Back
IN THE HIGH COURT OF PUNJAB AND HARYANA
SURYA KANT, P.B. BAJANTHRI, JJ.
SUMIT PASSI – Appellant
Vs.
ASSISTANT COMMISSIONER OF INCOME TAX – Respondent
CWP No. 13605 of 2015 (O&M)
Decided on : 22-03-2016
Income Tax Act - Reopening of Assessment - Section 148 - Assessment Years 2005-06 to 2013-14 - Summary of Acts and Sections: Income Tax Act, 1961, Section 147, Section 148, Section 37, Section 56 - The court discussed the provisions of Section 147 and Section 148 of the Income Tax Act, along with the interpretation of the term 'reason to believe' and the conditions for reopening of assessment. The court also considered the applicability of Section 37 and Section 56 in determining the taxable income from leasing of land.
Fact of the Case:
The petitioners, owners of an industrial plot, challenged notices under Section 148 of the Income Tax Act for reopening of assessment for the years 2005-06 to 2013-14. The Assessing Authority believed that their income chargeable to tax had escaped assessment due to the change in land use and payment of conversion charges by the lessee.
Finding of the Court:
The court declined to interfere in the impugned notices/orders and dismissed the writ petitions, stating that no case to quash the notices or the order rejecting the objections was made out at the premature stage.
Issues: The issues included the jurisdiction under Section 147, the nature of income chargeable to tax, the applicability of Section 37 and Section 56, and the reasons to believe that income had escaped assessment.
Ratio Decidendi: The court emphasized the conditions for reopening of assessment under Section 147 and Section 148, the interpretation of 'reason to believe', and the availability of remedies under the Act for the assessee.
Final Decision: The court declined to interfere in the impugned notices/orders and dismissed the writ petitions but to no order as to costs.
Surya Kant, J.
This order shall dispose of CWP Nos.13605, 13607, 13609, 13618, 13624, 13641, 13645, 13666, 13667, 13668, 13683 of 2015 as not only an identical question of law is involved but the parties are also the same and the impugned notices/orders too are similarly-worded except for the Assessment Years.
2. The petitioners (Sumit Passi and Sachit Passi, sons of Vijay Passi, the Assessees) are owners of plot No.125, Industrial Area-I, Chandigarh. They are also partners in the firm - M/s Krishna Automobiles having 50% of the share each.
3. The petitioners were served with notices under Section 148 of the Income Tax Act, 1961 (in short, `the Act') as the Assessing Authority had reasons to believe that their income chargeable to tax for the Assessment Years 2005-06 to 2013-14 escaped assessment within the meaning of Section 147 of the Act. Their objections to the re-opening of assessment have also been turned down. The notices as well as the orders disposing of their objections in respect of each Assessment Year are under challenge in this bunch of writ petitions. The facts are being extracted from CWP No.13605 of 2015. The Revenue has filed its reply in CWP Nos.13609 & 13667 of 2015 which have been adopted in the connected cases as well.
4. The facts may be briefly noticed. The Assessees entered into a lease agreement (P1) in respect of their industrial plot with the firm M/s Krishna Automobiles (the lessee) w.e.f. 01st April, 2005. The lessee agreed to pay a monthly rent of Rs. 1.50 lacs. The rent was payable to both the brothers in the ratio of 50:50. The agreed lease period was that of 15 years commencing from 01st April, 2005 with the stipulation of 5% annual increase in the monthly rent.
5. Some of the other salient terms and conditions agreed to between the lessee and the lessors are as follows:-
"4.2 The Lessee is fully authorized to construct the building to suit their own requirements, subject to the same complying with the prevailing bye laws. The Lessee shall have full ownership/control of the said building throughout the lease period.
5.2 The Lessee will obtain all requisite clearances & permissions and land use charges for setting up its BUSINESS as described above and pay all the charges/levies/taxes/fees as required by the concerned authorities.
5.4 On completion of the lease period, the Lessee shall hand over to the Lessors the building built on the said premises in good condition without any defects/damages/leakages/or any other areas requiring repairs.
5.5 The Lessee shall hand over quite and vacant possession of the land & building to the Lessors with no charges what so ever at the end of the lease period after paying all outstanding bills/taxes/fee/levies/bills/dues to the authorities and shall hand over a no due certificate on the date of the end of the lease period from the municipal corporation, Chandigarh, Estate office, Electricity Department, Water Department etc."
6. The Chandigarh Administration vide notification dated 19th September, 2005 notified the Scheme known as "Chandigarh Conversion of Land Use of Industrial Sites into Commercial Activity/Services in Industrial Area, Phase-I/Phase-II, Chandigarh Scheme-2005", thereby permitting to carry out commercial activities in the industrial plots after payment of conversion fee in the manner as prescribed under the Scheme.
7. The Assessees applied on 15th September, 2006 as the owners of above-stated industrial plot for the conversion of land use for commercial activities along with a sum of Rs. 96,24,996/- payable along with the application. The competent authority accorded the permission and the industrial plot was permitted to be used for commercial activities subject to payment of balance amount of Rs. 8,66,24,964/- to the Chandigarh Housing Board which the Assessees agreed to pay in 9 annual instalments of Rs. 1,40,11,415/- each with interest @ 8.25% per year. The last instalment was payable on or before 15th September, 2015.
8. The Assessees-cum
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
