KAVITABEN JAYSUKHBHAI ZALAWADIYA V. THE INCOME TAX OFFICER WARD - 3(3)(3)

SCA/14964/2019

AI Insights

The case involves Kavitaben Jaysukhbhai Zalawadiya, who challenged the notice and subsequent assessment order issued by the Income Tax Officer under Section 148 of the Income Tax Act, 1961. The writ applicant had initially claimed an exemption under Section 54B for a long-term capital gain on the sale of immovable property, which was partially allowed in the original assessment. However, the assessment was reopened, and the exemption was disallowed in the reassessment, leading to the filing of this writ petition. The court examined whether the reopening of the assessment was justified and found it to be a mere change of opinion by the Assessing Officer, thus quashing the notice and the reassessment order.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 766373 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-03-2021
• Assessment Year: misc
• Other Referred Cases: Asian Paints Limited v. Deputy Commissioner of Income tax, 2008 (296) ITR 90 (BOM), CIT Vs. Usha International Ltd, CIT Vs. Kelvinator India Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: VAIBHAVI PARIKH
• Keywords: Agriculture land; Exempt income; Income Tax Return; Long Term Capital Gain; Reopening of assessment; Scrutiny assessment
• Section: 147; 148; 142(1); 143(2); 143(1); 54B

Judgement Text

"C/SCA/14964/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14964 of 2019 ========================================================= KAVITABEN JAYSUKHBHAI ZALAWADIYA Versus THE INCOME TAX OFFICER WARD - 3(3)(3) ========================================================== Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 24/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application, under Article 226 of the Constitution of India, the writ applicant seeks to challenge the impugned notice dated 31.03.2019 issued under Section 148 of the Income Tax Act, 1961 and assessment order dated 29.08.2019 at Annexure – N to this writ application. 2. Briefly stated the facts that, the writ applicant – assessee is an individual had earned long term capital gain of Rs.1,86,51,572/- on sale of immovable property and while filing the return of income, same amount was claimed as exempt income under Section 54B of the Act, on account of purchase of new agriculture land for the AY 2012-13. She had filed her return of income on 06.07.2013 for the relevant year AY 2012-13 declaring her total income at Rs.12,01,550/- whereby, she had claimed the exemption of Rs.1,86,51,572/- under section 54B of the Act. The return of Page 1 of 11 C/SCA/14964/2019 ORDER income was processed initially under Section 143(1) of the Act. The case of the assessee for the year under consideration was selected for scrutiny assessment. The notices under Section 143(2) and 142(1) of the Act dated 02.09.20214 and 07.11.2014 respectively, came to be issued and assessee was called for to furnish various details including the details with regard to claim of long term capital gain. The assessee furnished various details including the copy of registered sale deed and bank transactions with regard to purchase and sale of agriculture land to explain the exempt income of Rs.1,86,51,572/-. During scrutiny proceedings, AO had taken into account the documentary evidence in the nature of sale deed etc. and allowed the long term capital gain to the extent of Rs.1,85,00,000/- and made addition for the difference amount of Rs.1,51,572/- to the total income of the assessee under the head of long term capital gain arising out of sale of immovable property. The assessment order was passed on 18.03.2015. The assessee had paid the tax on the difference amount. 3. Thereafter, the AO reopened the assessment by issuing impugned notice dated 31.03.2019 under Section 148 of the Act. After the impugned notice and in absence of income tax return, the notice under Section 142 (1) and 143(2) of the Act were issued on 21.08.2019. Accordingly to the case of the revenue, the assessee did not responded to the notices and thereafter, show cause notice dated 25.06.2019 was served to explain why the amount claimed as exempt amount under Section 54B of the Act, amounting to Page 2 of 11 C/SCA/14964/2019 ORDER Rs.1,85,00,000/- should not be added and/or disallow for the year under consideration and also called for necessary documentary evidence on or before 29.06.2019. In the show cause notice, the revenue supplied the copy of reasons recorded for the reopening. In response to the show cause notice, the assessee filed objections stating inter-alia that the reopening proceedings would nothing but mere a change of opinion as, earlier in the previous assessment proceedings, the issue of claim made under Section 54B of the Act was dealt with and decided in favour of the assessee. Therefore, the impugned notice as well as the subsequent proceedings are bad in law and in contravention of the provisions of Section 147 of the Act. However, the revenue passed an order vide dated 28.09.2019 of assessment under Section 143(3) of the Act, holding that the assessee failed to satisfy the condition of Section 54B of the Act and her claim of Rs.1,85,00,000/- came to be disallowed and added to the total income of the assessee. 