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2017 Supreme(Mad) 1152
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RAJIV SHAKDHER, J.
S.M. Kutubuddin - Petitioner
Vs.
The Assistant Commissioner of Income Tax, Chennai - Respondent
Writ Petition No. 12801 of 2016 and WMP Nos. 11196 and 27344 of 2016
Decided On : 02-06-2017
For the Petitioner: Mr. N. Murali Kumaran for M/s. Mcgan Law Firm
For the Respondent: Ms. Hema Muralikrishnan
The main legal point established in the judgment is that the assessing officer must furnish reasons for reopening an assessment, as required by law, and that a reassessment based on a mere change of opinion is not permissible.
Headnote:
Income Tax - Assessment Order - Section 143(3) - GKN Driveshafts (India) Limited Vs. Income Tax Officer, (2003) 1 SCC 72 - Section 148 - Section 147 - Section 2(14) - Change of Opinion - Agricultural Land - Capital Asset
Fact of the Case:
The petitioner filed a writ petition against the order passed by the respondent for Assessment Year (AY) 2008-2009. The petitioner sought to quash the order on the grounds that no reasons were furnished for reopening the assessment under Section 143(3) of the Income Tax Act, 1961 and that the reopening of assessment was based on a mere change of opinion.
Finding of the Court:
The court found that the respondent violated the mandate of law by not furnishing reasons for reopening the assessment, as required by the Supreme Court in GKN Driveshafts case. The court also found that the respondent's actions constituted a change of opinion, as the petitioner had supplied all particulars pertaining to the Kovalam property during the original assessment proceedings.
Issues: The issues were whether reasons were supplied for reopening the assessment and whether the reopening was based on a mere change of opinion.
Ratio Decidendi: The court held that the respondent violated the law by not furnishing reasons for reopening the assessment and that the actions constituted a change of opinion, as the petitioner had provided all necessary information during the original assessment proceedings.
Final Decision: The court set aside the impugned order and ordered the pending application to be closed. No costs were awarded.
Prefatory facts :
1. This is a writ petition directed against the order dated 02.03.2016, passed by the respondent, in respect of Assessment Year (AY) 2008-2009.
1.1. The petitioner makes a prayer for quashing the impugned order, on two broad grounds : First, that no reasons were furnished, even though sought for by the petitioner, for reopening the assessment completed under Section 143(3) of the Income Tax Act, 1961 (in short the Act ); Second, that the reopening of assessment has brought about on a mere change of opinion, which is not permissible in law, as the notice for reopening the assessment had been issued after the expiry of four years from the end of the relevant AY, i.e., AY 2008-2009.
2. In so far as the first aspect of the matter is concerned, the petitioner seek to rely upon the judgment of the Supreme Court in the matter of : GKN Driveshafts (India) Limited Vs. Income Tax Officer, (2003) 1 SCC 72.
2.1. It is pertinent to note, at this stage, that it is the petitioner's case that change in opinion has occurred with respect to an immovable property located at Kovalam village, Thiruporur Taluk, Chengalpet District (for the sake of convenience hereafter referred to as Kovalam Property). This property, evidently, at the relevant point in time, was held jointly by the petitioner, along with his sons; each having 1/3rd share in it. The said property was sold and, since, according to the petitioner, it was an agricultural land, it was not a capital asset, to which the provisions of the Act would apply, and hence, income derived upon its sale, was not included by him in his taxable income.
2.2. The record shows that a notice under Section 148 of the Act was issued to the petitioner on 30.03.2015, on the ground that income derived from the sale of the Kovalam property had escaped assessment, by reason of the failure on the part of the petitioner to disclose fully and truly of all material facts.
2.3. It is, this aspect, which on merits, is at the heart of the dispute obtaining between the parties, before me.
3. Notice, in this writ petition, was issued on 05.04.2016, since then, counter affidavit has been filed on behalf of the respondent.
4. In the interregnum, an interim order dated 06.10.2016, was passed, whereby, the respondent was directed not to initiate any coercive action against the petitioner for recovery of penalty.
5. The matter came up for hearing, before me, on 22.12.2016, when, accommodation was sought on behalf of the Revenue. The matter was renotified for hearing on 13.02.2017, when, upon hearing the arguments, judgment was reserved in the matter.
6. In order to adjudicate upon the instant writ petition, the following broad facts need to be noticed :
6.1. The petitioner, as it appears from the record, filed his return for AY 2008-2009, which was taken up for scrutiny and processed thereafter; resulting in an order under Section 143(3) of the Act being passed on 30.11.2010. Via the said order, the petitioner's taxable income was assessed and thus, pegged at Rs.6,14,730/-.
6.2. The record shows that prior to the passing of the assessment order dated 30.11.2010, the petitioner was called upon to furnish information by the Assessing Officer. The petitioner, through his Chartered Accountants, addressed two letters to the Assessing Officer with regard to information sought for from him. These letters are dated : 30.10.2010 and 09.11.2010.
6.3. A perusal of the said letters would show that the Assessing Officer had, apparently, raised several issues, which were sought to be addressed by the petitioner, albeit, via his Chartered Accountants, vide the aforementioned two letters. What is relevant, in so far as the instant matter is concerned, is, the response that the petitioner gave vis-a-vis the Kovalam property. Accordingly, the relevant extract from the petitioner's letter dated 09.11.2010, set forth hereafter :
Note on Kovalam property:
The assessee had purchased agricultural land admeasuring 1.59 acres at Kovalam vi
