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TMI Blog2017 (6) TMI 878X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Commissioner and canvassed that to tax the income as capital gain was wrong. The Commissioner having dismissed the appeal, the issue is pending before the Tribunal in assessee's appeal. Section 147 of the Act as is well known, empowers the Assessing Officer to reopen the assessment, subject to certain conditions. When the subject matter viz. the receipt of transfer of rights in land and the income relatable to such matter was the subject matter of appeal and thereafter second appeal, the principle of merger would apply. There cannot be two separate considerations to the same subject matter relatable to the income. One by the appellate authority or forum and another by the Assessing Officer in fresh assessment. Had material particulars concerning the income been withheld by the assessee, issue perhaps would stand on a different footing. Since such facts are not presented before us, we would not comment any further in this respect. While disposing of an appeal filed by an assessee against the order of assessment, the Commissioner after following the requirement of hearing provided in subsection (2) of section 251 may even enhance the assessment. The question of correct tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contended that the transaction in question was in the nature of a capital receipt not liable to tax and not a capital gain. 4. The Assessing Officer passed the order of assessment on 11.03.2011 and treated the said receipt for ₹ 29.92 crores as capital gain and taxed it accordingly. 5. To reopen such assessment, the Assessing Officer issued the impugned notice dated 20.09.2012. This notice was thus issued within a period of four years from the end of relevant assessment year. In order to issue the notice, the Assessing Officer had recorded following reasons: The assessee derives its income from production and selling of salt. A search under section 132 was carried out at the premises of the assessee on 18.3.2010. Proceedings u/s. 153A were initiated. The assessee filed return of income for AY 201011 on 31.5.2010. The assessee had shown income of ₹ 30,39,58,261/which included Long Term Capital Gain (LTCG) of ₹ 29,43,34,415/. This LTCG was in respect of transfer of land. The facts of the case is that, land admeasuring 350 acres was given on lease by the state government to the assessee, for production of salt, vide Collector's allotment lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement, the assessee was authorized to use the above land only for its own business of production of salt and its bye products and it was not authorized to use the land for any other purpose and also therefore, not authorized to assign this land to any third party for their business purposes. As per this agreement, the assessee was entitled to surrender the land to the state government and as per clause (4) of the note to the agreement, the assessee could claim compensation from the state government in lieu of premature surrender of land subject to the amount decided by the Salt Commissioner. Hence, it is evident that, the only compensation the assessee was entitled for, was what it could claim from the state government, subject to decision of the Salt Commissioner. In other words, the assessee was not authorized to claim any compensation from any other party for either surrendering its interest in the said land. Further, as per clause (11) of the said note, the assessee was not entitled to transfer its right in the land, by way of sale or gift or any other mode, without the prior permission of the lessee i.e., the state government. It is evident from the above that, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new lessee to put up the construction. He transferred his tenancy rights to the said company and became a licensee in respect of the premises under the same company. It was held by the Hon. Court that, that contention of Mr Banerjee that no capital asset has been transferred was to be rejected because, the assessee's monthly tenancy rights or the lease hold right is a capital asset and it has been transferred to the Associated Batteries with a consent of the landlords and on such transfer, his rights in it stood extinguished. It is evident from the above that, in this case there is no dispute about the fact that Mr Banerjee had a tenancy right in the property which he transferred in the favour of Associated Batteries and his rights stood extinguished on such transfer. However, in the case of the assessee, it is an undisputed fact that, the assessee did not transfer its right in the said land to M/s. CGPL., but has surrendered the same back to the state government. Moreover, the MoU between the assessee and the CGPL has no endorsement or authentication from the state government which is the sole owner of the land. Hence, the facts in the case of A Gasper, as above, is not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee from M/s. CGPL was to be considered as receipt in lieu of transfer of capital asset, it has to be seen whether the profit on the same could be taxed as long term capital gain as claimed by the assessee. As mentioned earlier, there is no dispute about the fact that the said land was alloted to the assessee vide an agreement dated 10.2.2006. The land was subsequently surrendered by the assessee to the State Government which was accepted vide an order dated 20.12.2008 of the Collector, Kutch, Bhuj. With the passing of this order by the Collector, Kutch, Bhuj, all rights of the assessee in the said land had extinguished. As per the provisions of subsection (42A) of section 2, short term capital assets means a capital asset held by an assessee for not more than 36 months immediately preceding the date of its transfer. Hence, it is evident that the asset in the hands of the assessee was a short term capital as it was held by the assessee from 10.2.2006 to 20.12.2008 which is less than 36 months, and the assessee was required to pay tax on the same as applicable in the case of transfer of short term capital asset as against tax as applicable in the case of transfer of long t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. To briefly summarize the long reasons recorded by the Assessing Officer, in his opinion, the receipt was not in the nature of capital gain at all, but was by way of income from other sources. The assessee was a lease holder and did not have the right to transfer the land or any rights therein in favour of anyone as per the conditions of the lease. The receipt of ₹ 29.45 crores from CGPL was thus, not for the purpose of transfer of rights in land. According to the Assessing Officer thus, the receipt was not in the nature of capital gain. His alternate contention was that if the receipt was a capital gain, the same was a short term capital gain. According to him the lease was terminated by the Collector by an order dated 20.12.2008. The assessee thus held the capital asset for a period between 10.02.2006 to 20.12.2008 i.e. for a period less than three years. The receipt should therefore be taxed as short term capital gain. 7. The petitioner opposed the notice for reopening by raising the objections which were however rejected by the Assessing Officer. At which stage this petition came to be filed. In Special Civil Application No.16649 of 2012 facts are similar excep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e contention and taxed the same as long term capital gain. 11. The assessee had filed appeal on this issue before the Commissioner (Appeals). We are informed that the appeal stands dismissed. Further appeal of the assessee before the Tribunal is pending. 12. At that stage, the Revenue wishes to reopen the assessment on the grounds that; (i) the receipt was not in the nature of capital gain but income from other sources and (ii) in the alternative, the gain was a short term capital gain. 13. From the above, it can be seen that the assessee had in return itself offered the receipt to tax as capital gain. In the context of the assessee's further expectation that the same may not be taxed at all, issue was examined by the Assessing Officer. Thus, on the question of taxability of such receipt, there was a scrutiny by the Assessing Officer. May be at that time, the Assessing Officer had not noticed that the Collector had passed an order on 20.12.2008 terminating the lease. The reference to the order was very much in the document in the nature of panchnama dated 13.05.2009. According to the assessee, this was the date on which his right to use the land got extinguished. If th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At that stage, it would not be open for the Assessing Officer to reopen the assessment on this matter which is a subject matter of the appeals. Our attention is drawn to a judgment of Division Bench of this Court in case of National Dairy Development Board v. Deputy Commissioner of Income Tax Anand Circle, dated 24.03.2011 passed in Special Civil Application No.14449 of 2010. The relevant paragraph of the said judgment reads as under: 14. Moreover, insofar as the second ground for reopening of assessment is concerned, it may be noted that the second proviso to section 147 of the Act expressly provides that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Thus by virtue of the second proviso to section 147 of the Act, income involving matters which are subject matters of any appeal, reference or revision has expressly been taken out of the purview of the said section. In the circumstances, insofar as the income stated to have escaped assessment under the second ground is concerned, the same having been subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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