9911796707
TMI Blog2025 (3) TMI 350X X X X Extracts X X X X X X X X Extracts X X X X ..... supplied and disclosed all the relevant details to decide the issue of chargeability of gain and modus-operandi of the transactions undertaken by the assessee and justified the returned income which was based on the submission so made was accepted by taking the plausible view on the matter. Based on the same material placed on record, the audit team substituted their view. Revenue accepting that view on the same material started the re-opening proceeding that too after 4 years and that too at the last date of time barring of six-year reasons were recorded, obtained the approval and notice alleged to have been served by way of affixture. As is evident from the reasons recorded that no allegation has been made in the reasons recorded that there was any failure on the part of assessee to disclose fully truly all material facts for the purpose of assessment. Thus, reassessment proceedings were initiated by the Assessing Officer based on change of opinion, which is impermissible, as in the instant case the Assessing Officer has duly applied his mind on the disclosures made in the Audit Report and replies filed by the assessee while assessment proceedings and supporting documents theret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e what is to could have been done by the assessee and is evident from the facts on record that the intention of assessee is not the necessary criteria for invoking section 45(2) of the Act corroborate the intention along with the passing off necessary entries in books of accounts which is absent. Even on the aspect of the charging the capital assets or business assets the CBDT vide circular dated also at the help of the assessee and directed the revenue officers vide circular no. 4/2007, issued by the Central Board of Direct Taxes (CBDT) on June 15, 2007, provides guidelines to distinguish between shares held as stock-in-trade and shares held as investments. This distinction is crucial because it affects how the income from the sale of these shares is taxed. Shares held as stock-in-trade are considered business income, while shares held as investments are treated as capital gain. The terms of the development agreement entered into by and between the assessee and developer has been referred by the ld. CIT(A) in detail. The assessee was not in the business of real estate, nor did it have any object clause for carrying out business of real estate. Entire responsibility of construction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disposed off by this consolidated order. 3. In this case the appeals of the revenue and the cross objection filed by the assessee were decided by a common order dated 20.02.2020. Against that order both the revenue and the assessee filed the Miscellaneous applications (MAs) wherein the assessee contended that the bench has not considered the various judgement cited by the assessee while deciding the appeal of the revenue. Whereas revenue in their MA contended that while deciding the appeal one of the grounds raised by the revenue was not decided. Considering that aspect of the matter the MA of the revenue and that of the assessee was decided by the bench vide order dated 03.10.2023 and thereby this order. Even in the arguments of this proceeding the revenue has raised the additional ground for A. Y. 2008-09 for which there was no MA filed by the revenue, which we will discuss and decide herein after. 4. As is evident from the order of the MA that the assessee has challenged the finding for both the years whereas the revenue has challenged the finding of the bench for the assessment year 2009- 10. Based on the arguments of both the parties the MA was decided wherein the bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the same on merits. However, the issue of addition in business income of Rs. 2,06,71,225/- & the long term capital gain of Rs. 66,76,744/- are separate issues (raised vide separate grounds of appeal) and these are different from the issue raised in ground no. 3 of Department appeal for A.Y. 2008-09. 4. In view of the above, as the ground no. 2 for A.Y. 2009-10 has not been adjudicated upon by the Hon. Bench, it is requested that the same may be taken up under section 254(2) of the I.T.Act, 1961 for adjudication by recalling and modifying the order dated 20/02/2020 in the case of DCIT, Circle-2, Jaipur vs. M/s. Man Prakash Talkies Pvt. Ltd. in ITA No. 407/JP/2018(Revenue's appeal) for A.Y. 2009-10.'' Hence, keeping in view the submissions as well as the grounds raised by the respective parties in the M.As, the order of the ITAT (supra) needs rectification and thus the Misc. Application of the assessee as well as Department are allowed and the Registry is directed to refix both the cases i.e. appeals of the department and CO's of the assessee in the regular course. 3.0 In the result, the Misc. Application of the assessee and Department are allowed as indicated hereinabo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is bad-in-law as well as on facts and is liable to be dismissed. 