M/s. Devrekha Engineers Pvt. Ltd., Surat V. The DCIT, Central Circle 1, Surat

ITA 2090/AHD/2013

• Counselvise Citation: 209020514 RSA 2013
• Duration Of Justice: 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 03-03-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 08-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: RASESH SHAH
• Keywords: Reopening of assessment; Capital asset; Depreciation; Cost of acquisition; Wrong claim; Reason to believe; Revenue expenditure
• Section: 143(3); 142(1); 148; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMADABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2090/AHD/2013 A.Y. 2005-06 M/S. DEVREKHA ENGINEERS PVT. LTD., A-2, 36/102, OPP. GIDC OFFICER, SACHIN, SURAT. PAN: AAACD8341C V S . DCIT, CENTRAL CIRCLE-1, SURAT. (APPELLANT) .. (RESPONDENT) REVENUE BY : SHRI K. C. MATHEWS, SR. D.R. ASSESSEE(S) BY : SHRI RASESH SHAH, A.R. / DATE OF HEARING : 03/03/2014 / DATE OF PRONOUNCEMENT: 27/03/2014 / // / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FRO M THE ORDER OF LEARNED CIT(A)-I, SURAT, DATED 25.06.2013. THE APPE LLANT HAS RAISED THE FOLLOWING GROUNDS: ' 1. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED C OMMISSIONER OF INCOME-TAX (APPEALS)HAS ERRED IN CON FIRMING THE ACTION OF ASSESSING OFFICER IN REOPENING ASSESSMENT BY ISSUING NOTICE U/S 148 OF I. T. ACT, 1961. 2. ON SHE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN TAXING THE SUM OF RS.1,46,00,000/- RECEIVED ON TRANSFER OF RIGHTS IN THE PLOT AS INCOM E FROM OTHER SOURCES WITHOUT ALLOWING ANY COST OF ACQUISITION AS AGAINST AMOUNT OF RS. 86,79,812 /- SHOWN BY THE ASSESSEE UNDER THE HEAD LONG TERM CAPI TAL GAIN AFTER CLAIMING INDEXED COST OF ACQUISITION OF RS. 59,20,1 88/-. 3. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE A S WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN NOT GRANTING DEDUCTION U/S. 54EC AGAINST THE AMOUNT OF RS. 1,46. 00.000/- TAXED BY HIM. ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 2 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AX LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED REDUCING THE CLAIM OF UNABSORBED DEPRECATION BY RS. 1,38,366/- OUT OF THE TOTAL CLAIM OF RS. 9,56, 520/-. 5. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ER RED IN GIVING DIRECTION U/S. 150(1) FOR ISSUE OF NOTICE U/S. 148 IN THE CASE OF SHRI DEVENDRA S. NAIK BY HOLDING THAT CAPITAL GAIN IS TAXABLE ONLY IN HIS CASE AS HE WAS HOLDING RIGHTS IN THE PROPERLY: 6. IT IS THEREFORE PRAYED THAT THE ASSESSMENT FRAME D U/S 143(3) R,W.S. 147 OF THE ACT MAY KINDLY BE QUASHED. 7. IT IS ALSO PRAYED THAT THE DIRECTIONS ISSUED U /S. 150(1) MAY PLEASE BE QUASHED. 8. FT IS ALSO PRAYED THAT THE AMOUNT RECEIVED ON TR ANSFER OF THE RIGHTS IN THE PLOT MAY PLEASE BE TAXED AS INCOME FROM LONG TERM CAPITA L GAIN IN THE HANDS OF THE ASSESSEE BY ALLOWING INDEXED COST OF ACQUISITION AN D ACCORDINGLY DEDUCTION U/S. 54EC MAY PLEASE BE GRANTED. ' 2. AT THE OUTSET, LEARNED AR HAS EXPRESSED NO T TO PRESS GROUND NO. 4, HENCE, THE SAME IS HEREBY DISMISSED BEING NOT PRESS ED. 2,1 LEARNED AR HAS FIRST CONTESTED CONNECTED G ROUND NOS.L & 6 BEING LEGAL IN NATURE, CHALLENGING THE VALIDITY OF THE AS SESSMENT. 3. FACTS IN BRIEF IN RESPECT OF THESE TWO GROUNDS A S EMERGING FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S.143(3) R .W.S. 147 OF IT ACT, DATED 29.12.2011 WERE THAT A RETURN OF NIL INCOME WAS FILED BY THE ASSESSEE FOR A.Y.2005-06 ON 31.10.2005, WHICH WAS A SSESSED U/S. 143(3) VIDE AN ORDER DATED 31.12.2007. THE RETURNED I NCOME WAS ACCEPTED. IN THE IMPUGNED ORDER VIDE PARAGRAPH 2, 3 AND 4 THE AC HAS GIVEN CERTAIN REASONS FOR REOPENING OF THE ASSESSMENT. FOR READY REFERENCE, THESE PARAGRAPHS ARE REPRODUCED BELOW: '2. AS PER SECTION 55(2)(A) OF THE IT. ACT, !961, FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAINS UNDER SECTION 48, 'COST OF ACQUISITION' IN RELATION TO CAPITA ASSET BEING TENANCY RIGHTS SHAL L BE THE PURCHASE PRICE PAID TO THE PREVIOUS OWNER AND IN OTHER CASES IT WILL BE 'NIL'. HERE PREVIOUS OWNER MEANS A TENANT WHO HAD THE TENANCY RIGHT