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2024 DIGILAW 1762 (GUJ)

Kalp Developers v. Income Tax Officer, Ward 3(3)(1), Ahmedabad

2024-08-23

BHARGAV D.KARIA, NIRAL R.MEHTA

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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. 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: “1. Brief details of the Assessee: Assessee is an individual bearing PAN: AAKFK1197Q and has filed return of income for A.Y.2013-14 on 31.10.2013 declaring total income of Rs. 12,83,920/-. Assessment u/ s.143(3) was made on 26.02.2016. 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 agricultural land at S.No.473, Santegni for the sale consideration of Rs.3,25,00,000/- by paying stamp duty of Rs.22,37,500/-. According to the stamp duty paid, the jantri value of the property comes out to Rs.4,56,63,265/-. Hence, there is a difference of Rs. 1,31,63,265/- between the sale deed value and the jantri value. 3. Analysis of information collected/received: On analysis of the information, it is seen that M/s. Kalp Developers has sold non agricultural land at S.No.473, Santegni for the sale consideration of Rs.3,25,00,000/- by paying stamp duty of Rs.22,37,500/-. Hence, there is a difference of Rs. 1,31,63,265/- between the sale deed value and the jantri value. 3. Analysis of information collected/received: On analysis of the information, it is seen that M/s. Kalp Developers has sold non agricultural land at S.No.473, Santegni for the sale consideration of Rs.3,25,00,000/- by paying stamp duty of Rs.22,37,500/-. According to the stamp duty paid, the jantri value of the property comes out to Rs.4,56,63,265/-. Hence, there is a difference of Rs. 1,31,63,265/- between the sale deed value and the jantri value. Hence, the amount of Rs. 1,31,63,265 /- has escaped assessment and is required to be brought to tax net for AY 2013-14. 4. Enquiries made by the AO as sequel to information collected/received: The ITBA/ITD data available in this office is verified, (i) As per PAN data base the case of the assessee is found to belong to the territorial jurisdiction of this ward, (ii) The assessee has filed Return of income for F.Y.2012-13 pertaining to A.Y.2013-14. (iii) Assessment u/s.143(3) was made on 26.02.2016 and income to the tune of Rs.1,31,63,265/- has escaped assessment. 5. Findings of the AO: As per the provisions of Section 50C of the Act, where the consideration received as a result of transfer of any capital asset is less than the value adopted or assessed by the Stamp Valuation Authority for the purpose of payment of stamp duty, the value so adopted or assessed by the Stamp Valuation Authority shall be deemed to be the full value consideration received. The assessee has sold the property for a consideration which is less than the jantri value. Therefore, income to the tune of Rs.1,31,63,265 has escaped assessment and is required to be brought to tax net for AY 2013-14. 6. Basis of forming reasons to belleve and details of escapement of Income: In view of the above facts and by failure on the part of the assessee to disclose fully and truly all the material facts necessary for the A.Y. 2013-14, I have reason to believe that income to the tune of Rs.1,31,63,265 /- has escaped assessment (more than Rs.1 Lakh) for which, the case of the assessee for the A.Y. 2013-14 needs to be re-opened within the meaning of Section 147 of the IT Act.” 5.9. The petitioner filed objections on 03.02.2022, which was disposed of by the respondent vide order dated 24.02.2022, justifying the notice for reopening of the assessment. Being aggrieved, the petitioner has preferred this petition. 6. Learned advocate Mr.Jimi Patel for the petitioner submitted that the impugned notice under Section 148 of the Act is issued beyond the period of four years from the end of the Assessment Year 2013- 14 on previously concluded scrutiny assessment under Section 143(3) of the Act and therefore the same is not a valid notice as per the proviso to Section 147 of the Act. 6.1. It was submitted that the Assessing Officer has failed to establish from the material available on record that there is failure on the part of the petitioner to fully and truly disclose all the material facts during the course of the original assessment proceedings and in absence of the same, the respondent Assessing Officer has no jurisdiction to issue the impugned notice under Section 148 of the Act. 6.2. It was submitted that from the facts available on record, the petitioner has disclosed all the material facts and there is nothing on record to establish the failure on the part of the petitioner. 6.3. It was submitted that the respondent Assessing Officer, except making bald statement of none disclosure has failed to even prima facie show that there is no disclosure on the part of the petitioner. 6.4. It was submitted that the impugned notice has been issued without verification of the material available on record in as much as the entire issue of sale of land at Santej has been thoroughly scrutinized, during the course of the regular assessment and in absence of any reference to new tangible materials and the reasons recorded to form the belief that the income has escaped assessment, the Assessing Officer could not have assumed jurisdiction to issue the impugned notice. 6.5. Learned advocate Mr.Patel invited attention of the Court that the Assessing Officer has categorically stated in the reasons that from the verification of record it was noticed and it is a settled legal position that if the reasons are recorded on the basis of the material available on record and notice is issued beyond four years from the end of the Assessment Year on scrutiny of assessment based on such reasons is legally not sustainable. Reliance was placed on the decision of this Court in case of Patel Alloys Steel Pvt. Ltd. versus ACIT reported in (2014) 225 Taxmann 84 Gujarat. 6.6. Learned Advocate Mr.Patel referred to the facts and materials provided during the course of regular assessment proceedings, such as documents pertaining to the sale of land, valuations of opening and closing stock and after scrutiny thereof the Assessment Order under Section 143(3) of the Act, excepting the returned income of the petitioner was passed. 6.7. It was therefore submitted that the Assessing Officer after perusing the details, consciously framed an opinion so as not to make any addition to the returned income on account of transaction of sale. In this view of the fact and in view of the same the impugned notice for reopening woud only tantamount to change of opinion, which is not permissible in law. Reliance was placed on the decision of this Court in case of Cliantha Research Ltd. Vs. Deputy Commissioner Of Income Tax reported in (2014) 225 Taxmann 102 Gujarat. 