorded earlier and instead of treating the transfer of land under head capital gains in the nature of trade nor in the final order of assessment any material purchase and sale of land as a commercial venture by the assessee. submitted that the final assessment order passed by the assessing officer not based on the draft assessment order and the reasons to believe mentioned therein for initiating proceedings under Section 148 of the Act. 6. Supreme Court in and others vs Lakhmani Mewal Das in Emirates Shipping Line, FZE vs Assistant Director of (2012) 349 ITR (2020) 422 ITR 1, to submit that any new material which may be unearthed been made and cannot be been considered and examined earlie 7. judgment of Assistant Commissioner of Income Tax another 2024 SCC OnLine Del 5312 could not have passed the order of assessment on additional reasons CWP No. 19667 of 2021 It was further submitted that the additions proposed in the draft ssment order dated 08.09.2021 related to capital gains and unexplained investment as the source of the same was doubted. of the reply, the respondents proceeded to pass the order dated 29.09.2021 wherein the assessing officer changed the stand completely and contrary to reasons recorded earlier and instead of treating the transfer of land under head capital gains, treated the entire consideration received in the nature of trade. It has been argued that neither i nor in the final order of assessment any material purchase and sale of land as a commercial venture by the assessee. submitted that the final assessment order passed by the assessing officer not based on the draft assessment order and the reasons to believe mentioned therein for initiating proceedings under Section 148 of the Act. Learned counsel for the petitioner has relied on judgment of Supreme Court in The Income-Tax Officer, and others vs Lakhmani Mewal Das (1976) 3 SCC 757, Emirates Shipping Line, FZE vs Assistant Director of ITR 493 and Vanita Sanjeev Anand vs Income Tax Officer (2020) 422 ITR 1, to submit that the reasons to believe have to be based on any new material which may be unearthed been made and cannot be on the basis of the documents which have already been considered and examined earlier. Learned counsel for the petitioner has also relied on judgment of Delhi High Court in Banyan Real Estate Fund Mauritius vs Assistant Commissioner of Income Tax Circle International Tax 112 and 2024 SCC OnLine Del 5312 to submit could not have passed the order of assessment on additional reasons -4- It was further submitted that the additions proposed in the draft 21 related to capital gains and unexplained was doubted. However, after furnishing of the reply, the respondents proceeded to pass the order dated 29.09.2021 ged the stand completely and contrary to reasons recorded earlier and instead of treating the transfer of land under treated the entire consideration received as an adventure It has been argued that neither in the reasons recorded nor in the final order of assessment any material was referred indicating the purchase and sale of land as a commercial venture by the assessee. It is submitted that the final assessment order passed by the assessing officer was not based on the draft assessment order and the reasons to believe mentioned therein for initiating proceedings under Section 148 of the Act. Learned counsel for the petitioner has relied on judgment of r, I Ward, District VI, Calcutta (1976) 3 SCC 757, Delhi High Court Emirates Shipping Line, FZE vs Assistant Director of Income-Tax Vanita Sanjeev Anand vs Income Tax Officer the reasons to believe have to be based on any new material which may be unearthed after the final assessment has on the basis of the documents which have already Learned counsel for the petitioner has also relied on a recent Banyan Real Estate Fund Mauritius vs Circle International Tax 112 and to submit that the assessing officer could not have passed the order of assessment on additional reasons or those It was further submitted that the additions proposed in the draft 21 related to capital gains and unexplained However, after furnishing of the reply, the respondents proceeded to pass the order dated 29.09.2021 ged the stand completely and contrary to reasons recorded earlier and instead of treating the transfer of land under as an adventure n the reasons recorded was referred indicating the It is was not based on the draft assessment order and the reasons to believe mentioned Learned counsel for the petitioner has relied on judgment of ard, District VI, Calcutta High Court Tax Vanita Sanjeev Anand vs Income Tax Officer the reasons to believe have to be based on after the final assessment has on the basis of the documents which have already recent Banyan Real Estate Fund Mauritius vs Circle International Tax 112 and that the assessing officer or those VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. which may be supplied subsequentl assessement order issued by the respondents is based on reasons no show caus 8. Assistant Commissioner of Income Tax, Circle, Panchkula has been filed is objected that the petition would not lie as the final assessment order has been passed against which appeal before the (Appeals) lies. The respondents have further stated that the order dated 29.09.2021 was uploaded notice issued assessment order are auto selected for generating in one go only. assessment order generates first and immediately in succession, the demand notice and computation sheet procedure. 9. stage the petitioner given any opportunity the initial notice passing of the order dated 29.09.2021 were given to the petitioner to submit not avail the same at his own peril for which the be said to be violative of principles of natural justice the petitioner sold the City Projects Private Limited land from Manjit Singh, Jarnail Singh and Karnail Singh he failed to substantiate the source of investment and CWP No. 19667 of 2021 which may be supplied subsequently. It is her submission that the assessement order issued by the respondents is based on reasons no show cause notice was given. Written statement on behalf of the respondents through Assistant Commissioner of Income Tax, Circle, Panchkula has been filed objected that the petition would not lie as the final assessment order has been passed against which appeal before the lies. The respondents have further stated that the order dated 29.09.2021 was uploaded on the portal at 04.39 p.m. and demand issued at 04.24 p.m. wherein it is stated that the time of assessment order was 15:37:03 and notice of demand auto selected for generating in one go only. assessment order generates first and immediately in succession, the demand notice and computation sheet is generated. No fault can be found with the Learned counsel for the revenue further submits that at this stage the petitioner cannot be allowed to raise the grievance that he was not given any opportunity and have tabulated the the initial notice under Section 148 of the Act the order dated 29.09.2021 to point out th were given to the petitioner to submit his reply and put up his case but he did not avail the same at his own peril for which the be said to be violative of principles of natural justice the petitioner sold the land measuring 92 kanals 2 marlas City Projects Private Limited on 12.06.2012 whi land from Manjit Singh, Jarnail Singh and Karnail Singh d to substantiate the source of investment and -5- y. It is her submission that the assessement order issued by the respondents is based on reasons for which Written statement on behalf of the respondents through Assistant Commissioner of Income Tax, Circle, Panchkula has been filed. It objected that the petition would not lie as the final assessment order has been passed against which appeal before the Commissioner of Income Tax lies. The respondents have further stated that the order impugned he portal at 04.39 p.m. and demand wherein it is stated that the time of generation of notice of demand is 15:38:06. The same auto selected for generating in one go only. As a defined sequence, the assessment order generates first and immediately in succession, the demand d. No fault can be found with the Learned counsel for the revenue further submits that at this cannot be allowed to raise the grievance that he was not the dates from 20.03.2020 when under Section 148 of the Act was issued to the date of to point out that several opportunities his reply and put up his case but he did not avail the same at his own peril for which the action of the revenue cannot be said to be violative of principles of natural justice. It is further stated that 92 kanals 2 marlas to M/s DSS Mega on 12.06.2012 which he had purchased the land from Manjit Singh, Jarnail Singh and Karnail Singh on 14.05.2012. But d to substantiate the source of investment and failed to fully disclose y. It is her submission that the for which Written statement on behalf of the respondents through . It objected that the petition would not lie as the final assessment order has Commissioner of Income Tax impugned he portal at 04.39 p.m. and demand of is 15:38:06. The same ce, the assessment order generates first and immediately in succession, the demand d. No fault can be found with the Learned counsel for the revenue further submits that at this cannot be allowed to raise the grievance that he was not from 20.03.2020 when date of at several opportunities his reply and put up his case but he did revenue cannot . It is further stated that to M/s DSS Mega he had purchased the But failed to fully disclose VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. all material facts necessary for assessment and, therefore, the assessing officer found and re-opened the assessment und necessary satisfaction of the Principal Commissioner of Income Tax, Panchkula. 