VESTED IN HIM BEFORE ITS TRANSFER AND NOT THE OWNER OF THE ACTUAL ASSET THAT HAS BEEN GIV EN ON LEASE OR RENT IN THE CASE OF ASSESSEE COMPANY. ON PERUSAL OF THE STATEME NT OF COMPUTATION OF INCOME, IT IS OBSERVED THAT THE TOTAL .INCOME AS PE R THE NORMAL PROVISIONS OF THE ACT WAS ARRIVED AT (-) RS.2079792 WHICH INCLUDE D LONG TERM CAPITAL GAIN TREATED SEPARATELY AS UNDER: ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 3 CONSIDERATION ON SALE OF LAND RS. 14600000 LESS: INDEXED COST OF ACQUISITION RS. 5920188 LT.C.G RS.8679812 LESS : DEDUCTION U/S. 54 EC (REC BONDS) RS.8700000 TAXABLE LTCG NIL 3. THE POSSESSION OF THE LAND WAX HANDED OVER TO TH E TRANSFEREE ON 31.12.04. FURTHER, ON PERUSAL OF THE RECORDS, IT IS OBSERVED THAT THE LAND SOLD WAS GIDC' LAND HELD ON LEASE WHICH WAS ALLOWED TO BE TRANSFER RED LO THE TRANSFEREE BY GIDC OFFICE ORDER DATED 16,6.2005, THUS, ASSESSEE H AD TENANCY RIGHTS VESTED IN IT WHICH WAS TRANSFERRED. 4. IN THE INSTANT CASE, ASSES-SEE HAD ACQUIRED THE LAND ON LEASE DIRECTLY FROM GIDC I.E. THE OWNER OF THE ASSET (LAND). SINCE, THE LEASE RIGHTS I.E. TENANCY RIGHTS, WAS NOT PURCHASED FROM A PREVIOUS OWNER (TE NANT) OF THE LEASE RIGHTS, AS PER THE PROVISIONS OF SECTION 55(2)(A) OF THE ACT, THE COST OF ACQUISITION WAS TO BE TREATED AS 'NIL'. HOWEVER, IN THE INSTANT CAS E, THE LTCG U/S.48 WAS COMPUTED BY ALLOWING INDEXED COST OF ACQUISITION OF RS. 5920188. INCORRECT COMPUTATION OF CAPITAL GAINS RESULTED IN UNDERASSES SMENT OF LT.C.G. OF RS. 59,00,000.'' 3.1 THEREAFTER A NOTICE U/S.148 WAS ISSUED ON 2 9.03.2011. UNDISPUTEDLY, THE REASONS RECORDED FOR THE REOPENI NG OF THE ASSESSMENT WERE PROVIDED TO THE ASSESSEE. FROM THE SIDE OF THE ASSESSEE, THE REOPENING WAS CHALLENGED PRIMARILY ON THE GROUND TH AT THERE WAS NO ESCAPEMENT OF INCOME ON THE PART OF THE ASSESSEE; H ENCE, THE ASSESSMENT ONCE COMPLETED SHOULD NOT BE REOPENED. IT WAS CON TESTED BEFORE AO THAT THE TERM 'PREVIOUS OWNER' SHOULD NOT BE GIVEN A R ESTRICTED MEANING SO AS TO INCLUDE ONLY THAT PERSON WHO HAS 'PENDING RIGHT' VESTED IN HIM BEFORE THE TRANSFER. ACCORDING TO THE ASSESSEE THE PREVIOU S OWNER OF THE PROPERTY IS ALSO 'LESSOR', AS IN THE INSTANT CASE. THE PAYME NT FOR ACQUIRING LEASE RIGHTS HAVE BEEN MADE TO LESSOR, I.E., GIDC; HENCE, THE COST OF ACQUISITION OF LEASE HOLD RIGHTS SHOULD BE ELIGIBLE FOR DEDUCTI ON AGAINST THE SALE VALUE OF THE SAID ASSET. HOWEVER, THE AO WAS NOT CONVINCE D. ACCORDING TO AO, THE ASSESSEE HAS NOT FURNISHED EVIDENCE OF PAYMENT TO GIDC. AS PER AO, THE ASSESSEE HAD ACQUIRED THE TENANCY RIGHT, I.E ., LEASE RIGHTS OF THE LAND ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 4 FROM GIDC WHO WAS NOT A LESSEE BUT THE ACTUAL OWNE R OF THE LAND. IN HIS OPINION THE PURCHASE PRICE PAID SHOULD NOT BE C ONSIDERED AS PAID TO THE PREVIOUS OWNER BECAUSE THE GIDC HAPPED TO BE THE OWNER OF THE LAND AND COULD NOT BE CONSIDERED AS A PREVIOUS OWNER. TH E AO HAS THEREAFTER MENTIONED SECTION 55(2)(A) OF IT ACT FOR THE PROPOS ITION THAT 'COST OF ACQUISITION' IN RELATION TO CAPITAL ASSET SHALL BE PAID TO PREVIOUS OWNER AND IN OTHER CASES IT IS 'NIL'. IN HIS OPINION, ASS ESSEE'S CASE HAD FALLEN UNDER 'OTHER CASES'. THE ASSESSEE HAD TRANSFERRED O NLY TENANCY RIGHTS; HENCE, THE CLAIM OF COST OF ACQUISITION WAS NOT PER MISSIBLE. AFTER ASSIGNING THOSE REASONS, AO HAS MADE AN ADDITION OF RS,59 LACS IN THE HANDS OF THE ASSESSEE. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 4. BEFORE LEARNED CIT(A), THE ASSESSEE HAD CHALLENG ED THE REOPENING OF THE ASSESSMENT BY MENTIONING THAT THE LAND IN QU ESTION WAS TAKEN ON LEASE BY THE ASSESSEE FROM GIDC FOR 99 YEARS. GIDC HAS ALLOWED TO TRANSFER THE LAND VIDE AN ORDER DATED 16.06.2005. I T WAS CONTESTED THAT THE PROVISIONS OF SECTION 55(2)(A) DID NOT APPLY ON THE FACTS OF THE CASE FOR THE REASON THAT THE ASSESSEE HAD MADE PAYMENT TO GIDC FOR ACQUISITION OF LEASE HOLD RIGHTS' AND THEREFORE THE SAID PAYMENT WAS IN THE NATURE OF ' COST OF ACQUISITION '. CHALLENGING THE VALIDITY OF THE REOPENING, IT WAS ARGUED THAT EARLIER AS ASSESSMENT WAS MADE U/S. 143(3) OF IT ACT AND