RIA RAJ DHOLAKIA V. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(3)

SCA/2491/2022

AI Insights

The case involves Ria Raj Dholakia, who challenged the reopening of her income tax assessment for the Assessment Year 2015-2016. The reopening was based on the claim that she had incorrectly availed an exemption under section 54B of the Income Tax Act, 1961, on the sale of agricultural land which was allegedly converted to non-agricultural land before the sale. The original assessment had accepted her claims, but the reassessment notice alleged that the land was not used for agricultural purposes for the required two years prior to the sale, leading to an underassessment of income. The court examined whether the reopening was justified, considering the principles of 'reason to believe' and the existence of new material.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 672212 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-09-2022
• Assessment Year: misc
• Other Referred Cases: Rakesh Agrawal Vs. ACIT, Raymond Woolen Mills Ltd. Vs. ITO, ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., Commissioner of Income tax v. P.V.S. Beedies Pvt. Ltd., New Light Trading Co. vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NIKUNT RAVAL; KALPANA RAVAL
• Assessee Lawyers: TUSHAR HEMANI; VAIBHAVI PARIKH
• Keywords: Agricultural Land; Capital Gain; Exemption under Section 54B; Income tax reassessment; Non-Agricultural Land
• Section: 148; 142(1); 143(2); 54B; 226

Judgement Text

"C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 2491 of 2022 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ========================================================== RIA RAJ DHOLAKIA Versus ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(3) ========================================================== Appearance: MR TUSHAR HEMANI, SENIOR ADVOCATE WITH MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MR NIKUNT RAVAL WITH MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 06/09/2022 ORAL JUDGMENT Page 1 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1.Heard learned Senior Advocate Mr. Tushar Hemani assisted by learned advocate Ms. Vaibhavi Parikh for the petitioner and learned advocate Mr. Nikunt Raval with learned advocate Mrs. Kalpana K. Raval for the respondent. 2.Having regard to the controversy involved in this petition, with the consent of the learned advocates for the respective parties, the petition is taken up for final hearing. 3.Rule returnable forthwith. Learned advocate Mr. Nikunt Raval waives service of notice of rule for the respondent. 4.The petitioner has preferred this petition under Article 226 of the Constitution of India challenging the impugned notice dated Page 2 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 31.03.2021 issued under section 148 of the Income Tax Act, 1961 (For short “the Act”) proposing to reopen the assessment for the Assessment Year 2015-2016. 5.Brief facts of the case are that the petitioner is an individual. During the year under consideration, the petitioner sold an agricultural land at village Bhesan bearing Survey No.99/2, Block No.176, admeasuring 14363 square meters, T. P. Scheme No.9, Mud Khand No.116 for Rs.5,74,52,000/- on 04.10.2014 along with two other co-owners and share of the petitioner in above referred sale consideration was Rs.3,44,71,200/-. It is the case of the petitioner that the petitioner utilized such sale consideration for purchase of agricultural land and claimed exemption of Rs.1,94,62,745/- under section 54B of the Act. Resultantly, the petitioner earned Short Term Capital Gain of Page 3 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Rs.13,18,257/- on sale of the land in question. 5.1) The petitioner filed return of income for the for the Assessment Year 2015- 2016 on 31.08.2015 declaring total income at Rs.54,25,340/- which included Short Term Capital Gain of Rs.13,18,257/- on sale of land in question. 5.2) The case of the petitioner was selected for scrutiny assessment by issuance of notice dated 20.09.2016 under section 143(2) of the Act. 5.3) The Assessing Officer, thereafter, issued notice dated 31.01.2017 under section 142(1) of the Act, calling upon the petitioner to furnish various details. 5.4) The petitioner, vide letter dated Page 4 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 20.03.2017, furnished the details that were called for by the Assessing Officer. 5.5) The Assessing Officer, thereafter, issued notice dated 08.08.2017 under section 142(1) of the Act, calling upon the petitioner to produce necessary evidences to the effect that the property at Bhesan was being utilized for agricultural purposes in order to substantiate the claim under section 54B of the Act. 5.6) The petitioner, vide letter dated 22.08.2017, furnished copy of agreement for agricultural land purchased for claiming benefit under section 54B of the Act as well as copy of relevant extract of notice under section 135D of the Bombay Land Revenue Code,1879 for substantiating the claim that the land was an agricultural land. Page 5 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 5.7) The petitioner, vide letter dated 20.09.2017 gave detailed explanation in support of the fact that the land in question was used for agricultural purposes. 