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TMI Blog2016 (8) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. The ld.AO thereafter recorded reasons and issued notice under section 148 of the Income Tax Act. The reasons recorded by the AO are reproduced by the ld.CIT(A) at page nos.3 and 4 of the impugned order. In order to appreciate the controversy in right perspective, it is imperative upon us to take note of these reasons. They read as under: "3.1 The reasons recorded for reopening of this assessment are as follows:- "On verification of case record for assessment year 2005-06 of the assessee company i.e., Sanitex Chemicals Limited, it is noticed that the company has plot area admeasuring at 59,388 sq. mts. It was decided by the company to sell the same by making plots. Out of total area i.e. 59,388 sq. mts., the company has retained with it plot admeasuring 12,043 sq. mts. for factory premises and it has sold 10,461 sq. mts. in the preceding assessment years. Further it has allotted 9357.96 sq. mts. for road and 3012.83 for common area. The break up or the treatment given of/to total plot area admeasuring 59.388 sq. mts. is as under:- Total Plot area. : 59,388 sq. mts. Less : Area retained for factory. : 12,043 sq. mts. 47,345 sq. mts. Less : Land already s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the balance sheet. The value of land Rs. 1,26,560/- (1582 sq. mts. x Rs. 80) is left to be shown in the balance sheet." In view of the above, I have reason to believe that long term capital gain to the extent of Rs. 1,11,76,884/- and cost of land Rs. 1,26,560/- escaped assessment. Necessary approval for issue of notice u7s, 148 may be accorded." 4. The ld.CIT(A) on analysis of the record found that in the original assessment proceedings, the ld.AO has confronted the assessee with this issue. The assessee has filed a reply dated 24.12.2007 and it gave a note on the issue of long term capital gain. The assessee has disclosed all these facts in this note. The ld.CIT(A) has reproduced this note on page no.15 of the impugned order. It reads as under: "Re: Note on Long Term Capital Gain Company have total land admeasuring 59,388 sq. mt. to sell the land, Company have plotted the land with permission of the competent authority, in smaller segment so as to sell the land to various person. Due to plotting of land, Land admeasuring 15,506 sq. mt was not sellable land due to provision of Road and Common Plot area. Therefore, net land admeasuring 43,882 sq. mt. (593883 - 15506 ) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to:- 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 153 assess or re-assess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts nec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. From the perusal of the reason recorded it is apparent that no case has been made out that the assesses had failed to disclose fully and truly all material facts necessary for his assessment and no observation has been made in this regard, On the basis of the same material which was available on record, the assessing authority was of the view that the deduction had been wrongly allowed under section 36(1)(viii) of the Act. The Tribunal observed that the assessee had furnished the requisite details in respect of leasing income and upfront fee as received in the assessment year under consideration and the same was duly disclosed in the audited profit and loss account, as is evident from pages 4 and 5 of the paper book read with page 23 of the paper book and also computation of income filed along with return, a copy of which is placed at pages 33 to 35 of the paper book. This finding of the Tribunal has not been disputed by raising any question and during the course of the argument by the learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons showed that the finding was based on the details filed by the assessee and from the profits and loss account. Therefore, it was impossible for the Assessing Officer to even draw the inference that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for assessment year 2002-03. Significantly, the reasons that had been disclosed to the assessee did not contain a finding to the effect that there was a failure to fully and truly disclose all necessary facts, necessary for the purpose of assessment. In these circumstances, the condition precedent to a valid exercise of the power to reopen the assessment, after a lapse of four years from the relevant assessment year, was absent in the present case. The notice was not valid and was liable to be quashed." Hon. Supreme Court in the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) held that where assessment is sought to be reopened after expiry of four years reasons for belief must show live link between the material and belief. There should be a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment cannot be reopened after four years. Hon. Gujarat High Court in Inducto Ispat Alloys Ltd. vs. ACIT (2010) 320 ITR 458 (Guj) and Nikhil K. Kotak vs. Mahesh Kumar (2009) 319 ITR 445 (Guj) also held that where the period of four years has expired from the end of relevant Asst. Year the proviso to section 147 would come into play. It stipulates three conditions and one of those conditions is showing omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. When we go through the reasons recorded and as mentioned above we do not find any reference to such failure on the part of the assessee to disclose any material fact necessary for assessment and in fact narration given in the reasons do not show any such failure which could be inferred even if not so mentioned specifically in the reasons. In our considered view when neither there is any allegation of failure nor the AO has brought any material on record to suggest escapement of income then it is only a change of opinion and therefore assessment cannot be reopened after expiry of four years." 9. A bare perusal of the reasons recorded by the AO for reopening o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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