THEREFORE AFTER THE LAPSE OF FOUR YE ARS, IN THE ABSENCE OF ANY CONCEALMENT OF FACTS ON THE PART OF THE ASSESSEE, T HE PROCEEDINGS U/S. 148 WERE WRONGLY INITIATED. IT WAS SUBMITTED BY THE-ASS ESSEE THAT THE PAYMENT MADE TO GIDC IN DIFFERENT YEARS TOTALING RS.43,27 ,224/- WERE INFORMED ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 5 WHILE PLACING ON RECORD THE WORKING OF THE LONG TER M CAPITAL GAIN AS UNDER: ASSESSMENT YEAR (AMOUNT IN RS.) 1992-93 6,96,611 1993-94 2,16,872 1994-95 4,12,218 1995-96 3, 68,769 1996-97 2,44,835 1997-98 3,33,923 1998-99 70,364 2003-04 15,83,691 2005-06 3,99,941 4.1 IT WAS INFORMED THAT JV ENTRIES WERE PASSED IN THE YEAR 2005-06 OF RS.14,02,250/- AND RS.12,16,453/-, ON RECEIVING THA T INFORMATION, LEARNED CIT(A) HAD REMANDED THE MATTER TO AO U/S.25 0(4) OF IT ACT. THE ASSESSEE WAS ASKED TO FURNISH THE ORIGINAL LEASE DE ED IN FAVOUR OF THE ASSESSEE. HENCE, THE AO WAS DIRECTED TO MAKE NECESS ARY INQUIRIES FROM GIDC. THE AO HAS SUBMITTED ITS REPORT ACCORDING TO WHICH THE LAND WAS ALLOTTED TO ONE PARTNERSHIP FIRM, NAMELY, M/S. D.S. SYNTHETICS, WHICH WAS LATER ON CONVERTED INTO A PROPRIETORSHIP CONCERN OF ONE SRI DIVENDRA SAMABHAI NAIK. THE SAID CHANGE IN THE CONSTITUTION WAS INFORMED, AS WELL AS, THE TRANSFER WAS APPROVED BY GIDC VIDE A L ETTER DATED 20 TH OF NOVEMBER, 2004. THEREUPON, THE SAID LEASE WAS TRANS FERRED IN FAVOUR OF M/S. R.D. DYEING AND PRINTING MILLS PVT. LTD. BY M/ S. D.S. SYENTHETICS. GIDC HAS ALSO INFORMED THE REVENUE DEPARTMENT AS UN DER: 'INITIALLY, THE SAID PLOT WAS ALLOTTED TO DS SYNTHE TICS VIDE THIS OFFICE ALLOTMENT LETTER NO.4738 DATED 25.04.1991 AND AGREEMENT WAS EXECUTED ON 25.05.1991. LATER ON AS PER THE APPLICATION RECEIVED FROM M/ S. D.S. SYNTHETICS, CHANGE IN ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 6 CONSTITUTION WAS MADE BY THIS OFFICE VIDE FINAL TRA NSFER ORDER DATED 02.01.1992. MOREOVER, PARTY HAD AGAIN APPLIED FAR C HANGE OF CONSTITUTION, I.E.. FROM M/S. D.S. SYNTHETICS (PARTNERSHIP FIRM) TO M/S. D.S. SYNTHETICS, PROP. SHRI DEVENDRA SOMABHAI NAIK VIDE THEIR APPLIC ATION DATED 16.10.2004. ACCORDINGLY, THIS OFFICE HAD ISSUED FINAL TRANSFER LETTER VIDE NO. 7682 DATED 20.11.2004. ON 07.02.2005. M/S. D.S. SYNTHETICS PROP SHRI DEVEN DRA SOMABHAI NAIK HAD APPLIED FOR TRANSFER IN FAVOUR OF M/S. RD DYG & PTG MILLS P. LID. HAVING TWO DIRECTORS (1) SHRI HARI VALLABH MADANLAL KOTHARI AN D (2) SHRI NANDKISHOR MADANLAL KOTHARI AND THIS TRANSFER WAS EFFECTED BY THIS OFFICE VIDE ORDER NO. 3170 DATED 16.06.2005. MOREOVER, LEASE DEED HAD BEEN EXECUTED BETWEEN G1DC AND M/S. RD DYG & PTG MILLS P. LID ON 07.07.20 05 AND SUBSEQUENTLY PERMISSION UNDER CLAUSE 2(R) OF LEASE DEED WAS ISSU ED ON 1607.2005. HENCE, CONSIDERING THE ABOVE FACTS, M/S. DEVREKHA E NGINEERING LTD/PVT DOES NOT EXIST ON GIDC ' '.V RECORD. THUS, THE SAID PLOT STANDS IN THE NAME OF M /S. RD DYG & PTG MILLS P. LTD. COPIES ALLOTMENT LETTER TO M/S. D.S. SYNTHETICS AND TRANSFER IN FAVOUR OF M/S. R.D. DYG & PTG MILLS P. LTD. ARE ENCLOSED HEREWITH. ' 4.2 ON THE BASIS OF THE ABOVE INFORMATION, LEARNED CIT( A) WAS OF THE VIEW THAT THE APPELLANT WAS NEVER A LESSEE AND CERT AIN MATERIAL FACTS WERE NOT DISCLOSED BEFORE THE AO; HENCE, HE HAS UPHELD T HE REOPENING OF ASSESSMENT AS WELL AS ISSUED A NOTICE OF ENHANCEMEN T, LEARNED CIT(A) HAS MENTIONED THAT THOSE FACTS WERE NOT IN THE POSS ESSION OF THE AO WHO HAD PASSED THE ORIGINAL ASSESSMENT ORDER ON 31.12.2 007. AN ANOTHER FACT HAS ALSO BEEN NOTED BY LEARNED CIT(A) IN PARAGRAPH 8.6 THAT THE MATTER WAS EARLIER REFERRED TO DVO VIDE A LETTER DATED 20' OF NOVEMBER, 2007, IN RESPECT OF SALE OF GIDC PLOT NO.365 AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS. THAT REFERENCE WAS MADE FOR THE REASON THAT IN VIEW OF THE THEN AO THE SALE CONSIDERATION HAD APPEARED TOWARDS LOWER S IDE. HOWEVER, THE ASSESSMENT WAS COMPLETED WITHOUT REPOR T AS THE MATTER WAS GETTING TIME BARRED. LEARNED CIT(A) HAS ALSO MENTIO NED FACTS RELATED TO THE EARLIER ASSESSMENT VIDE PARAGRAPH 8.7 AS UNDER: 'EVEN IF IT IS ACCEPTED THAT THE TRANSFER APPROVAL ORDER OF GIDC DATED 