5.8) It is the case of the petitioner that the Assessing Officer, after threadbare examining the details furnished by petitioner from time to time, consciously chose not to disturb the claim of exemption under section 54B of the Act while framing assessment under section 143(3) of the Act vide order dated 14.11.2017. 5.9) The respondent, thereafter, issued the impugned notice dated 31.03.2021 under section 148 of the Act seeking to reopen the case of the petitioner for Assessment Year 2015-2016. 5.10) The petitioner filed the return of Page 6 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 income in response to the impugned notice on 16.04.2021 and further requested the respondent to supply copy of reasons recorded for reopening the assessment. 5.11) The respondent supplied the copy of reasons for reopening the assessment vide letter dated 10.09.2021. The reasons recorded by the Assessing Officer for reopening the assessment under section 147 of the Act read as under: “1. Brief details of the Assessee: The assessee had filed her return of income for AY 2015-16 on 31.08.2015 declaring total income at Rs.54,25,340/-. The assessee had shown income from Capital Gain, Profit from firm and income from other sources during the year under consideration. Subsequently, the assessment u/s 143(3) of the Act for AY 2015-16 was completed in this case on 14.11.2017 determining the income at Rs.57,90,640/- by way of making addition of Rs.3,65,300/- on account of STCG. 2. Brief details of Information collected/ received by the AO: During the year under consideration, the assessee had sold a land Page 7 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 (village Bhesan bearing land survey No.99/2, Block No.176 area 1-43-63 sq.mtr., T.P Scheme No.9, Mud Khand No.116) for Rs 5,74,52,000/- on 04.10.2014 along with two other co- sellers and received his portion of share of Rs.3,44,71,200/-. Further, the assessee had claimed exemption u/s.548 of Rs.1,94,62,745/- on purchase of agriculture land. The assessee had sold the agriculture land after converting it to non- agriculture land. Further, the assessee has not carried out any agricultural activity in the said land for the two years immediately preceding the date on which transfer took place as provided in section 54B of the Act, the exemption of Rs.1,94,62,745/- claimed by the assessee was required to be disallowed and added to the long- term capital gain of the assessee. By not doing so resulted in underassessment of income to the tune of Rs 1,94,62,745/-. 3. Analysis of information collected/received: During the year under consideration, the assessee had sold a land at Bhesan along with other two co-sellers on 04.10.2014 and received her consideration of Rs.3,44,71,200/-. After deducting cost of acquisition and exemption u/ s.54B of the Act, STCG of Rs.13,18,257/- was offered for taxation by the assessee. The assessee had sold the agriculture land after converting it into non- agriculture land on 23.09.2014 and Page 8 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 thus before executing sale deed, the agricultural land was converted into non-agricultural land so the condition of immediately preceding two years for agricultural activity no fulfilled. Further, the assessee has not carried out any agricultural activity in the said land for the two years immediately preceding the date on which transfer took place as provided in section 54B of the Act, the exemption of Rs.1,94,62,745/- claimed by the assessee was required to be disallowed. 4. Enquiries made by the AO as sequel to information collected/ received: The assessee had sold a land (village Bhesan bearing land survey No.99/2, Block No.176 area 1- 43-63 sq mtr. T.P. Scheme No.9, Mud Khand No.116) for Rs 5,74,52,000/- on 04.10.2014 in which assessee being co-owner (other two co-owner 1 Vallabhbhai Sambhubhai Dholakia, 2. Himmatbhai Laljibhai Paladia) and received his portion of share of Rs 3,44,71,200/-. Further, the assessee had claimed exemption u/s. 54B of Rs.1,94,82,745/- on purchase of agriculture land. The said land was registered in the name of assessee and others as co-owners on 24.07.2015. Further, it was noticed that the said land was converted into non-agriculture land by Dy. Collector, Olpad District, Surat, vide order No/-63-176/...4/1348/2014 dated 23.09.2014 So status of the agricultural land was converted into non-agricultural land. Thus, before Page 9 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 executing sale deed the agricultural land was converted into non- agricultural land so the condition of immediately preceding two years for agricultural activity not fulfilled. Further, as