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TMI Blog2012 (12) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... edings but thereafter the AO does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the AO did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the AO had formed an opinion in the original assessment, though he had not recorded his reasons. Notice quashed - Decided in favor of assessee. - Special Civil Application No. 12598, 12600 & 12614 of 2012 - - - Dated:- 6-11-2012 - Akil Kureshi And Harsha Devani, JJ Appellant Rep. by : Mr. R.K. Patel Mr. B.D. Karia. Respondent Rep. by : Ms Paurami B. Sheth. JUDGEMENT Per : Akil Kureshi, J : 1. These petitions arising in common back-ground have been heard together and are being finally disposed of by this common judgement. 2. Petitioners, in all the petitions, have challenged notices issued by the Assessing Officer under Section 148 of the Income Tax Act,1961 (for short 'the Act') of the completed assessments. We may notice the facts as emerging from the record of Special Civil Application No. 12598 of 2012. 2.1 The petitioner is a co-operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sold five plots of nonagricultural land admeasuring 7685 Sq. Yards at sale price of Rs. 57,63,750/-. The assessee had offered long terms capital gain income of Rs. 37,32,945/- after adjusting the expenses towards cost of acquisition and improvement etc. The business of the assessee is land development and sale and purchase of plots and hence the land/plots are nothing but stock in trade and the profit/income arrived by the assessee should be treated as business income. Since the income returned is a business income in view of above position, the assessee shall not also be entitled to the benefit of cost indexation u/s. 48 of the Act. Accordingly to section 2(14) Capital Asset means property of any kind held by assessee but does not include any stock in trade, consume stores or raw materials held for the purpose of his business or profession. As per Sn. 45(2), the profits or gain arising from the transfer by way of conversation by the owner of a capital asset into or its treatment by him into, or its treatment by him as stock in trade of a business carried by him shall be chargeable to income tax as his income of the previous year in which such stock in trade is sold or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change of opinion. 6. From the record, it clearly emerges that the petitioner's return contained a single item of receipts upon sale of plots held by the petitioner-co-operative society. Petitioner claimed that the same was its long term capital gain. After adjustments permissible under law, the petitioner disclosed total income of Rs. 37,32,950/-. No other item were included in the return. The Assessing Officer, during scrutiny assessment, threadbare examined such return of the assessee. As many as three replies were elicited from the petitioner-assessee. In fact, specific queries were also raised. For example, on 20.02.2009, the Assessing Officer called upon the assessee to furnish following details: i) Basis of sale consideration, ii) Proof of basis of Commission paid to Navratna Organizers, iii) Details/proof of compensation paid to Agrawal Estate Organizers, iv) Name and address of plot purchased v) Total area/extent/remaining plot with the Co- Op.Soc., vi) Bank account extract/statement 7. In response to such a query, the petitioner addressed a detailed letter dated 13.05.2009. In such letter, it was stated as under: The Society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this regard, we are attaching hereinabove the Income U Expenditure Account and Balance Sheet as on 31.03.2007 of the Society as per Exhibit-II, wherein in income side, there are capital gain for the Accounting Year 2005-06 relevant to A.Y. 2006-07 in respect of Sola Plot of Land (Kalhar scheme) amounting to Rs 91,62,304/- and in respect of Sole Land amounting to Rs. 46,08,459/-. Both capital gains are pertaining to A.Y. 2006-07 which are duly offered for taxation in the Income Tax Return for A.Y. 2006-07. The copy of return of income for A.Y. 2006-07 is attached herewith as per Exhibit-III. However, in A.Y. 2006-07, such items were shown in Balance sheet and in current year, it is transferred to income Expenditure Account and hence, the said items are appearing in income Expenditure Account of accounting year 2006- 07. 9. Yet again on 21.05.2009, the petitioner made further clarifications to the Assessing Officer as under: Your honour has asked to finish the details of Name, Address and P.A. Corporation is a proprietary concern of Shri Gauttambhai S.Shah. Further, we are submitting herewith the contra confirmation of Shah Corporation for the period 2006-07 as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion or even review if statute so permits but not liable to be re-opened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to entire original assessment, of course at the hands of the revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition. 13. Similarly in a recent decision Full Bench of Delhi High Court by a majority opinion in case of Commissioner of Income Tax Vs. Usha International Ltd. held as under: It is, therefore, clear from the aforesaid position that: (1) Reassessment proceedings can be validly initiated in case return of income is processed under s. ..... 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