16.06.2005 AND NOTARIZED (UNREGISTERED) TRANSFER DE ED (IN GUJARATI) SIGNED BY M'S. D.S. SYNTHETICS AND M/S. R.D. DYG & PIG MILLS P. LTD. WERE FILED, AT THE TIME OF ORIGINAL ASSESSMENT THE FUEL IS THAT IN ALL THE WRITTEN SUBMISSIONS ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 7 BEFORE THE AO, THE APPELLANT ALWAYS CLAIMED THAT TH E LAND HAD BEEN SOLD BY THE APPELLANT AND LEASE WAS IN FAVOUR OF APPELLANT AND IT WAS TAKEN DIRECTLY FROM GIDC. AS MENTIONED IN THE LAND PLOT NO. 365 (GIDC SACHIN) LEDGER ACCOUNT FILED, THE DESCRIPTION OF JV ENTRY OF RS.12 ,16,453/- PASSED ON 31.03.2005 WAS 'JV AC GIDC 365, I.E., IT WAS NOT ME NTIONED THAT JV ENTRY HAD BEEN PASSED TRANSFERRING THE AMOUNT FROM THE BO OKS OF DEVENDRA S. NAIK. ' 4.3 HOWEVER, LEARNED CIT(A) HAS HELD THAT MERELY FI LING OF A NOTARIZED DEED DATED 4 LH FEBRUARY, 2005 'IN GUJARATI' AND SIMPLY FILING GID C APPROVAL DATED 16.06.2005 WOULD NOT AMOUNT TO FULL DISCLOSURE OF MATERIAL FACTS. AS PER HIM, THE ORDER PASSED U/S. 1 43(3) DID NOT DISCUSSED OF THOSE ASPECTS. HENCE, IT WAS NOT A CASE OF 'CHAN GE OF OPINION', AS HELD IN THE CASE OF PHOTO FINVEST LTD., 281 ITR 393. IT WAS CONCLUDED THAT THE AO PASSED THE ORIGINAL ORDER ON INCOMPLETE AND INCORRECT FACTUAL INFORMATION, THEREFORE, THERE WAS SUFFICIENT REASON TO REOPEN THE ASSESSMENT U/S. 148 OF IT ACT. THE CONCLUSION DRAWN BY LEARNED CIT(A) IS REPRODUCED BELOW: 'UNDER SEC/ION 147 OF THE IT ACT, THE ASSESSING OFF ICER SHOULD HAVE REASON TO BELIEVE REGARDING ESCAPEMENT OF INCOME AT THE TIME OF NOTICE U/S. 148. THIS REASON TO BELIEVE HAS TO BE FORMED ON THE BASIS OF MATERIAL BEFORE THE ASSESSING OFFICER. THE ABSENCE OF MATERIAL FACTS AN D INCORRECT FACTS ON RECORD MAY ALSO BE THE BASIS OF REASONS TO BELIEVE. IN THE PRESENT CASE, THE APPELLANT OFFERED INCOME FROM SALE OF PROPERTY UNDER THE HEAD LONG TERM CAPITAL GAIN IN RESPECT OF GIDC PROPERTY. HOWEVER, THE BALANCE S HEET/DEPRECIATION CHART SHOWED ONLY ONE ASSET WITH THE DESCRIPTION GIDC SHE D AND APPELLANT HAD CLAIMED DEPRECIATION ON THIS. THE OPENING WDV OF TH IS PROPERTY WAS 13,83,659 AND THE CLOSING WDV WAS RS. 12,45,293. DE PRECIATION CLAIMED WAS OF 1,38,666. APPARENTLY, THESE FIGURES HAD NO CO-RE LATION WITH THE COST OF ACQUISITION CLAIMED AT RS.43,27,224/-. SINCE NO FIX ED ASSET WAS REFLECTED IN BALANCE SHEET WITH VALUE OF RS.43,27,224/- THE ASSE SSING OFFICER INFERRED 'COST OF ACQUISITION' AS NIL. SINCE IN THE COMPUTATION OF LTCG. THE PROPERTY WAS REFERRED TO AS GIDC LAND, (OPEN PLOT NO.365) IT WAS INFERRED THAT IT IS TENANTED PROPERLY WITH NIL COST OF ACQUISITION U/S. 55(2)(A). SINCE, THE APPELLANT HAD MAINTAINED THAT IT HAS TAKEN THE PROP ERTY DIRECTLY FROM GIDC ON LEASE AND NO COST OF ACQUISITION OF EQUIVALENT A MOUNT WAS REFLECTED IN ANNUAL ACCOUNTS, ASSESSING OFFICER WAS LEFT WITH NO OPINION BUT TO BELIEVE THAT COST OF ACQUISITION WAS NIL AND LEASE RENTALS/CHARG ES WERE EITHER NOT PAID OR WERE CLAIMED AS 'REVENUE EXPENDITURE '. ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 8 8.16 THIS REASON TO BELIEVE WAS FORMED ON THE BASI S OF INFORMATION AVAILABLE IN RETURN AND PROVIDED BY THE APPELLANT. THEREFORE, IT CANNOT BE HELD THAT THE ASSESSING OFFICER DID NOT HAVE MATERIAL BE FORE HIM/HER TO FOR 'REASON TO BELIEVE'. EVEN NOW, WHEN ALL THE FACTS HAVE BEEN ASCERTAINED, THE COST OF ACQUISITION IS NIL AS NO PROPERTY, LICENSE OR LEASE RIGHTS HAVE BEEN ACQUIRED IN THE NAME OF APPELLANT - COMPANY. THEREFORE, THE FAC T THAT COST IN THE HANDS OF APPELLANT IS NIL IS STILL CORRECT. ONLY THE REASONS FOR THE SAME HAVE CHANGED AS A RESULT OF NEW FACTS CONSEQUENT TO ENQUIRES U/S. 2 50(4) OF THE ACT. ' 4.4 SINCE, THE REOPENING OF THE ASSESSMENT WAS AFFIRMED BY LEARNED CIT(A), THEREFORE, THE ASSESSEE IS NOW FURTHER IN A PPEAL. 