10. was appealable, and therefore, the writ petition should not be entertained. The reliance placed on verification report of the ITO 30.03.2015 was misconceived trading of land and the benefit under Section 10(37) and Section 54B of the Act was not available to the petitioner. It is stated that the petitioner though objecte the draft assessment order but did not substantiate his claim, and therefore, the that the assessee therefore, to be treated as 11. Supreme Court in and others (1999) 236 ITR 34 proceedings under section 147 is valid, the court has only to 12. Supreme Court in Dass Agarwal CWP No. 19667 of 2021 all material facts necessary for assessment and, therefore, the assessing officer found the belief that the income chargeable to tax escaped assessment opened the assessment under Section 147 of the Act satisfaction of the Principal Commissioner of Income Tax, It was also stated that the order passed by the assessing officer was appealable, and therefore, the writ petition should not be entertained. The reliance placed on verification report of the ITO was misconceived. As the petitioner was engaged trading of land, the amount was rightly added a and the benefit under Section 10(37) and Section 54B of the Act was not available to the petitioner. It is stated that the petitioner though objecte the draft assessment order but did not provide any documentary evidence substantiate his claim, and therefore, the objection the assessee has worked as an agent/ middle man and the earning was, therefore, to be treated as business income. Learned counsel for the revenue Supreme Court in Raymond Woolen Mills Limited vs Income Tax Officer (1999) 236 ITR 34, wherein it was held as under: “In determining whether commencement of reassessment proceedings under section 147 is valid, the court has only to see whether there is prima facie some material on the basis of which revenue could reopen the case, the suffi correctness of the material is not a thing to be considered at the stage of notice.” Learned counsel for the revenue also relied on judgment of Supreme Court in Commissioner of Income Tax and others vs Chhabil Dass Agarwal (2013) 357 ITR 357 in support of his submission that the -6- all material facts necessary for assessment and, therefore, the assessing that the income chargeable to tax escaped assessment er Section 147 of the Act after seeking satisfaction of the Principal Commissioner of Income Tax, It was also stated that the order passed by the assessing officer was appealable, and therefore, the writ petition should not be entertained. The reliance placed on verification report of the ITO Intelligence dated ioner was engaged in business of , the amount was rightly added and taxed as business income and the benefit under Section 10(37) and Section 54B of the Act was not available to the petitioner. It is stated that the petitioner though objected to provide any documentary evidence to objection was rejected. It is stated as an agent/ middle man and the earning was, revenue has relied on the judgment of Raymond Woolen Mills Limited vs Income Tax Officer wherein it was held as under:- In determining whether commencement of reassessment proceedings under section 147 is valid, the court has only to see whether there is prima facie some material on the basis of which revenue could reopen the case, the sufficiency or correctness of the material is not a thing to be considered at the Learned counsel for the revenue also relied on judgment of Commissioner of Income Tax and others vs Chhabil in support of his submission that the all material facts necessary for assessment and, therefore, the assessing that the income chargeable to tax escaped assessment after seeking satisfaction of the Principal Commissioner of Income Tax, It was also stated that the order passed by the assessing officer was appealable, and therefore, the writ petition should not be entertained. dated in business of e and the benefit under Section 10(37) and Section 54B of the Act was not d to to It is stated as an agent/ middle man and the earning was, the judgment of Raymond Woolen Mills Limited vs Income Tax Officer In determining whether commencement of reassessment proceedings under section 147 is valid, the court has only to see whether there is prima facie some material on the basis of y or correctness of the material is not a thing to be considered at the Learned counsel for the revenue also relied on judgment of Commissioner of Income Tax and others vs Chhabil in support of his submission that the VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. High Court under Article 226 of the Constitution ought not to petition when 13. judgments cited at issues which have been raised hereinabove. 14. quote Section 2(14)(iii)(a) Section 2(14)(iii)(a) and (b) of the Income Tax Act, 1961 Definitions. 2. In this Act, unless the context otherwise requires. xxx (14) xxx CWP No. 19667 of 2021 High Court under Article 226 of the Constitution ought not to petition when remedy of appeal lies to the CIT We have carefully considered the submissi judgments cited at bar as well as the law as exists today with regard to the issues which have been raised hereinabove. Before we go into the merits of the case, it would be apposite to quote Section 2(14)(iii)(a) and (b) of the Act, which is reproduced as under: Section 2(14)(iii)(a) and (b) of the Income Tax Act, 1961 Definitions. In this Act, unless the context otherwise requires. xxx xxx \"capital asset\" means— xxx xxx (iii) agricultural land in India, not being land situate (a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or (b) in any area within the distance, measured aerially, (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than one lakh but not exceeding ten lakh; or -7- High Court under Article 226 of the Constitution ought not to entertain the remedy of appeal lies to the CIT (Appeals) under the statute. We have carefully considered the submissions and the ar as well as the law as exists today with regard to the Before we go into the merits of the case, it would be apposite to and (b) of the Act, which is reproduced as under:- Section 2(14)(iii)(a) and (b) of the Income Tax Act, 1961- In this Act, unless the context otherwise requires.- xxx xxx agricultural land in India, not being land situate— in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or ny other name) or a cantonment board and which has a population of not less than ten in any area within the distance, measured aerially,— not being more than two kilometres, from the local limits of any municipality or cantonment referred to in item (a) and which has a population of more than ten thousand but not exceeding one lakh; or not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a lation of more than one lakh but not exceeding ten lakh; or entertain the ons and the ar as well as the law as exists today with regard to the Before we go into the merits of the case, it would be apposite to in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or ny other name) or a cantonment board and which has a population of not less than ten — not being more than two kilometres, from the local limits of any municipality or cantonment referred to in item (a) and which has a population of more than ten thousand but not not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a lation of more than one lakh but not VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 15. regard to the alternative remedy Court should refrain from entertaining a writ petition where there is a statutory alternative remedy of appeal provided. 16. Officer, Companies District I, Calcutta and another the Larger Bench of the against reassessment and reopening would be maintainable even if there is a provision available Discount Company Court in Commissioner of Income Tax and others vs Chhabil Dass Agarwal (2013) 357 ITR 357. However, we find that the Supreme c reiterated the law as laid down in Jeans Knit Private Limited vs Deputy Commissioner of Income Tax Bangalore and others 17. Mahesh Chander Sharma vs National Faceless Assessment Centre and others decided on 28.02.2024 had dismissed the writ petition on the ground that alternative remedy exist passed by the Supreme Court in CWP No. 19667 of 2021 (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation.—For the purposes of this sub \"population\" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year;” The first question which is required to be examine regard to the alternative remedy. It is true that in the ordinary course, this Court should refrain from entertaining a writ petition where there is a statutory alternative remedy of appeal provided. In Calcutta Discount Company Limited vs Officer, Companies District I, Calcutta and another Larger Bench of the Supreme Court by 3:2 ratio held that a writ petition against reassessment and reopening would be maintainable even if there is a provision available for filing an appeal. The said view expressed in Discount Company (supra) was sought to be distinguished by the Supreme Commissioner of Income Tax and others vs Chhabil Dass (2013) 357 ITR 357. However, we find that the Supreme c reiterated the law as laid down in Calcutta Discount Company Jeans Knit Private Limited vs Deputy Commissioner of Income Tax Bangalore and others (2018) 12 SCC 36. We are conscious that this Court in Chander Sharma vs National Faceless Assessment Centre and decided on 28.02.2024 had dismissed the writ petition on the ground that alternative remedy exists. In the said case we relied on judgments passed by the Supreme Court in The State of Maharas -8- not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. the purposes of this sub-clause, \"population\" means the population according to the last preceding census of which the relevant figures have been published before the first day of the The first question which is required to be examined is with . It is true that in the ordinary course, this Court should refrain from entertaining a writ petition where there is a statutory alternative remedy of appeal provided. Calcutta Discount Company Limited vs Income Tax Officer, Companies District I, Calcutta and another 1961 (41) ITR 191, Supreme Court by 3:2 ratio held that a writ petition against reassessment and reopening would be maintainable even if there is a for filing an appeal. The said view expressed in Calcutta (supra) was sought to be distinguished by the Supreme Commissioner of Income Tax and others vs Chhabil Dass (2013) 357 ITR 357. However, we find that the Supreme court Calcutta Discount Company (supra) and Jeans Knit Private Limited vs Deputy Commissioner of Income Tax We are conscious that this Court in CWP No. 4583 of 2024 – Chander Sharma vs National Faceless Assessment Centre and decided on 28.02.2024 had dismissed the writ petition on the ground . In the said case we relied on judgments The State of Maharashtra and others vs not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a clause, \"population\" means the population according to the last preceding census of which the relevant figures have been published before the first day of the d is with . It is true that in the ordinary course, this Court should refrain from entertaining a writ petition where there is a Income Tax 961 (41) ITR 191, Supreme Court by 3:2 ratio held that a writ petition against reassessment and reopening would be maintainable even if there is a Calcutta (supra) was sought to be distinguished by the Supreme Commissioner of Income Tax and others vs Chhabil Dass ourt (supra) and Jeans Knit Private Limited vs Deputy Commissioner of Income Tax – Chander Sharma vs National Faceless Assessment Centre and decided on 28.02.2024 had dismissed the writ petition on the ground . In the said case we relied on judgments htra and others vs VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. Greatship (India) Limited Pradesh and another vs M/s Commercial Engineers and Body Building Company Limited Court Larger Bench in subsequent ju Officer 2023 (452) ITR 222 took a different view. While the case of was at the initial stage, whereas in the present case the pleadings are complete and the case is pending since long before this Court, therefore, the discretion is exercised in favour of the assessee and the case is heard on merits. There is no bar proceedings initiated under Section 148 of the Act. 18. has held as under: preconditions for iss Income Tax Act, 1961 is satisfied. The provisions of reopening CWP No. 19667 of 2021 Greatship (India) Limited 2022 (13) Scale 770 and Pradesh and another vs M/s Commercial Engineers and Body Building Company Limited 2022 (14) Scale 920. However, we find that the Larger Bench in Calcutta Discount Company subsequent judgment in Red Chilli International Sales vs Income Tax 2023 (452) ITR 222, the Supreme Court after having considered took a different view. While the case of Mahesh Chander Sharma was at the initial stage, whereas in the present case the pleadings are complete and the case is pending since long before this Court, therefore, the discretion is exercised in favour of the assessee and the case is heard on merits. There is no bar to hear a writ petition in relation to challenge to proceedings initiated under Section 148 of the Act. In Red Chilli International Sales has held as under:- “We are with the petitioner that the impugned judgment rejecting the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court on the jurisdiction of High Court, as writ petitions have been entertained to be examined whether the jurisdiction preconditions for issue of notice under Section 148 of the Income Tax Act, 1961 is satisfied. The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in depth consid earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue w depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b) -9- 2022 (13) Scale 770 and The State of Madhya Pradesh and another vs M/s Commercial Engineers and Body Building 2022 (14) Scale 920. However, we find that the Supreme a Discount Company (supra) and a Red Chilli International Sales vs Income Tax , the Supreme Court after having considered Mahesh Chander Sharma (supra) was at the initial stage, whereas in the present case the pleadings are complete and the case is pending since long before this Court, therefore, the discretion is exercised in favour of the assessee and the case is heard on to hear a writ petition in relation to challenge to proceedings initiated under Section 148 of the Act. Red Chilli International Sales (supra), the Supreme Court “We are with the petitioner that the impugned judgment the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court on the jurisdiction of High Court, as writ petitions have been entertained to be examined whether the jurisdiction ue of notice under Section 148 of the Income Tax Act, 1961 is satisfied. The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in depth consideration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue would be examined in depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b) The State of Madhya Pradesh and another vs M/s Commercial Engineers and Body Building Supreme and a Red Chilli International Sales vs Income Tax , the Supreme Court after having considered (supra) was at the initial stage, whereas in the present case the pleadings are complete and the case is pending since long before this Court, therefore, the discretion is exercised in favour of the assessee and the case is heard on to hear a writ petition in relation to challenge to the Supreme Court “We are with the petitioner that the impugned judgment the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court on the jurisdiction of High Court, as writ petitions have been entertained to be examined whether the jurisdiction ue of notice under Section 148 of the Income Tax Act, 1961 is satisfied. The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would eration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the ould be examined in depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b) VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 19. initiated against him by reopening the final assessment invoking powers under sections 147 and 148 of the Act this court should entertain the writ petition. Reassessment and reopening of assessment are two issues which are different from regular assessment conducted under Section 143 assessment before the CIT against the final order passed under Section 147 of the Act. Supreme Court has been considering and examining that the case of reassessment and reopening is dif expressly time and again entertained writ petitions under Article 226 of the Constitution of India wherein the challenge is made to notice under Section 148A or 148B of the Act 20. alternative remedy of appeal and examine the case on merits. 