4. The assessee filed the present writ application on 03.09.2019 challenging the impugned notice as well as the assessment order, wherein, this Court issued notice on 05.09.2019 and granted ad- interim relief restraining the respondent revenue from proceedings further pursuant to the impugned notice. The order dated 10.10.2019 passed by this Court, reads as under: “ 1. Mr. Tushar Hemani, Senior Advocate, learned counsel with Ms. Vaibhavi Parikh, learned advocate for the petitioner submitted that in this case the objection raised by the petitioner against the reasons recorded by the Assessing Officer for reopening the assessment came to be disposed of by an order dated 19.8.2019. Immediately thereafter, three notices came to Page 3 of 11 C/SCA/14964/2019 ORDER be issued under section 143(2) of the Act returnable on 27.8.2019. It was submitted that on 29.8.2019, the petitioner filed an adjournment application and filed a writ petition before this court on 3.9.2019, wherein this court issued notice on 5.9.2019 and granted ad-interim relief restraining the respondent from proceeding further pursuant to the impugned notice. It was submitted that when the notice came to be served upon the respondent on 9.9.2019, the assessment order dated 29.8.2019, came to be served upon the petitioner. It was submitted that after the objections came to be disposed of, the respondent ought to have given a reasonable time to the petitioner to approach this court. However, the respondent in utmost haste has proceeded further and passed the assessment order. 2. Reliance was placed upon the decision of the Bombay High Court in the case of Asian Paints Limited v. Deputy Commissioner of Income tax, 2008 (296) ITR 90 (BOM.) wherein the court has clarified that if the Assessing Officer does not accept the objections so filed by the petitioner, he shall not proceed further in the matter within a period of four weeks from the date of receipt of service of the said order on objections, on the assessee. It was submitted that the court has directed the Income Tax Officer concerned to follow the above procedure strictly in all such cases of reopening of assessment. It was submitted that the above principles were required to be followed by the Assessing Officer in the present case also. 3. Having regard to the submissions advanced by the learned advocate for the petitioner, the operation of the impugned assessment order dated 29.8.2019 (Annexure-N to the petition) is hereby stayed. Direct service is permitted.” 5. Being aggrieved and dissatisfied with the impugned notice as well as subsequent assessment proceedings, the applicant came up before this Court by filing present application under Article 226 of the Constitution of India. 6. We have heard learned Senior counsel Mr. Tushar Hemani, Assisted by Mrs. Vaibhavi Parikh, learned counsel appearing for the writ applicant and Mrs. Kalpana Raval, the learned Standing Counsel Page 4 of 11 C/SCA/14964/2019 ORDER appearing for the revenue. 7. The learned Senior counsel Mr. Tushar Hemani for the writ applicant submitted that the impugned notice as well as subsequent proceedings are bad in law and without jurisdiction. He has urged that the issue of deduction was determined in the previous assessment proceedings on the basis of necessary details like sale deed etc, furnished by the assessee and accordingly, the AO had formed the opinion with regard to issue of long term capital gain and allowed the deduction to the extent of Rs.1,85,00,000/- and for the remaining differential amount, the assessee had paid tax. Thus, now on the same set of facts and material, the assessment is sought to be reopened on the ground that the assessee failed to submit necessary documents in support of deduction, which cannot be permitted in law, as it is nothing but a change of opinion in the hands of the Assessing officer. In this context, it was further submitted that the AO does not have power to review the issue which was earlier decided in the previous assessment proceedings on the same set of facts and law. He further submitted that the Revenue has not followed the directions given in the case of Asian paints Ltd. Vs. Dy. Commissioner of Income tax, 2008 (296) ITR, 90, (BOM), wherein, it was directed that if the AO does not accept the objections, filed by the assessee, he shall not proceed further in the matter within a period of 4 weeks from the date of receipt of service of order on objections. He would further submit that, here in the present case, the Page 5 of 11 C/SCA/14964/2019 ORDER revenue did not have given sufficient time as directed by the Bombay High Court to avail the appropriate remedy before the Competent Court. In this circumstances, the impugned notice as well as the consequential order of the assessment are without jurisdiction. 