the land was in the name of the owner, i.e., Shri Ria Raj Dholakia, however, process of the conversion of the land into non- agricultural land was in the name of the purchaser, i.e., Sankalp Enterprise, thus it seems that possession of the land was given by the assessee to the Sankalp Enterprise before executing sale deed. Without executing sale deed process, converting agricultural land into non-agricultural land proved that the agricultural activities were not being carried out by the assessee. For claiming exemption u/s 54B, the assessee has to fulfill the basic condition, i.e., (a) The land transferred should have been in use for agricultural purposes for at least two years immediately preceding the date of transfer by the individual or his parents if it is owned by the individual. Since the assessee has not carried out any agricultural activity in the land under consideration for the two years immediately preceding the date on which transfer took place as provided in Section 54B(1) of the IT Act, 1961; the exemption of Rs.1.94,62,745/- claimed by the assessee was required to be Page 10 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 disallowed and added to the long term capital gain of the assessee. 5. Findings of the AO: As per provisions of Section 54B relating to capital gain on transfer of land used for agricultural purposes, any capital gain arising from the transfer of a capital asset being land which, in the two years immediately preceding the date on which the transfer took place, was being used by the assessee or a parent of his for agricultural purposes, and the assesses has, within a period of two years after that date, purchased any other land for being used for agricultural purposes, shall be exempt to the extent such capital gain is invested in the purchase of another agricultural purpose, provided the new agricultural land purchased, is not transferred within a period of 3 years from the date of its acquisition. In the instant case, the assessee had sold a land at village Bhesan with two other co- sellers and received her portion of share of Rs.3,44,71,200/- Further, the assessee had claimed exemption u/s 54B of Rs.1,94,62,745/- on purchase of agriculture land. However, the said and was converted into non-agriculture land by Dy. Collector, Olpad District, Surat, vide order No/-63- 176/...4/ 1348/2014 dated 23.09.2014 and therefore status of the agricultural land was converted into non- agricultural land by this order Page 11 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Thus, before executing sale deed the agricultural land was converted into non-agricultural land so the condition of immediately preceding two years for agricultural activity does not get fulfilled. Accordingly, exemption of Rs.1,94,62,745/- claimed by the assessee was required to be disallowed and added to the long term capital gain of the assessee. 6 Basis of forming reason to believe and details of escapement of income: As discussed in the foregoing paragraphs, the assessee had sold a land at Bhesan along with other two co-sellers on 04.10.2014 and received her consideration of Rs 3,44,71,200/-. After deducting cost of acquisition and exemption u/s.54B of the Act, STCG of Rs.13,18,257/- was offered for taxation by the assessee. However, the assessee had sold the agriculture land after converting it into non-agriculture land on 23.09.2014 and thus before executing sale deed, the agricultural land was converted into non-agricultural land so the condition of immediately preceding two years for agricultural activity does not get fulfilled. Further, as the land was in the name of the owner, i.e., Shri Ria Raj Dholakia, however process of the conversion of the land into non-agricultural land was in the name of the purchaser, i.e. Sankalp Enterprise, thus it seems that possession of the land was given by the assessee to the Page 12 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Sankalp Enterprise before executing sale deed. Without executing sale deed process, converting agricultural land into non- agricultural land proved that the agricultural activities were not being carried out by the assessee. Thus, the amount of Rs 1,94,62,745/- claimed as exemption under section 54B of the Act was required to be disallowed which was chargeable to tax and has escaped assessment. Thus, this amount has remained out of ambit of taxation which is required to be brought to tax Hence, notice u/s 148 of the 1.T. Act 1951 is to be issued for the AY 2015-16. 7 Seventh paragraph will include escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India: No such assets. 