21. challenged the notice issued for re could be taken up for arguments, the respondents stated before the Court that the final order of assessment has been passed. The said to be incorrect. Thereafter assessment order was passed uploaded on the portal on Court allowed the petitioner to challenge the said present writ petition. CWP No. 19667 of 2021 including the annexure thereto, the reply filed by the and the order under Section 148 (d) of the Income Tах 1961.” The petitioner in the present petition challenges the proceedings initiated against him by reopening the final assessment invoking powers under sections 147 and 148 of the Act. The question would arise whether this court should entertain the writ petition. Reassessment and reopening of assessment are two issues which are different from regular assessment conducted under Section 143 of the Act. Regular appeal lies against regul assessment before the CIT (Appeals). It is true that an appeal would lie against the final order passed under Section 147 of the Act. Supreme Court has been considering and examining that the case of reassessment and reopening is different from regular assessment and has expressly time and again entertained writ petitions under Article 226 of the Constitution of India wherein the challenge is made to notice under Section 148A or 148B of the Act or thereafter for reassessment. In view of above, we need not further delve alternative remedy of appeal and examine the case on merits. In the present case, we find that the petitioner had initially challenged the notice issued for re-opening of could be taken up for arguments, the respondents stated before the Court that the final order of assessment has been passed. The said to be incorrect. Thereafter assessment order was passed uploaded on the portal on 29.09.2021. Upon finding that the Court was wrongly informed Court allowed the petitioner to challenge the said present writ petition. -10- including the annexure thereto, the reply filed by the petitioner and the order under Section 148 (d) of the Income Tах Act The petitioner in the present petition challenges the proceedings initiated against him by reopening the final assessment invoking powers . The question would arise whether this court should entertain the writ petition. Reassessment and reopening of assessment are two issues which are different from regular assessment of the Act. Regular appeal lies against regular ppeals). It is true that an appeal would lie against the final order passed under Section 147 of the Act. However, the Supreme Court has been considering and examining that the case of from regular assessment and has expressly time and again entertained writ petitions under Article 226 of the Constitution of India wherein the challenge is made to notice under Section or thereafter for reassessment. f above, we need not further delve into the question of alternative remedy of appeal and examine the case on merits. In the present case, we find that the petitioner had initially opening of assessment but before the case could be taken up for arguments, the respondents stated before the Court that the final order of assessment has been passed. The said statement was found to be incorrect. Thereafter assessment order was passed in the evening and Upon finding that the Court was wrongly informed, the High Court allowed the petitioner to challenge the said assessment order in the petitioner Act The petitioner in the present petition challenges the proceedings initiated against him by reopening the final assessment invoking powers . The question would arise whether this court should entertain the writ petition. Reassessment and reopening of assessment are two issues which are different from regular assessment ar ppeals). It is true that an appeal would lie However, the Supreme Court has been considering and examining that the case of from regular assessment and has expressly time and again entertained writ petitions under Article 226 of the Constitution of India wherein the challenge is made to notice under Section of In the present case, we find that the petitioner had initially he case could be taken up for arguments, the respondents stated before the Court that s found and , the High assessment order in the VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 22. of the Act for the assessment year 2013 With regard to the agricultural information in his books of accounts and the ITO, Karnal had verification report the agricultural Income Tax proceedings were completed in March, 2016, details relating to t agricultural additions were made on account of undisclosed income or capital gain was added accepted. 23. petitioner on 20.03.2020 and the subsequent order under Section 144 read with Section 147 of the Act for the assessment year 2013 assessing officer has made additions of Rs. assessee has failed to furnish the facts well as any other income relating to it 19,34,10,000/ 14. The order further treats the amount as a short term capital gain of Rs.15,58,35,000/ 3,75,75,000/- read with Section 147 of the Act 19,34,10,000/ 24. Court the petitioner has made two fold arguments: CWP No. 19667 of 2021 We find that the assessment proceedings for the assessment year 2013-14 were concluded With regard to the agricultural income, the petitioner had placed all information in his books of accounts and the ITO, Karnal had verification report dated 13.03.2015 with regard to the purchase and sale of agricultural land. The same was then Income Tax on 30.03.2015 itself. Thus, when the final assessment proceedings were completed in March, 2016, details relating to t land and verification report were available on record. No additions were made on account of purchase and undisclosed income or capital gain was added The notice under Section 148 of the Act was issued to the petitioner on 20.03.2020 and the subsequent order under Section 144 read with Section 147 of the Act for the assessment year 2013 assessing officer has made additions of Rs. assessee has failed to furnish the facts regarding well as any other income relating to it and the income to the extent of Rs. 19,34,10,000/- has escaped assessment in the case of assessment year 20 . The order further treats the amount as a short term capital gain 15,58,35,000/- and unexplained investment -. However, the final assessment order read with Section 147 of the Act holds the entire income of Rs. 19,34,10,000/- as adventure in the nature of business. As per the written submissions and arguments raised before the Court the petitioner has made two fold arguments: -11- We find that the assessment proceedings under Section 143(3) were concluded in March, 2016. income, the petitioner had placed all information in his books of accounts and the ITO, Karnal had submitted his dated 13.03.2015 with regard to the purchase and sale of then forwarded to the Director of . Thus, when the final assessment proceedings were completed in March, 2016, details relating to the land and verification report were available on record. No purchase and sale of the land and no undisclosed income or capital gain was added and the returns were finally The notice under Section 148 of the Act was issued to the petitioner on 20.03.2020 and the subsequent order under Section 144 read with Section 147 of the Act for the assessment year 2013-14 reflects that the assessing officer has made additions of Rs. 19,34,10,000/ and held that the regarding the source of investment as and the income to the extent of Rs. has escaped assessment in the case of assessment year 2013- . The order further treats the amount as a short term capital gain for sum and unexplained investment amounting to Rs. . However, the final assessment order under Section 143(3) holds the entire income of Rs. as adventure in the nature of business. As per the written submissions and arguments raised before the Court the petitioner has made two fold arguments:- ction 143(3) . income, the petitioner had placed all submitted his dated 13.03.2015 with regard to the purchase and sale of forwarded to the Director of . Thus, when the final assessment he land and verification report were available on record. No the land and no and the returns were finally The notice under Section 148 of the Act was issued to the petitioner on 20.03.2020 and the subsequent order under Section 144 read the and held that the as and the income to the extent of Rs. - sum amounting to Rs. under Section 143(3) holds the entire income of Rs. As per the written submissions and arguments raised before the VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. and the final order passed, are totally on different presumption orders of reassessment, ther 25. submitted that at the time of reassessment, the assessing officer cannot be said to only limit himself to the contents of the show cause notice issued for reassessment. The entire reassessment can him. He will look into the different aspects which are brought to his notice at the time of passing of order of reassessment under Section 143 (3) read with Section 147 of the Act. The tentative view taken at the time of CWP No. 19667 of 2021 Firstly, there was no