8. It was submitted by learned counsel for the writ applicant that the notice impugned is bad in law as the reassessment for the year under consideration was framed under Section 143(3) of the Act and same is sought to be reopened beyond the period of 4 years from the end of the relevant year and there was no any failure on the part of the assessee to disclose truly and fully necessary material facts for the assessment. 9. On the other hand, Mrs. Kalpana Raval, the learned Standing Counsel appearing for the revenue opposed the writ application, contending that the assessee at the stage of previous assessment proceedings, had not submitted an agreement to sell dated 04.08.2012, in support of the claim of deduction made under Section 54B of the Act and therefore, the conditions precedent to avail the benefit of deduction as provided under Section 54B of the Act are not satisfied. In this circumstances, the AO has rightly recorded the reasons for reopening of the assessment for the year under consideration and formed a belief that the income has escaped assessment, as during the previous assessment proceedings, the assessee failed to disclose the facts of purchase transactions and omitted to submit necessary documents in Page 6 of 11 C/SCA/14964/2019 ORDER support of the claim. 10.Having heard the learned counsel for the respective parties and having gone through the materials on record, the question falls for our consideration is whether Revenue is justified in reopening the assessment for the year under consideration? 11.It is not in dispute that the assessee being an individual had earned long term capital gain of Rs.1,85,,00,000/- on sale of immovable property and it was shown in the return of income as exempt income under Section 54B of the Act. The return of Income was initially processed under Section 143(1) of the Act. The case of the assessee was selected for scrutiny assessment. The AO had allowed the deduction of LTCG to the extent of Rs.1,85,00,000/- and made further addition of Rs.1,51,572/- to the total income of assessee and framed assessment vide order dated 18.03.2015. Thereafter, the impugned notice dated 31.03.2019 was issued and framed the assessment after issuing the notice under Section 142(1) of the Act. 12.In the present case, the reopening of the assessment seems to be a beyond 4 years from the end of the relevant assessment year. It is a settled law that to confer jurisdiction under clause (a) of Section 147 of the Act, beyond the period of 4 years, two conditions are required to be fulfilled, viz – (i) the AO must have reason to believe that the income chargeable to tax has escaped assessment and (ii) he must have reason to believe that such escapement was occasioned by reason of failure to disclose fully and truly material Page 7 of 11 C/SCA/14964/2019 ORDER facts necessary for the assessment for the year under consideration. 13.In the present case, the contention of the writ applicant is that at the stage of previous assessment proceedings, the issue of deduction was determined on the basis of necessary documents furnished by the assessee. Therefore, in absence of any tangible material available with the AO, based on the same material, which were relied at the time of original assessment proceedings, the reassessment proceedings is invalid and AO does not have power to review the earlier formation of belief on the same set of facts and law. 14.We have examined the reasons recorded for reopening of the assessment. A bare perusal of the reasons recorded, reveal that the findings recorded by the AO with regard to non-production of the necessary documents in support of the claim are without any basis and it reflects total non-application of mind to the record. Records indicate that the details with regard to deduction under Section 54B was called for and the assessee had complied the same by furnishing the registered sale deed and agreement of purchase along with bank particulars. The previous assessment order at Annexure – E, page-28 of the compilation of this writ application, shows that during the assessment proceedings, the AO had observed that the assessee had submitted all the details and were examined by him. The AO had discussed the issue of LTCG. The relevant extract i.e. para-4 of the assessment order is reproduced Page 8 of 11 C/SCA/14964/2019 ORDER as under: “para-4: Addition on account of Long term capital gain: During the course of assessment proceedings, it is seen that the assessee had claimed exemption of long term capital gain arising out of sale of immovable property of Rs.1,86,51,572/- The