6.8. Learned advocate Mr.Patel referred to the audited accounts placed on record to point out that the petitioner is engaged in the business of real estate development and sale of land and that the petitioner had treated the land as its stock in trade and of sale of land, the income arising there from is offered as income from business and profession in the return of income. 6.9. It was therefore submitted that the Assessing Officer now wants to reopen the assessment on the premises that the petitioner has not offered the sale consideration for tax under the head capital gains by invoking Section 50C of the Act would not be applicable as Section 50C is applicable only to capital assets and not to stock in trade. 6.10. Learned advocate Mr.Patel referred to Section 2(14) of the Act to submit that as per the definition of stock in trade cannot be considered as a capital asset as the same is expressly excluded under the said Section. 6.11. It was therefore submitted that when the land in question was held by the petitioner as stock in trade, any income that arose from sale of such land is required to be offered under the head “income from business and profession”, which was rightly offered by the petitioner. 6.12. 6.11. It was therefore submitted that when the land in question was held by the petitioner as stock in trade, any income that arose from sale of such land is required to be offered under the head “income from business and profession”, which was rightly offered by the petitioner. 6.12. Learned advocate Mr.Patel also referred to the order disposing the objection wherein respondent no.2 has fairly admitted that he has re-opened the assessment for the purpose of verification of expected evasion and therefore, it was submitted that there is no tax evasion by the petitioner in as much as it is a settled legal position that notice under Section 148 of the Act cannot be issued for the purpose of verification. 6.13. Learned advocate Mr.Patel therefore submitted that in the facts of the case, the impugned notice under Section 148 of the Act is liable to be quashed and set aside. 7. Per contra, learned Senior Standing Counsel Mr.Karan Sanghani for the respondent submitted that as per the reasons recorded, it is mentioned that income of the assessee for the year under consideration has escaped even though the assessment order had been passed under Section 143(3) of the Act as the Assessing Officer obtained information that the assessee had sold the non agricultural land for sale consideration of Rs.3,25,00,000/- by paying stamp duty of Rs.22,37,500/- and according to the stamp duty paid, the jantri value of the property would come to Rs.4,56,63,265/- resulting into difference of Rs.1,31,63,265/- between the value shown sale deed and the value of the jantri value. It was therefore submitted that it cannot be said that the reasons are based on material available on record. 7.1. It was further submitted that there is no change of opinion as during the original assessment proceedings, the assessing officer had framed assessment without considering the provisions of Section 50C of the Act, which were considered while recording the reasons for reopening of the case of the petitioner for the Assessment Year under consideration. 7.3. Reliance was also placed on the decision of the Honorable Apex Court in case of Income Tax Officer Vs. 7.3. Reliance was also placed on the decision of the Honorable Apex Court in case of Income Tax Officer Vs. Purshottamdas Bangur and another reported in 244 ITR 362 SC, as the respondent Assessing Officer in discharge of the official duty after issuing the impugned notice under Section 148 of the Act, the objections of the assessee has disposed of by speaking order and hence, no interference should be made in the impugned notice for reopening of the assessment for the year under consideration. 8. Considering the facts of the case and submissions made by learned advocates for both the sides, it is not in dispute that the petitioner has offered the income earned on sale of the land in question as “income from business and profession.” 9. Moreover, the entire issue with regard to the sale of land as “income from business and profession” was thoroughly scrutinized during the regular assessment proceedings by the then Assessing Officer accepting the explanation and information provided by the assessee and thereafter the order under Section 143(3) of the Act was passed. 10. It is also emerging from the facts as well as material on record that there is no failure on the part of the petitioner assessee to disclose fully and truly all the material facts relevant for the assessment and as such the respondent assessing officer could not have assumed the jurisdiction to issue impugned notice under Section 148 of the Act beyond the period of four years as per the proviso to Section 147 of the Act. 11. Moreover, the petitioner has shown the land in question as stock in trade in the audited balance sheet and profit and loss account and therefore, the assessing officer was not justified in the relying upon Section 50C of the Act as the same would not be applicable to the transaction of sale of land as stock in trade as the same excluded from the definition of the capital asset as provided in Section 2(14) of the Act. 12. From the above facts, it can be seen that the petitioner assessee had offered the entire sale consideration under the head “income from business and profession” which was subjected to detailed scrutiny by the Assessing Officer in the original scrutiny assessment. 12. From the above facts, it can be seen that the petitioner assessee had offered the entire sale consideration under the head “income from business and profession” which was subjected to detailed scrutiny by the Assessing Officer in the original scrutiny assessment. The Assessing Officer raised various questions which were answered in detail with documents by the petitioner in the several replies during the original scrutiny assessment. The Assessing Officer has framed the assessment after considering such replies and documents furnished by the petitioner. Therefore it cannot be said that the Assessing Officer failed to consider the provision of Section 50C in the original assessment as the same would not apply when the Assessing Officer accepted the transaction of sale of land being stock in trade and assessing the income therefrom under the head “income from business and profession”. 13. On perusal of the reasons recorded by the respondent Assessing Officer, it is clear that the provision of Section 50C of the Act is admittedly not applicable to sale of stock in trade as the same is not a capital asset and reopening the assessment based on such opinion is nothing but a mere change of opinion and as such, the impugned notice under Section 148 of the Act for reopening of the assessment for the year under consideration is not tenable. 14. In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notice dated 28.03.2021 issued under Section 148 of the Act is hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.