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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
J.B.PARDIWALA, ILESH J. VORA, JJ.
HARESHBHAI MATHURBHAI ZINZUWADIA - Appellant
Versus
ASSISTANT COMMISSIONE OF INCOME TAX CIRCLE 2(1), RAJKOT - Respondent
SPECIAL CIVIL APPLICATION NO. 19093 of 2018
With
SPECIAL CIVIL APPLICATION NO. 19068 of 2018
Decided On : 08-09-2021
Constitution of India,1950 – Article 226 - Income Tax Act, 1961 – Section 148 r/w 147,141 and 45(3) - Tax - Partnership firm - In both cases, Assessing Officer reopened assessment under Section 147 of Act by issuing impugned Notice under Section 148 of the Act - Reasons for reopening were furnished to both assessee - Both the assessee raised various objections vide letter and same came to be disposed of by Revenue vide order - In both the cases, the assessment is sought to be reopened on ground that, applicants have transferred capital asset received by them in the form of gift, to partnership firm by way of capital contribution at market rate and they are liable for capital gain under Section 45(3) of the Act - In this context, learned Senior Counsel submitted that reasons recorded are completely erroneous in law, so far as the applicability of Section 45(3) of Act is concerned - He urged that, Section 45(3) of the Act has no application at all in the facts of the present case - Whether the revenue is justified in reopening assessment for year under consideration.
Finding of the Court : In view of aforesaid facts, it cannot be said that reasons for reopening are merely based on the observations made by AO while framing assessment of partnership firm vide order - It is pertinent to note that, against the assessment order firm is in appeal before appellate authority and the appeal is still pending - Thus, while recording the reasons, the AO has considered relevant facts like issue of stock in trade, way in which the stock of proprietary concern came to be gifted to the family members by proprietor - It could be said that there was proper application of mind on the part of AO while recording reasons for reopening - When the return of income of both assessee was processed under Section 143(1) of Act and not under Section 143 (3) of the Act, AO is justified in arriving at conclusion that the income has escaped assessment - Court attention has been invited to a decision of the Apex Court in the case of Sunilbhai Vs. Commissioner of Income Tax (AIR 1996 SC 368) - In that case, the appellant assessee was a partner in Trading Company and had introduced his shares as capital asset in the firm as capital contribution and during the assessment proceedings, Commissioner of Income Tax was of view that difference between the market value of the shares and cost of acquisition of shares was liable to be taxed in view of Section 45 of the Act - Assessee appealed to the Income Tax Appellate Tribunal - For the foregoing reasons, court are convinced that no case is made out by writ applicants for interference.
Result: In the result, both writ applications fail and are hereby rejected.
JUDGMENT :
ILESH J. VORA, J.
1. As the common questions of law and fact arise in the captioned writ applications with respect to different assessees for the same year i.e. A.Y. 2015-16, were heard analogously and are being disposed of by this common judgment and order.
2. By these writ applications under Article 226 of the Constitution of India, the writ applicants seek to challenge the legality and validity of the Notice dated 28.03.2018 issued by the respondent under Section 148 read with Section 147 of the Income Tax Act, 1961 (‘the Act’ for short), seeking to reopen the writ applicants’ income tax assessment for the A.Y. 2015- 16.
3. Brief facts giving rise to filing present writ applications are as follows:-
3.1 The writ applicant being an individual assessee filed his return of income on 23.09.2015 declaring total income at Rs.3,73,32,220/-. The return of income was processed under Section 141 of the Act and no scrutiny assessment was undertaken.
SCA No.19068/2018 ( Darshit Ashokbhai Zinzuvadia):-
3.2 The writ applicant being an individual assessee filed his return of income on 23.09.2015 declaring total income at Rs.1,14,20,050/-. The return of income was processed under Section 141 of the Act and no scrutiny assessment was undertaken.
3.3 In both the cases, the Assessing Officer reopened the assessment under Section 147 of the Act by issuing impugned Notice dated 28.03.2018 under Section 148 of the Act for the A.Y. 2015-16. The reasons for reopening were furnished to both the assessee. Both the assessee raised various objections vide letter dated 04.06.2018 and 11.06.2018 respectively and the same came to be disposed of by the Revenue vide order dated 28.08.2018.
3.4 In both the cases, the assessment is sought to be reopened on the ground that, the applicants have transferred the capital asset received by them in the form of gift, to the partnership firm M/s. Radhika Jewelers by way of capital contribution at the market rate and therefore, they are liable for capital gain under Section 45(3) of the Act.
4. Being aggrieved by the disposal of the objections against the Notice for reopening of the assessment, the writ applicants are before this Court by filing present writ applications.
5. We have heard Mr. Saurabh Soparkar, the learned Senior Counsel assisted by Mr. Bandish S. Soparkar, the learned counsel for the writ applicants and Mr. Manish Bhatt, the learned Senior Counsel assisted by Mrs. Mauna M. Bhatt, the learned Standing Counsel appearing for the revenue.
6. In assailing the impugned notice issued under Section 148 of the Act, the learned Senior Counsel Mr. Soparkar appearing for the writ applicants urged the following submissions :-
(ii) In the aforesaid background, the learned Senior Counsel referring to the reasons recorded, submitted that, the assessment is sought to be erroneously reopened on the ground that, as both the writ applicants are said to have transferred their capital assets
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