reason to believe that there escape assessment nor there was any new material available with the ITO to reach to a conclusion that the earlier assessment required to be re-assessed; and Secondly, that while notice was issued to the petitioner on 20.03.2020 under Section 148 of the Act alleging that the agricultural land had been purchased without source of investment, and therefore, the income to the extent of Rs.19,34,10,000/- had escaped assessment; an amount of Rs. 15,58,35,000/- was liable to be treated a gain; and Rs. 3,75,75,000/- was to be treated as unexplained source of investment; at the time of final assessment done under Section 147 read with Section 143(3) of the Act, the respondents have held the amount of Rs.19,34,10,000/ unexplained income under the heading nature of the business”. It is his submission that the notice under Section 148 of the Act and the final order passed, are totally on different presumption orders of reassessment, therefore, are vitiated. On the other hand, learned counsel for the respondents has submitted that at the time of reassessment, the assessing officer cannot be said to only limit himself to the contents of the show cause notice issued for reassessment. The entire reassessment can be done and the scope is large for him. He will look into the different aspects which are brought to his notice at the time of passing of order of reassessment under Section 143 (3) read with Section 147 of the Act. The tentative view taken at the time of -12- Firstly, there was no reason to believe that there is a case of escape assessment nor there was any new material available with the ITO to reach to a conclusion that the earlier assessment Secondly, that while notice was issued to the petitioner on 148 of the Act alleging that the agricultural land had been purchased without showing the source of investment, and therefore, the income to the extent of had escaped assessment; an amount of Rs. was liable to be treated as a short term capital was to be treated as unexplained source of investment; at the time of final assessment done under Section 147 read with Section 143(3) of the Act, the respondents have held the amount of Rs.19,34,10,000/- as unexplained income under the heading of “adventure in the notice under Section 148 of the Act and the final order passed, are totally on different presumptions and the efore, are vitiated. On the other hand, learned counsel for the respondents has submitted that at the time of reassessment, the assessing officer cannot be said to only limit himself to the contents of the show cause notice issued for be done and the scope is large for him. He will look into the different aspects which are brought to his notice at the time of passing of order of reassessment under Section 143 (3) read with Section 147 of the Act. The tentative view taken at the time of initial is a case of escape assessment nor there was any new material available with the ITO to reach to a conclusion that the earlier assessment Secondly, that while notice was issued to the petitioner on 148 of the Act alleging that the the source of investment, and therefore, the income to the extent of had escaped assessment; an amount of Rs. s a short term capital was to be treated as unexplained source of investment; at the time of final assessment done under Section 147 read with Section 143(3) of the Act, the as “adventure in the notice under Section 148 of the Act and the On the other hand, learned counsel for the respondents has submitted that at the time of reassessment, the assessing officer cannot be said to only limit himself to the contents of the show cause notice issued for be done and the scope is large for him. He will look into the different aspects which are brought to his notice at the time of passing of order of reassessment under Section 143 (3) read initial VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. stage of draft assessment under Section 144 of the Act cannot limit his powers. It is his further submission that while passing the order dated 29.09.2021, agricultural land, however, it conducted any agricultural activities on the said land and had not produced any evidence in support of his any income chargeable under the capital gain Section 54 of the Act petitioner, who land, namely, Manjit Singh, Jarinal Singh and Karnail Singh was actually purchased from them and the petitioner was merely and he had earned income as nature of business therefore, fall within the meaning of undisclosed income from business. He, therefore, has proceeded to exa Act as inserted by the Finance Act, 2002 relating to transfer both. business as the total income under the said heading under Section 56(2)(vii) and Section 50C of the Act. 26. Supreme Court in well as various judgments cited therein. 27. above and the facts which have been placed on record. CWP No. 19667 of 2021 stage of draft assessment under Section 144 of the Act cannot limit his powers. It is his further submission that while passing the order dated 29.09.2021, the A.O. has noticed and recorded the fact that the land was agricultural land, however, it proceeded to hold that conducted any agricultural activities on the said land and had not produced any evidence in support of his any agricultural activit any income chargeable under the capital gain Section 54 of the Act. Thereafter, the A.O. has proceeded who had been given power of attorney by the three land, namely, Manjit Singh, Jarinal Singh and Karnail Singh was actually purchased from them and the petitioner was merely and he had earned income as nature of business therefore, fall within the meaning of undisclosed income from business. He, therefore, has proceeded to examine the case in terms of inserted by the Finance Act, 2002 relating to transfer by an assessee of capital The A.O. has also proceeded to hold adventure in as the total income under the said heading under Section 56(2)(vii) and Section 50C of the Act. Learned counsel for the respondents relies on judgment of Supreme Court in Phool Chand Bajrang Lal vs ITO arious judgments cited therein. We have carefully considered the submissions as mentioned above and the facts which have been placed on record. -13- stage of draft assessment under Section 144 of the Act cannot limit his powers. It is his further submission that while passing the order dated the A.O. has noticed and recorded the fact that the land was proceeded to hold that the assessee has not conducted any agricultural activities on the said land and had not produced agricultural activity, he could not claim any income chargeable under the capital gain in terms of Section 10(37) and Thereafter, the A.O. has proceeded to hold the had been given power of attorney by the three owners of the land, namely, Manjit Singh, Jarinal Singh and Karnail Singh that the land was actually purchased from them and the petitioner was merely a mediator and he had earned income as nature of business and the same would, therefore, fall within the meaning of undisclosed income from business. He, mine the case in terms of Section 50C of the inserted by the Finance Act, 2002 with effect from 01.04.2003 an assessee of capital asset being land or building or has also proceeded to hold adventure in nature of as the total income under the said heading under Section 56(2)(vii) Learned counsel for the respondents relies on judgment of Phool Chand Bajrang Lal vs ITO (1993) 4 SCC 77 as We have carefully considered the submissions as mentioned above and the facts which have been placed on record. stage of draft assessment under Section 144 of the Act cannot limit his powers. It is his further submission that while passing the order dated the A.O. has noticed and recorded the fact that the land was not conducted any agricultural activities on the said land and had not produced , he could not claim and the owners of the he land a mediator and the same would, therefore, fall within the meaning of undisclosed income from business. He, of the with effect from 01.04.2003 being land or building or nature of as the total income under the said heading under Section 56(2)(vii) Learned counsel for the respondents relies on judgment of (1993) 4 SCC 77 as We have carefully considered the submissions as mentioned VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 28. 2013-14, we find that the final asses 2016 by the A.O. Before he passed the said order, he had got conducted verification agricultural land for which he invested Rs. 3,75,75,000/ the same to the company M/s DSS Mega City Projects. The land was situated beyond the municipal limits. The ITO (Intelligence), Karnal submitted his verification report to the said effect on 30.03.2015. At the time of final assessment done in March, 2016, t income as part of the business income nor he included income which f within the ambit of capital asset in terms of Section 2(14)(iii)(a) and (b) of the Act (supra), and meaning of Income Tax Act. We are not satisfied with the submission of the Revenue that they have no information about the said transaction at the time of their first final assess a case of change of opinion which cannot be allowed to be a reason for reopening of the case of reassessment. 