2014 (3) TMI 1212 - HC - Income Tax

Reopening of assessment u/s 147 - propriety of allowance of exemption u/s 54 B - HELD THAT - Audit Department had placed a note pointing out that it was incorrect. The note has been responded to by the Deputy Commissioner of Income Tax on 29th June 2010 who pointed out that exemption allowed was in accordance with law. In this situation our attention has been invited to judgment of Kelvinator of India Limited 2010 (1) TMI 11 - SUPREME COURT to urge that mere change of opinion cannot constitute a reason to review the assessment. As submitted that admittedly the land was being used as agricultural land and as it falls under the Urban Agglomeration being urban land a return was required to be filed under the Urban Land and Ceilings Act and retainable land was worked out to 6000 Sq. Mtrs. As stated that it has been sold as agricultural land only and it was never converted and put to non -agricultural purposes. Advocate Parchure states that as land was in urban agglomeration and covered under the Urban Land Ceilings Act for the purposes of Income Tax act the same cannot be accepted as agricultural land. He further points out that a development scheme was also sanctioned under Section 20 of U.L.C. Act on said land. Question before this court is about the validity of change of opinion as a ground sufficient to issue notice under Section 148 of the Income Tax Act. Admittedly there were no section 263 proceedings. In this situation place the matter for further consideration on 16th April 2014 as jointly requested. We direct the respondent no.1 to complete the assessment in the meanwhile. However same shall be without prejudice to rights and contentions of the petitioner. Petitioner shall cooperate with the department for completion of such assessment.

Summary

Issues:
1. Propriety of allowance of exemption under Section 54-B for the assessment year 2006-2007.
2. Validity of change of opinion as a ground for issuing notice under Section 148 of the Income Tax Act.

Analysis:
1. The dispute in this case revolves around the propriety of allowing exemption under Section 54-B for the assessment year 2006-2007. The Audit Department had raised concerns about the correctness of the exemption granted, but the Deputy Commissioner of Income Tax defended the allowance as being in accordance with the law. Advocate Bhattad argued that the land in question, although falling under the Urban Agglomeration, was being used as agricultural land and had not been converted for non-agricultural purposes. On the other hand, Advocate Parchure contended that due to the land being covered under the Urban Land Ceilings Act and a development scheme being sanctioned on it, it could not be considered agricultural land for Income Tax purposes. The court was tasked with determining the validity of the exemption granted, considering the differing interpretations of the land's classification.

2. The key issue for consideration was whether a mere change of opinion could serve as a sufficient ground for issuing a notice under Section 148 of the Income Tax Act. The petitioner argued that the assessment should not be reviewed based solely on a change of opinion, citing a judgment from the Hon'ble Apex Court to support this stance. It was noted that there were no Section 263 proceedings in this case, adding complexity to the question of whether a notice under Section 148 was warranted. The court decided to defer further consideration of the matter to a later date, directing the respondent to complete the assessment in the interim while ensuring the petitioner's rights and contentions were preserved. The petitioner was instructed to cooperate with the department for the assessment process, with any potential recovery being held off pending further orders from the Court.

In conclusion, the judgment delves into the nuances of tax exemption allowances under Section 54-B and the implications of a change of opinion on assessment proceedings under the Income Tax Act. The analysis highlights the contrasting arguments presented by the advocates regarding the classification of the land in question and the significance of prior judicial decisions in guiding the court's determination.