2. Because the learned CIT(Appeals) erred in not deciding the Ground No. 6 relating to the service of notice u/s 148 and CIT(A) erred in para 3.2.2 page 74 that it is an academic in nature. 3. Because the Learned CIT(Appeals) erred in not deciding the Ground No. 3 relating to not providing the copy of the reasons recorded by AO before issue of notice u/s 148 inspite of the request." 8. The ld. DR appearing on behalf of the revenue has placed their additional grounds of appeal which is extracted in below; "Vide letter dated 07.05.2024 Sub:- Filing of additional grounds of appeal arising out of ITAT, Jaipur's order in ITA No. 406/JP/2018 & C.O. No. 11/JP/2018 dated 20/02/2020 in the matter of M/s Man Prakash Talkies Pvt. Ltd., Upper Ground 1st Floor, A-8, Golcha Trade Centre, M._. Road, Jaipur(PAN: AABCM6213F) for the A.Y. 2008-09-regarding- Kindly refer to the subject cited above. In this connection it is submitted that in this case appeal before the Hon'ble Bench had been filed on 28/03/2018 incorporating three grounds of appeal. In the above case, the Department wants to file additional gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icable and the income ought to be taxed as Business Income and not a Capital Gains? & Vide letter dated 06.08.2024 Sub: Filing of additional grounds of appeal arising out of ITAT, Jaipur's order in ITA No. 406/JP/2018 & C.O. No. 11/JP/2018 dated 20/02/2020 in the matter of M/s Man Prakash Talkies Pvt. Ltd., Jaipur, PANAABCM6231F, Upper Ground, 1st Floor, A-8, Golcha Trade Center, M I Road, Jaipur for the AY 2008-09 - regarding - Kindly refer to the subject mentioned above. 2. In this connection it is submitted that in this case, appeal before the Hon'ble Bench had been filed on 28.03.2018 incorporating three grounds of appeal. In the above case, additional grounds of appeal no. 4, 5, 6 & 7 were filed vide this office letter no. 172 dated 07.05.2024. Further, PCIT-1, Jaipur has directed to file modified ground of appeal i.e. additional ground no. 7 as per order no. 509 dated 05.08.2024. Therefore, it is requested to kindly admit following additional ground of appeal no. 7 as under :- "Whether on the facts and circumstances of the case, the Ld. CIT(A) is right in quashing the reopening proceedings of AO ignoring the fact that the assessee has converted its capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f portion of the constructed commercial complex, and the developer would get the remaining half portion of the said complex in lieu of the cost incurred in constructing the said complex. The assessee has computed Long Term Capital Gain at Rs. 2,01,69,487/- after deducting indexed cost of land (computed by the Valuer by taking DLC rate of 1973 and increasing it by 20% for each year upto 1981). Ld. AO noted that the assessee was earning Income from Cinema Hall in the past assessment years and had shown its Income under the head Business & Profession, meaning thereby that the use of the impugned capital asset i.e, land, as a cinema hall was the genesis of the income earned. The asset itself was never the gain or profit-earning item as it is in the case of sale of stock-in-trade. The land use was got changed from 'cinema hall' to 'commercial complex after which on 12 December 2001, the assessee entered into a Development Agreement with M/s Golcha Buildtech Pvt Ltd (developer) for construction of commercial complex. Between FY 2001-02 and FY 2007-08, the developer demolished the Cinema Hall and constructed a commercial complex (over the land earlier held as Cinema Hall) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid land got converted to stock in trade. Hence, the provisions of section 45(2) get invoked. Now, the quantification of income from business and profession as per section 45(2) needs to be done. Ld. AO further noted that the terms of Development Agreement, the assessee received half share of constructed complex (50086.73 sq. feet built up area, Portion A of Golcha Trade Centre, the building constructed on land on which the erstwhile cinema hall stood) in lieu of half portion of land (Le the stock in trade) sold or otherwise transferred by it to the developer in May, 2007. Hence, for the purpose of section 45(2), the said 'stock in trade was sold or otherwise transferred in the FY 2007-08, relevant to AY 2008-09. The valuation of the assessee's portion of the constructed building (and not the land on which it was constructed) was got done vide Valuer's report based on visit on 22.05.2007 and the value was determined at Rs. 18,49,76,342/-. This value, thus, constitutes the 'transfer consideration for commercial land (i.e. stock in trade) which is required to be considered for computation as 'Income from Business and Profession'. Out of this consideration, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Only' valued through Registered Valuer, Sh.Govind Singh Bapna on 13.04.2009. According to this valuation Report, the entire land i.e. 4830.50 sq.meters) has been valued as on 1.4.1981 