29. three Judges Bench of the Apex CWP No. 19667 of 2021 The assessment year is 2013-14. In relation to assessment year 14, we find that the final assessment orders were passed in March, 2016 by the A.O. Before he passed the said order, he had got conducted verification relating to the transactions done by the assessee of the agricultural land for which he invested Rs. 3,75,75,000/ the same to the company M/s DSS Mega City Projects. The land was situated beyond the municipal limits. The ITO (Intelligence), Karnal submitted his verification report to the said effect on 30.03.2015. At the time of final assessment done in March, 2016, the A.O. did not include the said income as part of the business income nor he included income which falls beyond the municipal limits. Thus, it would not come in the ambit of capital asset in terms of Section 2(14)(iii)(a) and (b) of the Act (supra), and would, therefore not liable to capital gain within the meaning of Income Tax Act. We are not satisfied with the submission of the Revenue that they have no information about the said transaction at the time of their first final assessment conducted in March, 2016. It appears that it is a case of change of opinion which cannot be allowed to be a reason for reopening of the case of reassessment. In CIT vs Kelvinator of India Limited three Judges Bench of the Apex Court held as under: 7. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the assessing officer. Hence, after 1-4-1989, the assessing officer has power to reopen, provided there is \"tangible material\" to com conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted d hereinabove. Under the Direct Tax Law -14- 14. In relation to assessment year sment orders were passed in March, 2016 by the A.O. Before he passed the said order, he had got conducted the relating to the transactions done by the assessee of the agricultural land for which he invested Rs. 3,75,75,000/- and later on sold the same to the company M/s DSS Mega City Projects. The land was situated beyond the municipal limits. The ITO (Intelligence), Karnal submitted his verification report to the said effect on 30.03.2015. At the time he A.O. did not include the said income as part of the business income nor he included it as agricultural beyond the municipal limits. Thus, it would not come in the ambit of capital asset in terms of Section 2(14)(iii)(a) and (b) of , therefore not liable to capital gain within the meaning of Income Tax Act. We are not satisfied with the submission of the Revenue that they have no information about the said transaction at the time ment conducted in March, 2016. It appears that it is a case of change of opinion which cannot be allowed to be a reason for CIT vs Kelvinator of India Limited (2010) 2 SCC 723, a Court held as under:- One must treat the concept of \"change of opinion\" as an built test to check abuse of power by the assessing officer. 1989, the assessing officer has power to reopen, provided there is \"tangible material\" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted d hereinabove. Under the Direct Tax Laws 14. In relation to assessment year sment orders were passed in March, the relating to the transactions done by the assessee of the and later on sold the same to the company M/s DSS Mega City Projects. The land was situated beyond the municipal limits. The ITO (Intelligence), Karnal submitted his verification report to the said effect on 30.03.2015. At the time he A.O. did not include the said agricultural beyond the municipal limits. Thus, it would not come in the ambit of capital asset in terms of Section 2(14)(iii)(a) and (b) of , therefore not liable to capital gain within the meaning of Income Tax Act. We are not satisfied with the submission of the Revenue that they have no information about the said transaction at the time ment conducted in March, 2016. It appears that it is a case of change of opinion which cannot be allowed to be a reason for SCC 723, a One must treat the concept of \"change of opinion\" as an built test to check abuse of power by the assessing officer. 1989, the assessing officer has power to e to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of s VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. from the companies against omission of the words \"reason to 30. exercise of power by the assessing offi that they had any new information or documentary evidence for reopening of the case while the power is available with them. The same has to be exercised carefully and sanctity of assessment maintained. Merely because a new assessing officer may not be happy with the manner in which assessment was done earlier, cannot review assessment. The power available, as noticed above, is of reassessment and not of 31. notice dated 20.03.2020 as well as show cause notice along with the draft assessment order before this Court up before the Court, i assessment order which actually had not case was taken up, the statement in the Court, however, the pe final assessment order dated 29.09.2021. 32. that the assessing officer has CWP No. 19667 of 2021 (Amendment) Act, 1987, Parliament not only deleted the words \"reason to believe\" but also inserted the word \"opinion\" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words \"reason to believe\", Parliament reintroduced the said expression and deleted the word \"opinion\" on the ground that it would vest arbitrary powers in the assessing officer.” We respectfully follow and hold the action to be arbitrary exercise of power by the assessing officer. No document has been produced by the respondents to show that they had any new information or documentary evidence for reopening of the case while the power is available with them. The same has to be exercised carefully and sanctity of assessment maintained. Merely because a new assessing officer may not be happy with the manner in which assessment was done earlier, cannot review assessment. The power available, as noticed above, is of reassessment and not of review of earlier assessment. We also noticed that the petitioner had challenged the order and notice dated 20.03.2020 as well as show cause notice along with the draft assessment order before this Court the Court, it was informed that the Revenue has passed the final assessment order which actually had not been case was taken up, the apology was accepted by this Court in the Court, however, the petitioner was allowed to challenge the final assessment order dated 29.09.2021. From the perusal of the order passed on 29.09.2021, we find that the assessing officer has now completely changed his stand from what -15- (Amendment) Act, 1987, Parliament not only deleted the words \"reason to believe\" but also inserted the word \"opinion\" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words \"reason to Parliament reintroduced the said expression and deleted the word \"opinion\" on the ground that it would vest arbitrary powers in the assessing officer.” We respectfully follow and hold the action to be arbitrary No document has been produced by the respondents to show that they had any new information or documentary evidence for reopening of the case while the power is available with them. The same has to be exercised carefully and sanctity of assessments already done should be maintained. Merely because a new assessing officer may not be happy with the manner in which assessment was done earlier, cannot be a reason to review assessment. The power available, as noticed above, is of review of earlier assessment. We also noticed that the petitioner had challenged the order and notice dated 20.03.2020 as well as show cause notice dated 23.09.2021 along with the draft assessment order before this Court. When the case came t was informed that the Revenue has passed the final been passed. By that time when the apology was accepted by this Court of giving a wrong titioner was allowed to challenge the From the perusal of the order passed on 29.09.2021, we find completely changed his stand from what (Amendment) Act, 1987, Parliament not only deleted the words \"reason to believe\" but also inserted the word \"opinion\" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words \"reason to Parliament reintroduced the said expression and deleted the word \"opinion\" on the ground that it would vest We respectfully follow and hold the action to be arbitrary No document has been produced by the respondents to show that they had any new information or documentary evidence for reopening of the case while the power is available with them. The same has to be should be maintained. Merely because a new assessing officer may not be happy with a reason to review assessment. The power available, as noticed above, is of We also noticed that the petitioner had challenged the order and dated 23.09.2021 he case came t was informed that the Revenue has passed the final By that time when the of giving a wrong titioner was allowed to challenge the From the perusal of the order passed on 29.09.2021, we find completely changed his stand from what VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. he had taken cause notice issued to the petitioner alleging that Rs.19,34,100,00/ From the show cause notice, we find that the same was categorized as escape in assessment on account of treating it as a short term capital gain a sum of Rs.15,58,35,000/ 3,75,75,000/- income to be under the heading clearly based on surmises of the assessing officer. 