8. Applicability of the provisions of section 147/ 151 to the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 14.11.2017. Since 4 years (extended time limit) from the end of the relevant year has not expired in this case, the only requirement to initiate proceeding u/s. 147 of the Act is reason to believe which has been recorded in the foregoing paragraphs. It is pertinent to mention here that reasons to believe Page 13 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 that income has escaped assessment for the year under consideration have been recorded above (Para 2 to 6) It is pertinent to mention here that in this case an assessment was made as stipulated u/s. 2(40) of the Act. However as discussed in reasons to believe hereinabove in this case, income chargeable to tax has been under assessed by an amount of Rs. 1,94,62,745/-. In view of the said facts, the provisions of clause (c) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.” 5.12) The petitioner, vide letter dated 27.09.2021, raised the objections against reopening the assessment. 5.13) The respondent, vide order dated 14.12.2021 disposed of such objections holding that the reopening is justified. 5.14) Being aggrieved by the impugned order, the petitioner has preferred the Page 14 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 present petition. 6.Learned Senior Advocate Mr. Tushar Hemani for the petitioner submitted that the assessment for the year under consideration was already framed under section 143(3) of the Act and now the Assessing Officer is seeking to reopen such assessment beyond the period of four years from the end of the relevant assessment year. It was submitted that assessment can be reopened beyond the prescribed period of four years if and only an income chargeable to tax has escaped assessment by reason of failure on part of the petitioner to file return under section 139 in response to the notice issued under section 142(1) or section 148 of the Act or if the petitioner has not disclosed fully and truly all material facts necessary for assessment. It was submitted that from the documents on record such as computation of Page 15 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 income, various notices issued by the respondents and letters addressed by the petitioner as well as the assessment order, it is clear that there is no failure on part of the petitioner to disclose truly and fully all material facts necessary for the assessment. 6.1) It was submitted that the notice under section 148 of the Act can be issued only if an Assessing Officer has the reason to believe that income chargeable to tax has escaped assessment. It was submitted that words “reason to believe” suggest that firstly, the belief must be of the Assessing Officer, secondly, it must be based upon reasonable ground and not a mere change of opinion and thirdly, there must be live link or close nexus between the material before the Assessing Officer and the belief he has formed regarding escapement of income. It was Page 16 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 submitted that the case of the petitioner was selected for scrutiny assessment and after examining the materials threadbare, the Assessing Officer framed the original assessment. Thereafter, no new tangible material has come in possession of the respondent after framing the assessment under section 143(3) of the Act. Thus, it is apparent that the assessment is sought to be reopened merely on the basis of materials that were already available on record. Thus, reassessment is nothing but a mere change of opinion which is unwarranted, invalid and bad in law. 6.2) Learned Senior Advocate Mr. Hemani submitted that the assessment mainly is sought to be reopened on the basis of transaction entered into for sale and purchase of land by the petitioner and subsequent claim of exemption under section Page 17 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 54B of the Act. The petitioner and other co- owners sold an agricultural land for Rs.5,74,52,000/- on 04.10.2014 whereby Rs.3,44,71,200/- came to the share of the petitioner out of such sale proceeds which was utilized by the petitioner for purchase of another agricultural land. The petitioner claimed exemption of Rs.1,94,62,745/- under section 54B of the Act while filing the return and thereby the petitioner earned Short Term Capital Gain of Rs.13,18,257/- on the sale of land. The Assessing Officer was of the view that the land in question was converted into non-agricultural land on 23.09.2014 which was prior to transferring the land in question and therefore, the condition as to use of the land in question for agricultural purposes for immediately preceding two years does not get fulfilled due to which the petitioner is not entitled to claim exemption under section 54B of the Page 18 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Act. It was submitted that vide conveyance deed dated 4.10.2014, the petitioner sold the land in question to a partnership firm namely “Sankalp Enterprise”. Since the buyer was a partnership firm i.e. a non-agriculturist, an application was moved under section 63 of the Gujarat Tenancy and Agricultural Lands Act, 1948 for executing the sale deed and vide order dated 23.09.2014, such permission came to be granted which fact is evident from the conveyance deed dated 4.10.2014. It was submitted that the order dated 23.09.2014 is not at all with respect to conversion of land in question from agricultural land to non- agricultural land and therefore, the very foundation for reopening the assessment itself is on an erroneous premise. It was further submitted that the land in question was converted into non-agricultural land vide order dated 3.11.2016 which was much later than the date of transfer being 4.10.2014 and Page 19 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 therefore, reopening the assessment on such basis is not justified. 