at Rs. 2,99,10,456/-, adopting the Sub-Registrar rate of Rs. 6192/- per sq. meter. Thus, the value as on 1.4.1981, of the half portion of the entire land i.e. 2415.25 sq.meters [which was transferred to (or otherwise rights thereof surrendered to) the developer for constructing their portion of the commercial complex] comes to Rs. 1,49,55,228/-. Thus, adopting the CII of 2001 at 426, the indexed cost of acquisition comes to Rs. 6,37,09,271/- which, when reduced from the Full Value of Consideration (Rs. 16,06,14,125/-), gives the net capital gain from this transaction at Rs. 9,69,04,854/- The same was, accordingly, added to the taxable income of the assessee. Accordingly, as against the return of income of Rs. 2,00,29,764/-, assessed income was determined at Rs. 11,91,43,500/-. 13. Feeling dissatisfied from the order of the assessing officer, the assessee filed an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee the relevant finding of the ld. CIT(A) is reiterated he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2010 at the returned income. Subsequently, the AO has initiated proceedings u/s 147 of the Act and has issued notice dated 31.03.2015 u/s. 148 of the Act after recording the reasons for initiation of proceedings u/s 147 of the Act as reproduced hereunder: "(a) The assessee M/s Manprakash Talkies Pvt. Ltd. was earning Income from Cinema Hall in the past assessment years and had shown its Income under the head Business & Profession. It got "the land use changed from cinemahall' to 'commercial complex' after which on 12 December 2001 it entered into a development agreement with M/s Golcha Buildtech Pvt Ltd' (developer) for construction of commercial complex. Between FY 2001-02 and FY 2007-08, the developer demolished the Cinema Hall and constructed a commercial complex (over the land earlier held as Cinema Hall) and in May, 2007 it transferred 50% share of the constructed portion of the commercial building named Golcha Business Centre (GTC) to the assessee company in lieu of half portion of land (on which the Cinema Hall existed earlier). As per Development Agreement, all the expenses regarding approvals from competent authorities etc were to be borne by the deve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;transfer consideration for commercial land which should have been declared as 'Income from Business and Profession rather than Long Term Capital Gain as declared by the lessee. The assessee has computed Long Term Capital Gain at Rs. 2.01,69,487/- after deducting indexed cost of land (which in itself has been computed by the Valuer on a rough estimate basis by taking DLC rate of 1973 and notionally increasing it by 20% for each year upto 1981). Thus, it is seen that income amounting to Rs. 16,48,06,855/- has escaped assessment. (b) On perusal of computation of income it is observed that the assessee had sold a shop no. GF 8A and had shown short term capital gain of Rs. 10,12,630/-. The assessee company had been handed over the constructed commercial complex including the aforesaid shop by M/s Golcha Buildtech Pvt. Ltd. (developer). It did not make any expenditure on its own because as per development agreement whole expenditure to develop the building was to be incurred by the developer company. Thus, purchase price of the shop for the assessee company was Nil. Further, since the said property is a commercial complex, profit arising out of sale of shops situated in the comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped assessment." (v) It is noted from the reasons recorded by the AO for initiating proceedings u/s 147 of the Act that the AO has relied heavily on clause 2 of the development agreement dated 12.12.2001 which is reproduced as under: "2. Whereas looking to the demand for showroom and offices in multistoried buildings situated at good location, Owner herein decided to develop a multistoried commercial complex on the said plot of land in accordance with the rules, regulation and building bye laws of the local authorities, and the State Government" (vi) On the basis of the above clause, the AO has come to the conclusion that it was the intention of the appellant (i.e. the owner) to develop its property into a commercial complex to harvest 'the demand for showrooms and offices in multistoried buildings situated at good location'. Thus, the decision to change the use of land from 'cinema hall' to commercial' was done as part of the appellant's deliberate, preplanned move to enter into an adventure in the nature of trade in respect of the land 'situated at good location' and thus, the Income from this activity should have been treated as income from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. (c) The above judgement of Full Bench of Hon'ble High Court of Delhi has been affirmed by the Hon'ble Apex Court in the case of CIT Vs Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC), wherein it was held by the Hon'ble Apex Court that: x x x x (d) On the similar issue, in the case of CIT vs. Chaitanya Properties (P.) Ltd. [2016] 67 taxmann.com 