33. the respondents produced in support of any agricultur claim under the capital gain under Section But the assessee all times asserted the same therefore, beyond the provisions of Section 2(14)(iii) of the Act. His contention has been supported by the report of the ITO (Intelligence) A.O. does not refer either to the report of the ITO (Intelligence) nor to the submissions power. When an authority is empowered to exercise and pass orders in terms of the Act, it has to remain within the four corners of the manner the said power is required to be exercised. O the case under Section 147 of the Act is of non the capital gain and non authority available in law to pass order holding that income had escape assessment, which was following as ‘adventure in the nature of business’. CWP No. 19667 of 2021 taken while issuing the draft assessment cause notice issued to the petitioner alleging that Rs.19,34,100,00/- was acquired as ‘adventure in the nature of business’. From the show cause notice, we find that the same was categorized as sessment on account of treating it as a short term capital gain Rs.15,58,35,000/- and unexplained source of investment -. Such change of reasons for reassessment and treating the income to be under the heading of ‘adventure in clearly based on surmises of the assessing officer. We have extensively quoted the submissions of the counsel for the respondents, who has proceeded to submit produced in support of any agricultural activit claim under the capital gain under Section 10(37) of Section 54 of the Act. ut the assessee, as we find, had not claimed s asserted the same to be falling beyond the municipal therefore, beyond the provisions of Section 2(14)(iii) of the Act. His contention has been supported by the report of the ITO (Intelligence) A.O. does not refer either to the report of the ITO (Intelligence) nor to the of the assessee. We, thus, find it a case of power. When an authority is empowered to exercise and pass orders in terms it has to remain within the four corners of the manner the said power is required to be exercised. O the case under Section 147 of the Act is of non capital gain and non-disclosure of sources of authority available in law to pass order holding that income had escape assessment, which was following as ‘adventure in the nature of business’. -16- assessment order. There is no show cause notice issued to the petitioner alleging that the income of was acquired as ‘adventure in the nature of business’. From the show cause notice, we find that the same was categorized as sessment on account of treating it as a short term capital gain for and unexplained source of investment Rs. Such change of reasons for reassessment and treating the ‘adventure in the nature of business’, is clearly based on surmises of the assessing officer. We have extensively quoted the submissions of the counsel for submit that there was no evidence al activity and would now, therefore, 10(37) of Section 54 of the Act. ed it as a capital gain, but has at beyond the municipal limits and, therefore, beyond the provisions of Section 2(14)(iii) of the Act. His contention has been supported by the report of the ITO (Intelligence). The A.O. does not refer either to the report of the ITO (Intelligence) nor to the ssessee. We, thus, find it a case of colourable exercise of power. When an authority is empowered to exercise and pass orders in terms it has to remain within the four corners of the manner in which the said power is required to be exercised. Once the basis for re-opening of the case under Section 147 of the Act is of non-disclosure of income under sources of investment, the A.O. had no authority available in law to pass order holding that income had escaped assessment, which was following as ‘adventure in the nature of business’. . There is no show income of was acquired as ‘adventure in the nature of business’. From the show cause notice, we find that the same was categorized as for Rs. Such change of reasons for reassessment and treating the the nature of business’, is We have extensively quoted the submissions of the counsel for that there was no evidence , therefore, 10(37) of Section 54 of the Act. but has at limits and, therefore, beyond the provisions of Section 2(14)(iii) of the Act. His . The A.O. does not refer either to the report of the ITO (Intelligence) nor to the exercise of power. When an authority is empowered to exercise and pass orders in terms which opening of disclosure of income under investment, the A.O. had no d VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 34. Court, the assessee was assessed of income having escaped assessment, however, so far as the show cause notice is conc on the premise that the assessee had not filed his income tax return for the year 2016-17. Later on, while passing the order it proceeded to hold that certain income has escaped assessment for the year 2014 basis for issuing show cause notice was different from that of the final assessment order and the same was accordingly quashed. 35. assessment proceedings were completed in March, 2016 wi the report of the ITO was obtained with regard to the nature of the land but no additions were made at that level. 36. Chawal Udyog and others Supreme Court examined the issue opinion” and Central Sales Tax Act, 1956 proceedings can only be initiated if the assessing authority has provides for “re 37. may re-open any assessment been any relevant material which CWP No. 19667 of 2021 In Banyan Real Estate Fund Mauritius Court, the assessee was assessed of income having escaped assessment, however, so far as the show cause notice is conc on the premise that the assessee had not filed his income tax return for the 17. Later on, while passing the order it proceeded to hold that certain income has escaped assessment for the year 2014 basis for issuing show cause notice was different from that of the final assessment order and the same was accordingly quashed. We find that the record was available at the time when the assessment proceedings were completed in March, 2016 wi the report of the ITO was obtained with regard to the nature of the land but no additions were made at that level. In the case of State of Uttar Pradesh and others vs Aryaverth Chawal Udyog and others (2015) 17 SCC 324, Supreme Court examined the issue and difference between the and “reasons to believe” while considering the provisions of the Central Sales Tax Act, 1956 and held as under: “19. Under Section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has “reason to believe” that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute provides for “reason to believe”, either the reasons should appear on the face of the notice or they must be available on the material which have been placed before him.” We find that the Income Tax Officer or the Assessing Officer open any assessment already done by been any relevant material which is disclosed subsequently relating to the -17- Banyan Real Estate Fund Mauritius (supra), Delhi High Court, the assessee was assessed of income having escaped assessment, however, so far as the show cause notice is concerned, the same was issued on the premise that the assessee had not filed his income tax return for the 17. Later on, while passing the order it proceeded to hold that certain income has escaped assessment for the year 2014-15 thereto, the basis for issuing show cause notice was different from that of the final assessment order and the same was accordingly quashed. We find that the record was available at the time when the assessment proceedings were completed in March, 2016 with the A.O. and the report of the ITO was obtained with regard to the nature of the land but State of Uttar Pradesh and others vs Aryaverth (2015) 17 SCC 324, a three Judges Bench of the and difference between the “change of ” while considering the provisions of the and held as under:- Under Section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has “reason to believe” that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute ason to believe”, either the reasons should face of the notice or they must be available on the material which have been placed before him.” e find that