6.3) Learned Senior Advocate Mr. Hemani submitted that as per section 151 of the Act, it is mandatory on part of the Assessing Officer to obtain sanction from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner which should not be merely mechanical in nature and such authorities should recorded the satisfaction in a detailed manner and mere endorsement of the view taken by the Assessing Officer would not meet the requirement of the provisions of section 151 of the Act. It was submitted that in the present case since the reopening of assessment is beyond a period of four years, sanction of the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner was to be mandatorily obtained, however, there is no Page 20 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 application of mind while sanctioning the issuance of notice under section 148 of the Act and reopening is sanctioned merely in a mechanical manner and therefore, reopening the assessment is not justified. 6.4) Learned Senior Advocate Mr. Hemani further submitted that reopening of the assessment in case of petitioner is on the basis of audit objection raised by the audit party and it is well settled that an assessment cannot be reopened based on audit objection. 7.On the other hand, learned advocate Mr. Nikunt Raval for the respondent submitted that four years from the end of the relevant assessment year i.e., 2015-2016 falls on 31.03.2020. Due to the outbreak of COVID-19 pandemic, the Government brought the Taxation and Other Laws (Relaxation of Certain Page 21 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Provisions) Ordinance, 2020 on 31.03.2020 which extended time limits for completion of proceedings and compliance of actions. The Ordinance was subsequently replaced by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act (For short “Relaxation and Amendment Act”) on 29th September 2020 by the Parliament (Legislature). This Relaxation and Amendment Act legislated upon several relaxations, notifications and amendments pertaining to Income Tax Act, 1961. Clause (a) of section 3(1) of the Relaxation and Amendment Act granted relaxation till 31.03.2021 as a part of the original Legislation. However, it delegated powers to the Central Government for relaxation of time beyond 31.03.2021 i.e., from 01.04.2021 and onwards for completion of various proceedings and issuance of notice to authorities under the Act. Page 22 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 7.1) It was submitted that Central Board of Direct Taxes (\"CBDT\") as a constituent of the Central Government, exercised the powers delegated to Central Government as per section 3(1) of the Relaxation and Amendment Act and extended the time limit for completing various actions which included reassessment proceedings from 31.03.2020 to 31.03.2021 and subsequently to 30.06.2021. It was submitted that in case of the petitioner, time limit of four years was expiring on 31.03.2020, however, as per section 3(1) of Relaxation and Amendment Act, time limit for taking action under section 148 of the Act was extended till 30.06.2021 and therefore, the case of the petitioner was reopened within the purview of section 147 of the Act well within the period of four years from the end of relevant assessment year. Page 23 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 7.2) Relying upon section 147 of the Act, learned advocate Mr. Raval submitted that the bare reading of the section 147 explicitly provides that the only pre-condition or requirement for the Assessing Officer to assume jurisdiction for reopening is to have \"reason to believe\". It was submitted that from plain reading of the reasons recorded for reopening the assessment, the Assessing Officer has rightly formed opinion that the assessee had sold the agriculture land after converting it into non-agriculture land on 23.09.2014 and thus before executing sale deed, the agricultural land was converted into non-agricultural land and therefore, the condition of immediately preceding two years for agricultural activity does not get fulfilled. It was further submitted that process of the conversion of the land into non-agricultural land was in the name of the purchaser, i.e. Sankalp Enterprise which Page 24 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 indicates that possession of the land was given by the assessee to the Sankalp Enterprise before executing sale deed and without executing sale deed process, converting agricultural land into non- agricultural land prove that the agricultural activities were not being carried out by the assessee. 