2018 (10) TMI 247 - HC - Income Tax

Revision petition - Validity of order under Section 264 - Assessing Officer to treat the lands in question as non-agricultural in nature and therefore, as capital assets, in the hands of the assessee, exigible to capital gain tax - whether the present writ is maintainable against the order of the first respondent? - Held that - No doubt, Explanation 1 to Sub Section (7) of Section 264 contemplates that an order by the Principal Commissioner or Commissioner declining to interfere shall, for the purpose of Section 264, be deemed not to be an order prejudicial to the assessee. But that does not mean that even though the Authority under Section 264 rejected the revision, thereby declining to interfere with the order put to challenge in revision, the aggrieved assessee cannot have any further remedy at all against the said order made under Section 264. There is no dispute to the fact that against an order made under Section 264, no further statutory appellate remedy is available to the aggrieved party. Therefore, it leads to an irrebutable conclusion that, under such circumstances, a remedy under Article 226 of the Constitution of India is always available to the aggrieved party to challenge the order made under Section 264. Thus reject the above objection made by the Revenue on the maintainability of the writ petition. It is further contended that the very revision itself was not maintainable before the first respondent and consequently, the order passed by the first respondent cannot be challenged by way of the present writ petition. I have already pointed out that the very issue against the maintainability of the revision before the first respondent, having not been raised by the Revenue before the first respondent, the same cannot be raised now before this Court as first time. Nature of land - whether the lands in question are agricultural or non agricultural lands? - Held that - he first respondent, first of all, has not discussed the above aspect in detail except extracting the particular clause in his order and thereafter, to decide only by saying that the case of the assessee is rejected. As rightly pointed out by the learned counsel for the petitioner, the character of the property, at the relevant point of time, at the hands of the vendor, alone should be taken into consideration and that the intention of the purchaser as to how he is going to treat the property after such purchase, cannot be a determinative factor to decide such character. Even otherwise, the above clause in the Power of Attorney relied on by the first respondent clearly indicates that the Power of Attorney is going to convert the entire property as house sites. Therefore, it is evident that at the relevant point of time, the character of the lands at the hands of the assessee cannot be construed as house sites, since such conversion was intended to take place in future. Therefore, the first respondent ought to have gone by the other relevant revenue records and supportive confirmation certificates to arrive at a conclusion with regard to the nature of the land. Though the petitioner in this writ petition has contended that the reopening of the assessment under Section 147 was beyond four years without there being any averment that the petitioner had not fully and truly disclosed the material facts, perusal of the revision petition filed under Section 264 dated 25.02.2016 and a written submission filed in the said revision dated 12.09.2016 do not indicate that the petitioner has raised the above contention before the first respondent/revisional authority. The order passed by the first respondent, impugned in this writ petition, also does not deal with such issue. In any event, as this Court has chosen to remit the matter back to the first respondent, it is open to the petitioner to raise such contention as well before the first respondent by way of additional grounds and if any such ground is made - matter is remitted back to the first respondent to reconsider the entire matter afresh.

Issues Involved:

1. Maintainability of the writ petition against the order passed under Section 264 of the Income Tax Act, 1961.
2. Validity of the reopening of the assessment under Section 147 of the Income Tax Act.
3. Determination of whether the lands in question are agricultural or non-agricultural lands.
4. Applicability of principles of res judicata in income tax proceedings.
5. The impact of the assessment order of the co-owner on the current case.

Issue-wise Detailed Analysis:

1. Maintainability of the Writ Petition:
The petitioner argued that the writ petition is maintainable against the order passed under Section 264 of the Income Tax Act, 1961, as there is no other alternative remedy available. The High Court can exercise its jurisdiction under Article 226 to examine the factual aspects of the case. The court agreed, stating that the absence of a statutory appellate remedy against an order under Section 264 justifies the writ petition's maintainability. The court rejected the Revenue's objection, emphasizing that the Revenue neither opposed the withdrawal of the appeal before the Commissioner of Income Tax (Appeals) nor challenged the order dismissing the appeal as withdrawn.

2. Validity of Reopening of Assessment:
The petitioner contended that the reopening of the assessment under Section 147 was beyond four years without any averment that the petitioner had not fully and truly disclosed material facts. However, the court noted that this contention was not raised before the first respondent/revisional authority. The court allowed the petitioner to raise this contention before the first respondent by way of additional grounds upon remand.

3. Determination of Agricultural or Non-Agricultural Lands:
The core issue was whether the lands in question were agricultural or non-agricultural. The first respondent concluded that the petitioner failed to prove beyond reasonable doubt that agricultural operations were carried out just before the sale. The court found that the first respondent's rejection of revenue records and confirmation certificates was not justified. The court emphasized that if revenue records lack some details, they should be verified with the concerned authorities. The court also noted that the first respondent failed to consider the assessment order of the co-owner, which treated the same lands as agricultural.

4. Applicability of Principles of Res Judicata:
The Revenue argued that principles of res judicata do not apply to income tax proceedings, citing Supreme Court decisions. The court did not address this objection at this stage, as the first respondent had not considered the issue of the co-owner's assessment order. The court indicated that this issue could be addressed upon remand.

5. Impact of Co-Owner's Assessment Order:
The petitioner argued that the lands were treated as agricultural in the co-owner's assessment order, and the same should apply to the petitioner. The court agreed that the first respondent failed to consider this issue. The court cited the Supreme Court's observation that it is not open to the Revenue to accept the case of one assessee and challenge its correctness in another case without just cause.

Conclusion:
The High Court allowed the writ petition, set aside the impugned order, and remitted the matter back to the first respondent for fresh consideration. The first respondent was directed to reconsider the entire matter, taking into account the findings and observations made by the court, and pass a fresh order within four weeks. The petitioner was allowed to submit further substantial materials, including identity proof and addresses of the lessees. The connected miscellaneous petitions were also closed.

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