5. FROM THE SIDE OF THE ASSESSEE, LEARNED AR MR. RA SESH SHAH HAS INFORMED THAT A LETTER DATED 16 TH OF JUNE, 2005 WAS VERY MUCH IN THE KNOWLEDGE OF THE REVENUE AUTHORITIES WHEN ORIGINALL Y THE ASSESSMENT WAS MADE. ACCORDING TO HIM, IN FACT THAT WAS THE BASIS FOR REOPENING OF THE IMPUGNED ASSESSMENT. HE HAS DRAWN OUR ATTENTION ON THE 'REASONING FOR REOPENING' DATED 23.03.2011, A PORTION ALREADY REPRODUCED SUPRA, AS DISCUSSED BY THE AO IN THE ASS ESSMENT ORDER. LEARNED AR HAS FURTHER DRAWN OUR ATTENTION ON THE O RIGINAL ORDER PASSED U/S. 143(3) DATED 31.12.2007 ACCORDING TO WHICH THE RETURNED INCOME WAS ASSESSED WITHOUT ANY CHANGE. HOWEVER, HE HAS MENTIO NED THAT BEFORE THE SAID ASSESSMENT A NOTICE WAS ISSUED U/S. 142(1) AND U/S. 143(2) OF IT ACT AND IN ONE OF THE REPLY THE ASSESSEE HAS INFORMED A S UNDER: '(1) REGARDING SALE OF OPEN LAND PLOT NO. 365 AT GI DC SACHIN, SURAT FOR AN AMOUNT OF RS. 1.46,00,000,-, THE NET LONG TERM CAPI TAL GAIN WAS RS.86,79,812/-. MY CLIENT HAS INVESTED RS.87,00,000 /- IN RURAL ELECTRIFICATION CORPORATION LTD. BOND, THE BENEFITS UNDER SECTION 5 4EC OF THE INCOME TAX ACT, 1961 FOR LONG TERM CAPITAL GAINS. THE XEROX CO PY OF BOND CERTIFICATE & COPY OF A/C. LAND PLOT NO. 365(GIDC SACHIN) IS AT TACHED HEREWITH FOR YOUR KIND VERIFICATION. (2). IN G.I.D.C. SACHIN THERE WAS NO SALE DEED WAS MADE. THE TRANSFER PROCEDURE WAS COMPLETED AFTER RECEIVING NO OBJECTIO N CERTIFICATE FROM SELLER & NO DUE CERTIFICATE RECEIVE FROM G.I.D.C.' ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 9 5.1 LEARNED AR HAS ALSO INFORMED THAT FOR A.Y. 2005-06 RETURN OF INCOME WAS FILED WHEREIN THE LONG TERM CAPITAL GAIN WAS COMPUTED AT & RS.86,79,812/- AND BECAUSE A SUM OF RS. 87,00,00 0/- WAS INVESTED IN REC BONDS, THEREFORE, DEDUCTION U/S.54EC WAS CLAIME D. IN THE RESULT, NIL LONG TERM CAPITAL GAIN WAS DISCLOSED. A DETAILED WO RKING OF THE LONG TERM CAPITAL GAIN AS PER THE YEAR-WISE COST OF ACQU ISITION HAS ALSO BEEN FURNISHED ALONG WITH RETURN. HE HAS PLEADED THAT IN A SITUATION WHEN ALL THE INFORMATION WAS PLACED AT THE TIME OF ORIGINAL ASSESSMENT AND THERE WAS NO NEW MATERIAL OR FACTS CAME INTO THE KNOWLEDG E OF THE AO AFTER THE COMPLETION OF THE SAID ASSESSMENT, THEN THE NOT ICE U/S.147/148 AFTER LAPSE OF FOUR YEARS WAS BAD IN LAW. LEARNED AR HAS PLACED RELIANCE ON CIT VS. KELVINATOR OF INDIA LTD., 320 ITR 561 (SC) , AND CIT VS. FORAMER FRANCE, 264 ITR 566 (SC), H.K. BUILDCON LTD. VS. ITO, 339 ITR 535 (GUJARAT). HE HAS ALSO ARGUED THAT THE LEARNED CIT(A) HAS WRONGLY CHANGED THE HEAD OF INCOME WHICH IS NOT PER MISSIBLE AS HELD IN THE CASE OF GUJARAT FLUROCHEMICAL, 319 ITR 289 (GUJ .). 6. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. K.C. MATHEWS APPEARED. HE HAS PLACED STRONG RELIANCE ON THE FACT UAL AS WELL AS LEGAL FINDINGS OF LEARNED CIT(A). HE HAS CONTESTED THAT W HEN THE ORIGINAL RETURN WAS FILED THE TRUE AND CORRECT FACTS WERE NO T DISCERNIBLE FROM THE RETURN FILED. RATHER BEFORE LEARNED CIT(A) IT WAS A SKED TO PRODUCE THE ORIGINAL LEASE DEED BUT THAT WAS NOT FURNISHED. THE ASSESSEE WAS NEVER HOLDING RIGHTS IN THE SAID PROPERTY. THE ADMITTED F ACTUAL POSITION WAS THAT THE LAND IN QUESTION WAS ALLOTTED BY GIDC TO A FIRM M/S. D.S. SYNTHETICS. ONLY THAT FIRM WAS GRANTED PERMISSION TO TRANSFER T HE LAND TO M/S. R.D. DYEING AND PRINTING MILLS VIDE A LETTER OF GIDC, DATED 16 TH OF JUNE, ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 10 2005. THE ASSESSEE HAS STATED WRONG FACTS AT THE TIME OF ORIGINAL ASSESSMENT, THEREFORE, WHEN THE AO CAME TO KNOW T HE CORRECT FACTS THEN HE HAS ISSUED THE NOTICE U/S. 148 OF IT ACT. IT WAS WRONG ON THE PART OF THE ASSESSEE TO DISCLOSE LONG TERM CAPITAL GAIN IN RESPECT OF A PROPERTY WHICH WAS NOT GRANTED ON 99 YEARS LEASE TO THE ASSE SSEE. THAT LEASE WAS IN FAVOUR OF SOME OTHER ENTITY; HENCE, IT WAS CORRE CT THAT THE INACCURATE PARTICULARS WERE FURNISHED BY THE ASSESSEE. HE HAS ALSO SUPPORTED THE ORDER OF LEARNED CIT(A) ON THE GROUND THAT IN A SIT UATION WHEN THERE WAS NO COST OF ACQUISITION THEN THE ENTIRE GAIN WAS REQ UIRED TO BE ASSESSED IN THE HANDS OF THE RECIPIENTS. HOWEVER, IF THE AMOUNT RECEIVED DID NOT PERTAIN TO ANY ASSET THEN AUTOMATICALLY THE IMPUGNE D RECEIPT IS CORRECTLY TAXED UNDER THE HEAD 'OTHER SOURCES'. LEARNED CIT(A ) HAS DIRECTED TO ISSUE NOTICE TO M/S. D.S. SYNTHETICS BECAUSE THE LA W REQUIRES TO ASSESS THE AMOUNT IN THE HANDS OF THE RIGHT PERSON. FOR THIS L EGAL PROPOSITION HE HAS PLACED RELIANCE ON CIT VS KIRANBHAI JAMNADAS SHETH (HUF) 39 TAXMANN.COML 16 (GUJ). AT THIS JUNCTURE ITSELF IT I S WORTH TO MENTION THAT THE FACTS OF THIS PRECEDENTS HAVE REVEALED THAT THE ASSESSMENT WHICH WAS REOPENED WAS INITIALLY COMPLETED U/S 143(1) OF THE ACT, THEREFORE, IT WAS THAT BEING COMPLETED WITHOUT SCRUTINY HENCE CAN BE REOPENED BEYOND FOUR YEARS. THIS DISTINCTION IS TO BE KEPT IN MIND WHILE DECIDING THE ISSUE IN HAND. 7. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US. THE ADMITTED FACTUAL POSITION IS THAT FOR A.Y. 2005-06 A NOTICE U/S. 148 WAS ISSUED BY THE AO ON 29.03.2011. A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR HAS, THEREFORE, EXPIRED IN MARCH, 2010. HENCE, ADMITTEDLY THE ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 11 IMPUGNED NOTICE U/S. 148 WAS ISSUED AFTER THE LAPSE OF FOUR YEARS. DUE TO THIS REASON, PARTIES APPEARING BEFORE US HAVE ADMIT TED THAT THE FIRST PROVISO TO SECTION 147 IS TO BE APPLIED IN THIS CASE. THE R ELEVANT PORTION OF THE SAID PROVISO IS EXTRACTED BELOW: 'IF THE [ASSESSING] OFFICER [HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO LAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT THE PROVISIONS OF SECTIONS 148 TO 153. ASSE SS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE LO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE C OURSE OF THE ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE C OURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTED THE LOSS OR THE D EPRECIATION PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTED THE LOSS OR THE D EPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE. FOR THE AS SESSMENT YEAR CONCERNED (HEREINAFTER IN THIS SECTION AND IN SECTIONS 148 LO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT Y EAR NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR Y EARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE L O A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECT ION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT, FOR THAT ASSESSMENT YEAR. 7.1 THIS PROVISO PRESCRIBES THAT WHERE AN ASSESSMEN T U/S. 143(3) IS MADE THEN NO ACTION SHALL BE TAKEN UNDER THIS SECTI ON, I.E. 147, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE LO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. TO EXAMINE WHETHER THIS PROVISO HAS RIGHTLY BEEN INVOKED UNDER THE FACTS AND CIRCUM STANCES OF THE CASE, WE HAVE EXAMINED THE RETURN FILED BY THE ASSESSEE A ND THEREAFTER THE NOTICE ISSUE BY THE REVENUE DEPARTMENT. AS FAR AS T HE POSITION OF THE RETURN FILED BY THE ASSESSEE IS CONCERNED, WE HAVE FOUND THAT THE SAME WAS ADMITTEDLY FILED ON 31.10.2005, WHEREIN A COMPUTATION OF LONG ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 12 TERM CAPITAL GAIN WAS FURNISHED DISCLOSING THE YEAR -WISE INVESTMENT MADE BY THE ASSESSEE. AS PER THE SAID CALCULATION, THE INDEX COST OF & ACQUISITION WAS COMPUTED AT RS.59,29,188/-. THE SAI D INDEXED COST OF ACQUISITION WAS REDUCED FROM THE SALE PRICE OF RS.1 ,46,00,000/-, THEREFORE, THE BALANCE AMOUNT OF RS.86,79,812/- WAS DISCLOSED UNDER THE HEAD 'LONG TERM CAPITAL GAIN'. FURTHER, THE ASSESSE E HAD MADE AN INVESTMENT IN RAC BONDS OF RS.87 LACS, THEREFORE, A 'NIL' LONG TERM CAPITAL GAIN WAS DISCLOSED IN THE RETURN. ON RECEIV ING THAT RETURN THE REVENUE DEPARTMENT HAD ISSUED NOTICES AS APPEARED I N THE PAPER BOOK. IN COMPLIANCE ASSESSEE HAS INFORMED CERTAIN BASIC FACT S, RELEVANT PORTION ALREADY EXTRACTED ABOVE. THE AO HAS THEN COMPLETED THE ASSESSMENT U/S.L43(3) ON 31.12.2007. IN THE SAID ORDER VIDE PA RAGRAPH 2, THE AO HAS GIVEN A FINDING THAT THE NOTICES U/S 143(2) AND 142(1) WERE ISSUED TIME TO TIME AND IN COMPLIANCE THE ASSESSEE HAD FURNISHE D THE DETAILS CALLED FOR. THOSE DETAILS WERE STATED TO HAVE BEEN EXAMINED BY THE AO, THEREAFTER, THE RETURNED INCOME AT RS. NIL WAS ACCEPTED BY THE THEN AO. IN VIEW OF THOSE FACTS ONE THING IS CLEARLY EMERGING THAT THE MATERIAL FACTS IN RESPECT OF THE LONG TERM CAPITAL GAIN WAS VERY MUCH DISCLOS ED; HENCE VERY MUCH IN THE KNOWLEDGE OF THE REVENUE DEPARTMENT. CE RTAIN MATERIAL FACTS WERE DULY DISCLOSED , SUCH AS THE NATURE OF T RANSACTION AND THE REASON FOR DISCLOSING THE LONG TERM CAPITAL GAIN. T HUS IT COULD BE HELD AT THIS JUNCTURE THAT THE INFORMATION OF THE LONG T ERM CAPITAL GAIN WAS FULLY DISCLOSED BY THE ASSESSEE. 