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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
Bhargav D. Karia, Niral R. Mehta, JJ.
Kalp Developers – Petitioner
Versus
Income Tax Officer, Ward 3(3)(1), Ahmedabad & Anr. – Respondents
R/Special Civil Application No. 4857 of 2022
Decided On : 23-08-2024
Taxation - Income Tax Act - Sections 143(3), 147, 148, 50C, 2(14) - The court interpreted the provisions regarding reopening of assessments, emphasizing that the notice under Section 148 was invalid due to lack of new material and the applicability of Section 50C to stock in trade.
Fact of the Case:
The petitioner filed a return for AY 2013-14, declaring income from the sale of land. After scrutiny, an assessment order was passed. Years later, a notice under Section 148 was issued for reopening the assessment based on a perceived income escape.
Finding of the Court:
The court found that the petitioner had disclosed all material facts during the original assessment and that the reopening notice was issued beyond the permissible time frame without new evidence, rendering it invalid.
Issues: Whether the notice under Section 148 for reopening the assessment was valid given the time elapsed and the absence of new material facts.
Ratio Decidendi: The court held that the reopening of the assessment was not justified as it constituted a mere change of opinion without new evidence, and Section 50C did not apply to stock in trade.
Result: The notice under Section 148 was quashed and set aside.
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard learned advocate Mr.Jimi S. Patel for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for Mrs.Kalpana K.Raval for the respondent no.1.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr.Karan Sanghani waives service of notice of rule for the respondents.
3. Having regard to the controversy in narrow compass, with the consent of learned advocates for the respective parties, the matter is taken up for hearing.
4. By this petition under Article 226 and 227 of the Constitution of India, the petitioner has prayed for the quashing and setting aside notice dated 28.03.2021 for the assessment year 2013-14.
5. The brief facts of the case are as under:
5.1. The petitioner filed return of income for the Assessment Year 2013-14 on 31.10.2013 declaring total income of Rs.12,83,920/-. The petitioner had offered its entire income under the head “Income from Business and Profession” which arose on account of sale of land situated at Santej.
5.2. The petitioner had sold land situated at Block no.510, Revenue Survey No.473 and Block No.512, Revenue Survey No.479 situated at Santej by executing tri-parte conveyance deed registered on 27.06.2012 for total consideration of Rs.3,25,00,000/- which was received by six different cheques drawn on Union Bank of India, Vastrapur Branch out of the six cheques, two cheques bearing cheque no.780103 amounting to Rs.30,00,000/- dated 09.06.2012 and cheque no.780106 amounting to Rs.75,00,000/- dated 22.06 2012, were given directly in the name of confirming party K.R.Developers by the purchaser Eliment Procorn LLP. Hence the petitioner received sale consideration of Rs.2,20,00,000/-. The petitioner has shown his sale consideration in return of income.
5.3. Thereafter the case of the petitioner was selected for scrutiny assessment and notice dated 04.09.2014 under Section 143(2) of the Income Tax Act, 1961 (for short “the Act”) was issued. The petitioner furnished copy of the ITR, Statement of total income on tax audit report along with letter dated 27.07.2015. Thereafter notice under Section 142(1) of the Act dated 31.07.2015 was issued requiring the petitioner to furnish various details, which was replied by the petitioner on 31.07.2015 and 15.10.2015. The petitioner submitted copy of the agreement to sale and sale deeds for the transaction of sale of land made during the year under consideration. The petitioner thereafter provided further details vide letter dated 22.12.2015 and 28.01.2016 with regard to the valuation of opening and closing stock of land situated at Santej, which was sold during the year.
5.4. The Assessing Officer passed an Assessment Order dated 26.02.2016 under Section 143(3) of the Act.
5.5. Thereafter the petitioner received notice dated 10.05.2019 to furnish purchase deed of sale of land, ledgere account of purchase and balance sheet which was provided by the petitioner by letter dated 17.05.2019.
5.6. The petitioner thereafter received the impugned notice under Section 148 of the Act dated 28.03.2021 after almost 6 years from the end of the Assessment Year for escapement of the income under Section 147 of the Act.
5.7. The petitioner therefore tried to file return of income pursuant to the said notice but due to some technical glitches on portal, it could not be filed within the time allowed. The petitioner thereafter was able to file return of income on 20.11.2021 declaring the same income as stated in the original return.
5.8. The respondent thereafter provided reasons for reopening of the assessment vide letter dated 28.01 2022 as under:
2. Brief details of information collected/received by the AO: From verification of records, it was noticed that M/s. Kalp Developers has sold non agricultura
The court established that reopening assessments requires new material evidence, and Section 50C does not apply to stock in trade, reinforcing the principle against mere changes of opinion.
Reopening of assessments requires tangible evidence of income escapement; mere change of opinion based on previously disclosed facts is insufficient.
The main legal point established in the judgment is that re-assessment based on a change of opinion is impermissible under the Income Tax Act, and tangible material is required to justify re-opening.
The Assessing Officer cannot reopen an assessment based solely on a change of opinion; valid reasons must exist to believe that income has escaped assessment.
Reopening of assessment under Section 148 requires fresh tangible information and cannot be based on audit objections alone.
The court established that the reopening of an assessment under section 148 requires a clear nexus with income escapement, which was not present in this case.
Reopening of assessment under Section 148 requires new tangible material; mere change of opinion does not justify reopening.
The main legal point established in the judgment is the requirement of tangible material and cogent facts for invoking powers under Section 147 of the Income Tax Act, and the importance of the reason....
Reopening of assessment under section 148 requires new tangible material; reliance on previously considered facts constitutes a change of opinion, which is impermissible.
Assessment - “reason to believe” the income chargeable to tax has been under assessed - Petitioner is bound to participate in the re-assessment proceedings by availing the opportunities to be provi....
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