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TMI Blog2023 (5) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... uant to the compromise which has taken place, the sale has been made effective of 23% of the overall land for amount of Rs.5,13,61,000/-. Thus, it appears that once this issue has been gone into by the respondent authority, it would not be open for the respondent authority to re-open the issue relating to long term capital gain. Whether re-opening is permissible after audit party expresses opinion? - Re-opening of the case on the basis of factual error pointed out by the audit party is permissible, we may revert back to the decision delivered in the case of Reckitt Bencksier Healthcare India (P.) Ltd., ( 2016 (9) TMI 338 - GUJARAT HIGH COURT] wherein it has been propounded that it is settled position of law that reason to believe need to be of the assessing officer alone and same cannot be substituted based upon receiving objection from the Audit Department and as such, considering the aforesaid situation which is prevailing on record, and having found this fundamental error as indicated above, we are of the opinion that a case is made out by the petitioner. Decided in favour of assessee. - HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI And HONOURABLE MR. JUSTICE J. C. DOSHI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2. It is the case of the petitioner that respondent authority provided the reasons on 27.07.2021 for re-opening and against the same, specific objection as well re-joinder to objection was submitted for challenging the validity of notice under Section 148 of the Act on 21.09.2021. However, respondent no. 2 disposed of the objections by passing order on 10.03.2022 which has given rise to the filing of present petition under Article 226 of the Constitution of India. 3. Pursuant to the notice issued and ad-interim relief which has been granted vide order dated 22.03.2022, upon completion of pleadings, the matter has come up for consideration before this Court in which Mr. B.S. Soparkar, learned advocate has represented the petitioner whereas, Mr. Karan Singhania with Mr. Nikunt Raval, learned advocate has represented the respondent authority. 4. Mr. B.S. Soparkar, learned advocate appearing for the petitioner has vehemently contended that the main basis upon which the impugned action is tried to be initiated is that assessee sold his share of the land to another co-owner for Rs.5,13,61,000/- (rate of Rs.5450/-per sq.mtr. x 40,974/-per area x 23% share) and according to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84, in absence of any new material or opinion comes to the notice of the respondent authority, and in the absence of any fresh tangible material, this re-opening step under Section 148 of the Act is impermissible. It has further been contended that in fact no income has escaped assessment. On the contrary, the reasons while disposing of the objections are suffering from vice of non-application of mind and based upon incorrect premise. First of all petitioner assessee in fact sold the agricultural land and not the open land and therefore, the rate adopted by the assessing officer of open land is basically erroneous and this fundamental error has affected the decision making process. In fact, the petitioner has taken correct valuation and even stamp authority has also accepted the sale document, raised no objection and as such, the assessing officer has no authority to substitute the valuation which is accepted by the stamp authority and therefore, by making reference to Section 50C(1) of the Act, a contention is raised that incorrect reason has since led the authority to initiate step for re-opening of assessment, and there is hardly any reason to assess the same. Learned advocate M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... few decisions delivered, which may be dealt with hereafter and as such, has requested the Court to allow the present petition. 5. As against this, Mr. Karan Singhania, learned advocate appearing for the respondent has opposed the petition by raising a plea that this issuance of re-opening notice is not based upon mere change of opinion. In fact, this notice has been issued within a period of four years and the relevant Assessment Year is A.Y. 2017-18 whereas notice is issued on 18.03.2023 and as such, when the notice is issued within period of four years, element of failure on the part of the petitioner and omission thereof would not be relevant circumstance and it is always open for the authority to re-open the assessment. According to learned advocate Mr. Singhania it has been submitted that such query which has been raised is with regard to claim of cost of improvement at Rs.61,79,922/- with supporting document, but in fact, the taxability issue under Section 50C was neither raised nor opined nor was the subject matter of scrutiny and as such, it is always open for the authority to re-open the assessment since there was no opinion at all so formulated with regard to taxabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/-. 