7.3) It was further submitted that during the original assessment proceeding casual approach was undertaken in respect of considering the deduction/exemption under section 54B of the Act. Though the material was available on record, at the time of first assessment, when no conscious consideration of the material is made and a mistake has been committed, it would not, in any case create an embargo on the power of the Assessing Officer to exercise powers under amended section 147 of the Act as there could Page 25 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 not be change of opinion in the factual background of the case. 7.4) Relying upon the judgment of Delhi High Court in case of Rakesh Agrawal Vs. ACIT reported in (1997) 225 ITR 496 Delhi, it was submitted that the Court held that under the amended section, power to reopen assessment is much wider and can be exercised even if an assessee had disclosed fully and truly all material facts. 7.5) Relying upon the judgment in case of Raymond Woolen Mills Ltd. Vs. ITO reported in 236 ITR 34, 35 [SC], it was submitted that the Court held that for determining whether initiation of reassessment proceeding are valid, it is only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the Page 26 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 material is not a thing to be considered at this stage. 7.6) Relying upon the judgment of the Hon'ble Supreme Court in case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in (2007) 291 ITR 500 (SC) it was submitted that in order to invoke the provisions of Section 147 of the Act, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment, then jurisdiction is conferred on the Assessing Officer to reopen the assessment. It was submitted that the only requirement is to see that the escapement of income which exists in the instant case and therefore, the notice issued under Section 148 is a valid notice. 7.7) It was further submitted that the competent authority to sanction approval for Page 27 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 reopening of assessment for the cases within the period of four years from the end of the relevant assessment year is Additional/Joint Commissioner as per the provisions of section 151 of the Act and necessary approval was obtained from the Additional Commissioner of Income-tax, Range-1(3), Surat. Therefore, the notice issued under Section 148 is a valid notice issued after obtaining valid approval from the Competent Authority. 7.8) Relying upon the decision of Hon’ble Supreme Court in case of Commissioner of Income tax v. P.V.S. Beedies Pvt. Ltd. reported in (1999) 237 ITR 13, it was submitted that if the Assessing Officer on the basis of audit information, forms an independent belief that income chargeable to tax has escaped assessment, there is nothing preventing him from exercising power of reassessment. Reliance was also placed on Page 28 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 decision in case of New Light Trading Co. vs. Commissioner of Income Tax reported in (2002) 256 ITR 391 (Del), wherein Division Bench of the Delhi High Court referred to the decision of Supreme Court in case of CIT vs. P. V.S. Beedies Pvt. Ltd., to submit that audit objection can be a valid ground for reopening of the assessment. 8.Considering the submissions made by the learned advocates for both the sides, it is not in dispute that during the original scrutiny assessment, the Assessing Officer has thoroughly examined and scrutinised the issue regarding the capital gain on sale of land made by the petitioner. 9.The petitioner during the course of scrutiny assessment furnished the details comprising of working of capital gain realised on sale of land after claiming deduction under Page 29 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 section 54B of the Act. The petitioner also furnished the copy of conveyance deed for sale as well as subsequent purchase of land so as to claim the deduction under section 54B of the Act. The Assessing Officer after considering the details furnished by the assessee accepted the computation of capital gain provided by the petitioner and thereafter passed the assessment order under section 143(3) of the Act. 10. It appears that the respondent Assessing Officer has misinterpreted the facts which were already existing on record ignoring that by order dated 23.09.2014, permission was granted by the Collector under section 63 of the Gujarat Tenancy and Agricultural Lands Act, 1948 for executing the sale deed as the agricultural land was to be sold to the non agriculturist partnership firm namely, “Sankalp Enterprise”. Thereafter the land in Page 30 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 question was sold by a registered sale deed on 4.10.2014 and the land continued to be an agricultural land till the same was converted into non agricultural land vide order dated 3.11.2016. Therefore, the Assessing Officer while recording the reasons was not justified in considering the land to be a non agricultural land when the same was sold on 4.10.2014. Thus there is a clear change of opinion on part of the Assessing Officer to reopen the assessment though there is no reason to believe that there is escapement of income on the basis of material available on record, more particularly, when the issue with regard to computation of the capital gain was considered in detail during the original assessment proceedings. 