details of this long term capital gain claimed were called for. From the details it is seen that the assessee has earned the long term capital gain of Rs.1,86,51,572/- and because of this he has claimed the set off of the entire capital gain u/s. 54 of the I.T. Act. From the details it is seen that thought the assessee has claimed set off of long term capital gain of Rs.1,86,51,572/- he has made payment of Rs.1,85,00,000/- only for the purpose of new agriculture land for Rs.2,71,00,000/- Therefore, there was the short payment of Rs.1,51,572/- which the assessee did not pay fill the filing of return. In view of this the assessee was issued a show cause notice dated 09.02.2015 which is reproduced as under: “During the course of assessment proceedings, it seems that you have made payment of Rs.1,85,00,000/-instead of Rs.1,86,51,572/- according to your share in the sale property. The difference comes to Rs.1,51,572/- i.e. outstanding for payment as on the date of filing of return. You are requested to show cause as to why the capital gain tax should not be charged on the outstanding payment of Rs.1,51,572/-.” In response to this show cause notice, the assessee vide her letter dated 13.02.2015 agreed that she has not made payment of Rs.1,51,572/- till the date of return filed for A.Y. 2012-13. She also showed her willingness to pay long term capital gain on this amount. She further requested that since this payment of Rs.1,51,572/- was not made to the seller only because of financial crunch and she has no intention to evade tax on this amount and also that she was not aware about such provision of the Act, she may be forgiven on this issue and penalty may not be imposed on her. Considering the submission made by the assessee wherein, she has agreed to make the payment of tax on addition of Rs.1,51,572/- I make an addition of Rs.1,51,572/- to the total income of the assessee under the head long term capital gain arising out of sale of immovable property.” 15.Considering the issue of deduction dealt with by the AO in a previous proceedings, we are of the view that initiation of the Page 9 of 11 C/SCA/14964/2019 ORDER proceedings based on the same set of facts, which were earlier relied upon by the AO while framing the assessment order, would nothing but a review of earlier proceedings, which cannot be permitted in law. The attempt on the part of the AO to reopen the assessment is nothing but he has changed his opinion. In the previous assessment proceedings, the AO had consciously applied his mind to the relevant facts and material available and framed the assessment and now, on the same set of facts, again, on the different view by the AO to reopen the proceedings would amount to change of opinion. It also appears that at the stage of previous assessment proceedings, the assessee had disclosed all the primary facts for the assessment and based upon the materials the AO did not disallow the deduction to the extent of Rs.1,85,00,000/-. We take the notice of the fact that revenue has failed to show that which necessary facts were not disclosed by the assessee at the stage of previous assessment proceedings. Therefore, in these circumstances, we are of the view that no new material surfaced during the reassessment proceedings on which the AO could have formed a requisite belief with regard to escape of assessment, especially when the assessee has disclosed all materials fully and truly at the stage of original assessment proceedings. Reference may be made to the case of CIT Vs. Usha International Ltd, wherein, the Full Bench of Delhi High Court held that the reassessment will be invalid, in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. The reassessment proceedings in the said cases, will be hit Page 10 of 11 C/SCA/14964/2019 ORDER by principles of “change of opinion”. 16.It would be appropriate to rely and refer the observation of the Apex Court in case of CIT Vs. Kelvinator India Ltd, wherein, it was observed that ‘one must treat the concept of ‘change of opinion’ as an inbuilt test to check abuse of power by the AO. It was further observed that the AO has power to reopen the assessment proceedings, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. 17.Applying the law laid down by the Full Bench of the Delhi High Court as well as the Apex Court and considering the facts and circumstances of the present case, we are of the opinion that the impugned action on the part of the respondent to issue notice under Section 148 of the Act and consequential proceedings are without jurisdiction and therefore, is required to be quashed and set aside and accordingly, it is quashed and set aside. 18.In the foregoing reasons, the writ application is allowed. The impugned notice dated 31.03.2019 and the assessment order dated 29.08.2019 are hereby quashed and set aside. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT Page 11 of 11 "