7.2 THE OTHER QUESTION IS THAT WHETHER TH E ASSESSEE HAS RIGHTLY COMPUTED THE CAPITAL GAIN. IN THE REASONS RECORDED DATED 23.03.2011, THE ALLEGATION OF THE AO WAS THAT THE 'COST OF ACQUISITION' WAS WRONGLY ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 13 CLAIMED BY THE ASSESSEE. THE ASSESSEE HAD COMPUTED THE INDEXED COST OF ACQUISITION AT RS.59,20,L88/- WHICH WAS OBJECTED BY THE AO ON THE GROUND THAT THE ASSESSEE HAD NOT ACQUIRED LAND ON L EASE DIRECTLY FROM GIDC, OWNER OF THE LAND. THE LEASE RIGHTS, I.E., TE NANCY RIGHTS WERE NOT PURCHASED FROM A PREVIOUS OWNER (TENANT), ACCORDING TO AO, AS PER THE PROVISIONS OF SECTION 55(2)(A) OF IT ACT, THE AO HA S THUS FIXED THE COST OF ACQUISITION AT RS. NIL. WE ARE NOT CONVINCED WITH T HE INTERPRETATION ASSIGNED BY THE AO IN RESPECT OF PROVISION OF SECTI ON 55(2)(A). FOR THE PURPOSE OF COMPUTATION OF SECTION 48 AND SECTION 49 THE COST OF ACQUISITION IN RELATION TO A CAPITAL ASSET MEANS TH E AMOUNT OF THE PURCHASE PRICE. THE CAPITAL ASSET AS DEFINED IN THIS SECTION ARE GO ODWILL OF A BUSINESS, TRADE MARK, BRAND NAME ASSOCIATED WI TH A BUSINESS, RIGHT TO MANUFACTURE OR PRODUCE OR PROCESS ANY ARTICLE OR TH ING, RIGHT TO CARRY ON BUSINESS, TENANCY RIGHTS, LOOM HOURS, STAGE CARRIAGE PERMITS. IN THE CASE OF ACQUISITION OF SUCH ASSETS BY THE ASSESSEE BY PU RCHASE FROM PREVIOUS OWNER THE AMOUNT OF PURCHASE PRICE IS TO BE CONSIDE RED AS 'COST OF ACQUISITION'. PRIMA FACIE, WHILE ISSUING THE NOTICE U/S. 148, THE OBSERVATION OF THE AO WAS THAT THE LAND SOLD WAS TH E LAND OF GLDC. THE TENANCY RIGHTS AS PER AO WERE ACQUIRED DIRECTLY FRO M GLDC. SO THE ALLEGATION WAS THAT IN A SITUATION WHEN THE RIGHTS WERE ACQUIRED RIGHTLY FROM GLDC, THEN THE GLDC WAS THE OWNER OF THE LAND AND NOT THE PREVIOUS OWNER (TENANT OF THE LAND). SO THE INTERPR ETATION OF THE AO WAS THAT THE TENANCY RIGHTS WERE NOT ACQUIRED FROM ANY 'PREVIOUS OWNER', THEREFORE, THERE WAS 'NIL COST OF ACQUISITION'. ACC ORDING TO US, IT WAS AN INCORRECT INTERPRETATION OF THIS SECTION. IN THE CA SE OF LALITABEN GULABCHAND, 108 ITR 764 (BOM), IT WAS HELD THAT IN THE CASE OF A LEASE, THE DATE OF ACQUISITION WILL BE THE DATE FROM WHICH THE ASSESSEE TOOK ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 14 POSSESSION AS LESSEE EVEN THOUGH THE ACTUAL ACQUISI TION AND REGISTRATION IS MUCH LATER, THEREFORE, THE PREVIOUS OWNER DOES NOT MEAN THAT THERE SHOULD BE AN ANOTHER PARTY BETWEEN TRANSACTION. BECAUSE OF THIS BASIC REASON WE HEREBY HOLD THAT THE SATISFACTION RECORDED BY THE A O FOR ISSUANCE OF NOTICE U/S.148 WAS BASED UPON A WRONG INTERPRETATIO N OF THE PROVISIONS OF SECTION 55(2)(A) OF IT ACT. 7.3 APART FROM THE ABOVE DISCUSSION, BEFORE LEARNED CIT(A) AN ANOTHER CONTROVERSY HAS BEEN ADDRESSED THAT THE LAND IN QUE STION WAS NOT A PROPERTY OF THE ASSESSEE, THEREFORE, THE LONG TERM CAPITAL GAIN WAS NOT TO BE ASSESSED IN THE HANDS OF THE ASSESSEE BUT TO BE ASSESSED IN THE HANDS OF M/S D.S. SYNTHETICS. IT APPEARS THAT THE L EARNED CIT(A) WANTED TO STEP INTO SHOES OF AO WHILE RECORDING REASONS FO R ISSUANCE OF NOTICE U/S.148 OF IT ACT. THE SAME IS NOT PERMISSIBLE IN T HE EYES OF LAW. THE REASONS RECORDED FOR ISSUANCE OF NOTICE U/S.148 WAS NOT THAT THE LONG TERM CAPITAL GAIN DID NOT ARISE TO THE ASSESSEE, BU T TO M/S. D.S. SYNTHETICS. THE REASONS FOR REOPENING ASSIGNED WERE THAT THE WRONG COMPUTATION OF LONG TERM CAPITAL GAIN, ESPECIALLY, THE INDEXED COST OF ACQUISITION, WAS SHOWN BY THE ASSESSEE. WE THEREFOR E HOLD THAT IN A SITUATION WHEN THE ASSESSEE HAS OWNED UP THE LONG T ERM CAPITAL GAIN IN ITS HANDS AND MADE AN INVESTMENT IN REC BONDS WHICH WAS DULY EXAMINED AT THE TIME OF ORIGINAL ASSESSMENT WHILE F RAMING THE ASSESSMENT U/S, 143(3) OF IT ACT AND A DISCLOSURE W AS MADE ON THE MATERIAL FACTS THEN THERE WAS NO OCCASION ON THE PA RT OF THE LEARNED CIT(A) TO TWIST THE REASONS OF REOPENING AND THEREU PON UPHELD THE ACTION TAKEN U/S. 148 OF IT ACT. WE ARE OF CONSCIEN TIOUS VIEW THAT LEARNED ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 15 CIT(A) WENT WRONG IN UPHOLDING THE ACTION OF THE AO ; HENCE, HIS FINDINGS IS HEREBY REVERSED. 