the Income Tax Officer or the Assessing Officer done by him if he finds that there has disclosed subsequently relating to the (supra), Delhi High Court, the assessee was assessed of income having escaped assessment, erned, the same was issued on the premise that the assessee had not filed his income tax return for the 17. Later on, while passing the order it proceeded to hold that the basis for issuing show cause notice was different from that of the final We find that the record was available at the time when the th the A.O. and the report of the ITO was obtained with regard to the nature of the land but State of Uttar Pradesh and others vs Aryaverth Bench of the change of ” while considering the provisions of the Under Section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has “reason to believe” that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute ason to believe”, either the reasons should face of the notice or they must be available on e find that the Income Tax Officer or the Assessing Officer that there has disclosed subsequently relating to the VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. said year or assessment and of such a nature which would reflect that such non-disclosure has resulted in under Section 148 of the Act and proceed accordingly. cannot be allowed to merely reopen the assessment on his opinion that the earlier assessment was wrongful or that he has a reason to suspect th therefore, has to be based on cogent material available before it not available at that relevant time. officer based its opinion, therefore, cannot be irre Merely on account of there being an error of the ITO in relation to the earlier assessment for initiating reassessment State of Rajasthan opening of assessment some material a case of escaped assessment exist Limited vs CCT 38. purchased agricultural land from three agriculturists, namely, Manjeet Singh, Karnail Singh and Jarnail Singh disclosed in his earlier return of the amount having been release of FDRs. Megacity Projects Private Limited would not eve capital asset and no capital gain was liable to be taxed. position that the land was agricultural and beyond the municipal limits therefore, would not come within the ambit of Section 2 Act which require agricultural land within the ambit of Section 2(14)(iii)(b) of the Act CWP No. 19667 of 2021 said year or assessment and of such a nature which would reflect that such disclosure has resulted in an under assessment, under Section 148 of the Act and proceed accordingly. cannot be allowed to merely reopen the assessment on his opinion that the earlier assessment was wrongful or that he has a reason to suspect that the assessment was done wrongfully. therefore, has to be based on cogent material available before it not available at that relevant time. The material on which the assessing based its opinion, therefore, cannot be irre Merely on account of there being an error found ITO in relation to the earlier assessment for initiating reassessment (ref. Delhi Cloth and General Mills Co. State of Rajasthan (1980) 4 SCC 71) nor can the reason to believe for re opening of assessment be based on an opinion that from the same perusal of some material a case of escaped assessment exist Limited vs CCT (2007) 15 SCC 435. On merits of the case, we also purchased agricultural land from three agriculturists, namely, Manjeet Singh, Karnail Singh and Jarnail Singh for a sum of Rs. disclosed in his earlier return of the amount having been FDRs. Further selling of the agricultural land to M/s Megacity Projects Private Limited would not eve capital asset and no capital gain was liable to be taxed. position that the land was agricultural and beyond the municipal limits therefore, would not come within the ambit of Section 2 Act which required conducting of agricultural activity and would be agricultural land within the ambit of Section 2(14)(iii)(b) of the Act -18- said year or assessment and of such a nature which would reflect that such under assessment, he can issue notice under Section 148 of the Act and proceed accordingly. However, the ITO cannot be allowed to merely reopen the assessments already finalized based on his opinion that the earlier assessment was wrongful or that he has a at the assessment was done wrongfully. Re-assessment, therefore, has to be based on cogent material available before it, which was The material on which the assessing based its opinion, therefore, cannot be irrelevant, irrational or vague. found based on a personal opinion ITO in relation to the earlier assessment, cannot be a reason to believe Delhi Cloth and General Mills Co. Ltd. vs CC 71) nor can the reason to believe for re- be based on an opinion that from the same perusal of some material a case of escaped assessment exists (ref. Binani Industries also find that the petitioner had purchased agricultural land from three agriculturists, namely, Manjeet Singh, for a sum of Rs. 3,75,75,000/-. He had disclosed in his earlier return of the amount having been obtained from ling of the agricultural land to M/s DSS Megacity Projects Private Limited would not even come within the ambit of capital asset and no capital gain was liable to be taxed. It is an admitted position that the land was agricultural and beyond the municipal limits, and therefore, would not come within the ambit of Section 2 (14)(iii) (a) of the conducting of agricultural activity and would be agricultural land within the ambit of Section 2(14)(iii)(b) of the Act. said year or assessment and of such a nature which would reflect that such can issue notice However, the ITO based on his opinion that the earlier assessment was wrongful or that he has a assessment, which was The material on which the assessing irrational or vague. based on a personal opinion be a reason to believe Ltd. vs - be based on an opinion that from the same perusal of Binani Industries that the petitioner had purchased agricultural land from three agriculturists, namely, Manjeet Singh, . He had obtained from DSS come within the ambit of admitted and of the conducting of agricultural activity and would be VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment CWP No. 39. escaped income also as the said aspect stood alr assessment order passed after conducting an enquiry by the A.O. at the relevant time based on the report of the ITO (Intelligence), Karnal. 40. undertaken in 2016 did not w opening for fresh assessment. The entire proceedings initiated vide notice dated 20.03.2020 are contrary to law Accordingly, the same shall not petition is accordingly allowed. The notice dated 20.03.2020 22.09.2021, dated 24.09.2021, dated 29.09.2021 and demand notice dated 29.09.2021 are quashed and set aside. 41. 42. 02.09.2024 vs Whether speaking/reasoned Whether reportable CWP No. 19667 of 2021 In the present case, we are satisfied that there is no case of escaped income also as the said aspect stood alr assessment order passed after conducting an enquiry by the A.O. at the relevant time based on the report of the ITO (Intelligence), Karnal. Thus, we are satisfied that the assessment proceedings as undertaken in 2016 did not warrant any interference or warrant any re opening for fresh assessment. The entire proceedings initiated vide notice 20.03.2020 are contrary to law and Accordingly, the same shall not be sustainable in the eyes of law. The petition is accordingly allowed. The notice dated 20.03.2020 22.09.2021, dated 24.09.2021, dated 29.09.2021 and demand notice dated are quashed and set aside. All pending applications shall stand disposed of. No costs. (SANJEEV PRAKASH SHARMA) Whether speaking/reasoned Yes/No Whether reportable Yes/No -19- In the present case, we are satisfied that there is no case of escaped income also as the said aspect stood already noticed vide final assessment order passed after conducting an enquiry by the A.O. at the relevant time based on the report of the ITO (Intelligence), Karnal. Thus, we are satisfied that the assessment proceedings as arrant any interference or warrant any re- opening for fresh assessment. The entire proceedings initiated vide notice and are found to be illegal. sustainable in the eyes of law. The writ petition is accordingly allowed. The notice dated 20.03.2020, orders dated 22.09.2021, dated 24.09.2021, dated 29.09.2021 and demand notice dated All pending applications shall stand disposed of. (SANJEEV PRAKASH SHARMA) JUDGE (SANJAY VASHISHT) JUDGE Yes/No Yes/No In the present case, we are satisfied that there is no case of eady noticed vide final assessment order passed after conducting an enquiry by the A.O. at the Thus, we are satisfied that the assessment proceedings as - opening for fresh assessment. The entire proceedings initiated vide notice found to be illegal. writ , orders dated 22.09.2021, dated 24.09.2021, dated 29.09.2021 and demand notice dated VARINDER SINGH 2024.09.03 10:14 I attest to the accuracy and authencity of this order/judgment "