8. In view of the aforementioned factual situation, perusal of the reasons for re-opening for Assessment Year 2017-18 reflecting on page 46 if to be perused, in paragraph 2 it has been observed that while going though the valuation report, rate of the said land was Rs.12,250/- per sq. mtr., (open land rate) and applying rate of land furnished by the Sub-Registrar-8, Rander, Surat the value of the land area of 9424.02 sq.mtr., comes to Rs.11,54,44,245/-. So the land in question is assumed to be open land and despite agriculture which relates to agricultural land and determination of stamp paid is accepted by the stamp valuation authority, there appears to be a fundamental error of fact by the authority as it reflects from the records. 9. Further, Section 50C of the Act which deals with the special provision for full value of consideration in certain cases, the explanation whereof indicates that for the purpose of this Section expression assessable means price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed if it were referred to such authority for the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had already expired on 22.09.1992 and the same was not noticed by the Income Tax Officer and this is not the case of information on the question of law. The, real dispute as to whether re-opening is permissible after audit party expresses opinion on the question of law is now being considered by the Larger Bench of this Court and according to the stand of the respondent, there can be no dispute that audit party is entitled to point out the factual error or omission in the assessment and this is always permissible by virtue of Section 147(b) of the Act. This stand of the authority is at first instance attractive, but then the basic infirmity which has proceeded on the record is that valuation has been taken that of open land which is quite in conflict with not only the sale document, but also from the rates which are prescribed by Government Resolution dated 18.04.2011, the Court cannot ignore such fundamental error which has taken place. In light of the aforesaid background of facts of the case on hand, we may draw our attention to the decision which has been cited in the case of Bhagirathbhai Manubhai Baldha (Pithavadiwala) (supra) wherein also almost similar situation was erupt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Commissioner of Income Tax reported in 350 ITR 266, the Court had held and observed as under: 42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of section 50C(2) of the Act. Under such provision, an assessee disputing the stamp valuation of any sale deed could call upon the Assessing Officer to make reference to the DVO to ascertain the value of the capital asset. Be that as it may, the Assessing Officer did not make any additions in the order of assessment. Thus, silently accepting the assessee's representation it was thereafter not open for him to rake up the same issue through the process of reopening of assessment. 14. Under the circumstances, the petition is allowed. Impugned notice is set aside. Petition is disposed of. 11. Further, in light of the aforesaid discussion, we may also take note of yet another decision delivered by the Delhi High Court in the case of Oriental Insurance Co. v. Commissioner of Income Tax-Delhi reported in [2015] 63 taxmann.com 171 (Delhi), wherein few observations contained in paragraphs 20, 22, 23 and 24 are as under :- 20. It is at once clear from the above that the AO had expressed its opinion that profits and gains on realization of investments were exempt from taxation. Admittedly, such profits had been included by the Assessee in its Profit and Loss Accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in section 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows : 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression ' reason to believe' in section 147.--A number of representations were received against the omission of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the Assessee that the AO did not have the jurisdiction to tax the profits and gains from sale/realization of investments under Section 147 of the Act.The first and the third questions of law are, therefore, answered in favour of the Assessee and against the Revenue. In view of our decision that the AO could not assume jurisdiction to reopen the assessment under Section 147 of the Act, it is not necessary to address the second question of law, which relates to the taxability of profits on sale of investments on merits. 12. In light of the aforesaid background of facts and the stand which has been taken in affidavit-in-reply, especially in paragraph 7.8 about assertion to the effect that re-opening of the case on the basis of factual error pointed out by the audit party is permissible, we may revert back to the decision delivered by the Hon ble Apex Court in the case of Reckitt Bencksier Healthcare India (P.) Ltd., (supra) wherein it has been propounded that it is settled position of law that reason to believe need to be of the assessing officer alone and same cannot be substituted based upon receiving objection from the Audit Department and as such, considering ..... X X X X Extracts X X X X X X X X Extracts X X X X
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