7.4 WE HAVE EXAMINED A DECISION CITED BY LEARNED C IT-D.R. PRONOUNCED IN THE CASE OF CIT VS. KIRANBHAI JAMUNADAS SETH, 39 TAXMANN.COM 116 (GUJ). IN THE SAID CASE, A RETURN WAS PROCESSED U/S. 143(1) OF IT ACT, ADMITTEDLY IT WAS A NOT SCRU TINY ASSESSMENT. ON THAT GROUND, THE HON'BLE COURT HAS OPINED THAT THE ORIGI NAL ASSESSMENT BEING MADE WITHOUT ANY SCRUTINY, THEREFORE, THE REVENUE C OULD HAVE RE-OPENED THE ASSESSMENT BEYOND FOUR YEARS. FURTHER, A DECISI ON OF SUN PHARMACEUTICALS INDUSTRIES LTD., 29 TAXMANN.COM 262 (GUJ) HAS BEEN CITED, WHEREIN THE ADMITTED FACT WAS THAT THERE WAS NON DISCLOSURE OF PRIMARY FACTS. THE RETURN OF INCOME WAS FILED U/S. 1 15 JA. THE ASSESSMENT WAS MADE U/S. 143(3) DETERMINING HIGHER TAXABLE INC OME. SUBSEQUENTLY, IT WAS NOTED THAT THERE WAS DOUBLE CLAIM OF DEDUCTI ON IN RESPECT R&D EXPENDITURE. THERE WAS AN EXCESS DEDUCTION U/S.80IA AS WELL. THE COURT HAS THEREFORE HELD THAT THERE WAS NO TRUE AND FULL DISCLOSURE AS ALSO THE PRIMARY FACTS WERE NOT DISCLOSED; HENCE, THE REOPEN ING OF THE ASSESSMENT WAS JUSTIFIED. CONTRARY TO THIS, IN THE PRESENT CASE, ON EXAMINATI ON OF THE REASONS GIVEN FOR REOPENING OF THE IMPUGNED ASSESSMENT, THE ALLEGATION OF THE AO WAS NOT THAT THE ASSESSEE HAD NOT MADE TRUE AND COMPLETE DISCLOSURE OR THAT THE AO HAD COME ACROSS CERTAIN MATERIAL FAC TS WHICH WERE NOT FILED AT THE TIME OF FILING OF THE RETURN. BUT THE REASON ASSIGNED WAS THAT THERE WAS WRONG CLAIM OF COST OF ACQUISITION IN RES PECT OF THE LONG TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE. DUE TO THIS DISTINCTION, THE ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 16 DECISION OF SUN PHARMACEUTICALS INDUSTRIES (SUPRA) IS NOT APPLICABLE ON THE FACTS OF THIS APPEAL. IN THE CASE OF VIPIN KUMAR P. KHANDCLIYA, 28 TAXMANN.COM 218 (GUJARAT), A SEARCH WAS CARRIED AND A DISCLOSURE WAS MADE WHIC H WAS RETRACTED LATER ON. A RETURN WAS FILED WITHOUT DISC LOSING THE FACT THAT A DISCLOSURE WAS MADE DURING THE COURSE OF SEARCH. TH E ASSESSMENT WAS COMPLETED ON THE BASIS OF THE RETURN FILED. THEREUP ON, RE-ASSESSMENT PROCEEDINGS WERE INITIATED BECAUSE IT WAS HELD THAT AT THE TIME OF FILING OF THE RETURN THE ASSESSEE HAD NOT MADE TRUE AND COMPL ETE DISCLOSURE, RATHER ALL MATERIAL FACTS WERE NOT DISCLOSED. ON THOSE FAC TS, THE ACTION U/S.147 WAS JUSTIFIED BY THE COURT. ON THE FACE OF IT'S FAC TS, THIS PRECEDENT IS NOT APPLICABLE HERE. EVEN IN THE CASE OF DISH MAN PHARMACEUTICALS AND CHEMICALS, 30 TAXMANN.COM 67(GUJARAT). THE CRUX OF UPHOLDING THE REOPENING WA S THAT SIMPLY PRODUCTION OF BOOKS OF ACCOUNT WAS NOT ENOUGH IF THE FOUNDATION OF THE REOPENING WAS THAT THE ASSESSEE H AD NOT TRULY AND FULLY DISCLOSED OF MATERIAL FACTS. ON THE OTHER HAND, DEC ISIONS AS CITED BY THE ASSESSEE SUCH AS KELVINATOR OF INDIA 320 ITR 561(SC) ETC, ARE SUPPORTING THE VIEW TAKEN BY US. WE RATHER HOLD, FO LLOWING GUJARAT FLURO CHEMICALS 319 ITR 282 (GUJ.) THAT THE AO HAD RECORDED THE REASONS AND THOSE REASONS RECORDED CANNOT BE SUPPLE MENTED OR EXPANDED BY THE FIRST APPELLATE AUTHORITY AT THE STAGE OF AP PEAL. THE ACTION OF LEARNED CIT(A) IS HEREBY DISAPPROVED BY US. 7.5 SINCE THE REOPENING OF THE ASSESSMENT ITSELF HELD AS BAD IN LAW, THEREFORE, REST OF THE GROUNDS ON MERITS NEED NOT T O BE ADJUDICATED UPON. ITA NO. 2090/AHD/2013 M/S. DEVREKHA ENGINEERS PVT. LTD. V/S. DCIT, CENTRA L CIRCLE-1, SURAT. FOR A.Y. 2005-06 17 8. IN THE RESULT, APPEAL IS PARTLY ALLOWED PROTANTO. SD/- SD/- (T.R. MEENA) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUDICIA L MEMBER AHMADABAD; DATED 27/03/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF ORDER FORWARDED TO: 1. !' / APPELLANT 2. $%!' / RESPONDENT 3. '(') % %* / CONCERNED CIT 4. % %*- / CIT (A) 5. ./ % ), % % ), 12( / DR, ITAT, AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ , 1% '8 % % ), 12(9