11. It is true that in view of the provisions of Taxation and other laws (Relaxation and Amendment of certain Page 31 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 Provisions) Act, 2020, the time limit for issuance of notice under section 148 of the Act was extended upto 30.06.2021 and as such, the impugned notice issued on 31.03.2021 cannot be said to be issued beyond a period of four years. However, as discussed above, when the Assessing Officer during the course of regular assessment proceedings has considered the issue on the basis of material available on record and in absence of any new material available for reopening of the assessment and to form a reason to believe on the same material, issuance of notice under section 148 of the Act cannot be sustained as the Assessing Officer could not have any reason to believe on the same material to come to prima facie opinion that income chargeable to tax has escaped assessment. In facts of the case, entire material was available with the Assessing Officer during the regular assessment which Page 32 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 was duly considered and the assessment order under section 143(3) of the Act was passed and therefore, merely because of change of opinion, the Assessing Officer cannot reopen the assessment by misinterpreting the facts which are already available on record. Moreover, it appears that notice for reopening is based on audit objection without there being anything on record to suggest that such notice was issued on account of new tangible material available on record. 12. In view of foregoing reasons, the impugned notice under section 148 of the Act to reopen the assessment for the Assessment Year 2015-2016 is nothing but a mere change of opinion and the Assessing Officer therefore, cannot assume the jurisdiction to issue such notice. The Hon’ble Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. reported in (2010) Page 33 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 320 ITR 561(SC), has held that the words “reason to believe” would not give arbitrary power to the Assessing Officer to reopen the assessment on the basis of “mere change of opinion” which cannot be per-se reason to reopen the assessment. The Apex Court further observed that the conceptual difference between the powers to review and powers to reassess has to be kept in mind and the Assessing Officer has no powers to review but he has powers to reassess. Therefore, it was held that the reassessment has to be based on fulfillment of certain pre-condition and if the concept of “change of opinion” is removed as contended on behalf of the department then in garb of reopening the assessment, review would take place and as such the concept of “change of opinion” has to be applied as an inbuilt test to check the abuse of power by the Assessing Officer. Page 34 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 13. In view of the facts emerging from the record as well as the settled legal position, the impugned notice under section 148 of the Act is nothing but a mere change of opinion by the Assessing Officer resulting into review of assessment order leading to make a roving inquiry into the facts which were already considered by the Assessing Officer at the time of framing the regular assessment under section 143(3) of the Act. The Assessing Officer therefore, cannot be permitted to re-verify the facts for exercising the powers to reopen the assessment. The decisions relied upon by the learned advocate for the respondents are therefore, not applicable to the facts of this case, more particularly, when there is no new tangible material available on record which would lead to a reason to believe that income has escaped the assessment. Page 35 of 36 C/SCA/2491/2022 JUDGMENT DATED: 06/09/2022 14. For the foregoing reasons, the impugned notice dated 31.03.2021 issued under section 148 of the Act by the respondent exercising the powers to reopen the assessment for the Assessment Year 2015-2016 is illegal and liable to be set aside. Accordingly, impugned notice dated 31.03.2021 is hereby set aside. 15. The petition succeeds and is allowed. Rule is made absolute to the aforesaid extent. No order as to costs. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) RAGHUNATH R NAIR Page 36 of 36 "