201 (Karnataka), it was held by the Hon'ble High Court (head note) that: x x x x (e) In the case of Spunpipe and Construction Co. vs. ACIT [2014] 44 taxmann.com 409 (Gujarat), it was held by the Hon'ble High Court that: x x x x (f) In the case of CIT vs. Usha International Ltd. [2002] 25 taxmann.com 200 (Delhi) (FB), it has been held by the Full Bench of Hon'ble High Court of Delhi that: x x x x (g) In the case of Manan Exports (P.) Ltd. vs. ITO [2017] 78 taxmann.com 225 (Gujarat), it was held by the Hon'ble High Court that: x x x x (h) In the case of ACIT vs. ICICI Securities Primary Dealership Ltd. [2012] 24 taxmann.com 310 (SC), it was held by the Hon'ble Apex Court that: x x x x ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 of the Act but chose not to comment on the contention of the appellant that there was no failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration. (xi) It is evident from the reasons recorded by the AO that there was neither any whisper that the appellant has not disclosed all the material facts, fully and truly for its assessment nor the same is discernible from these reasons. In fact, the AO has not stated anything in the reasons recorded for initiating proceedings u/s 147 of the Act that the appellant has not disclosed any particular fact truly or fully for the purpose of its assessment. In fact, there was no such allegation in the reasons recorded and it has not been stated by the AO, what material facts were not disclosed truly and fully by the appellant at the time of original assessment proceedings concluded u/s 143(3) of the Act. It would be appropriate to discuss some of the judicial pronouncement as under:- (a) In the case of CIT vs. Manish Ajmera [2011] 13 taxmann.com 132 (Rajasthan), it was held by the Hon'ble jurisdictional High Court of Rajasthan that: x x x x (b) In the case of PCIT vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year, the proviso to Section 147 of the Act is also applicable. Further, there was no failure on the part of the appellant to disclose, truly and fully all material facts, which are necessary, for its assessment for the year under consideration at the time of original assessment proceedings, it is held that the conditions required for initiation of reassessment proceedings, as stipulated in the proviso to section 147 of the Act were not satisfied. Hence, in view of the above discussion, looking to the facts and circumstances of the case, it is held that the reassessment proceedings initiated by the AO under consideration were bad in law and consequently, the assessment order based on such bad initiation cannot be allowed to be sustained and thus, hereby quashed. Finding of ld. CIT(A) on other technical ground such as service of notice, no opportunity, re-opening based on audit objections etc. Finding of ld. CIT(A) 3.2.2 Determination It has already been held in the earlier ground of appeal that the reassessment proceedings were bad in law. Therefore, these legal issues became academic in nature and hence, are not adjudicated. Finding of ld. CIT(A) on the merits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shop (Rs. 36,25,870) as per the following details: Profits and Gains from business and Professions: Profits and gains from business or profession declared in ITR (-)180968 Profits and gains from business as per section 45(2): Sale consideration of plot i.e. stock (capital asset converted to stock in trade) (deemed value of half portion (2415.25 sqm) retained against which constructed portion handed over by Developer M/s Golcha Buildtech Pvt. Ltd.) Rs. 18,49,76,342/- Less(-) FMV on date of conversion (@Rs. 66500 for year 2001, being conversion effected before 12.12.2001, the date of development agreement] Rs. 16,06,14,125/- Profit from business in the year in which stock is sold. i.e. FY 2007-08(A) Rs. 2,43,62.217/- Profit on sale of shop No. GF 8A during the FY 2007-08 Sale consideration of shop no. GF 8A Rs. 36.25,870/- Less (-) cost of construction] NIL (NIL because no cost was incurred by the assessee in constructing it: entire cost was borne by developer in lieu of one-half share of plot, which has been considered separately above) Profit from sale of shop No. GF8A was sold i.e. FY 2007-08 (B) Rs. 36,25,870/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scribed in the schedule hereunder written popularly known as Manprakash Cinema. 2. That the developer has agreed to keep with the owner a sum of Rs. 2.50 crores (Rupees Two Crores and Fifty Lacs) by way of interest free security deposit towards proper commencement and timely completion and development of the plot as per the stipulation made in the agreement and to secure due performance of the developer's obligations under this agreement. The security deposit shall be refunded on completion of the new building and making over of the owner's allocation to the owner in habitable condition in the new building and making over of the owner's allocation to the owner in habitable condition in the new building or builder will adjust this security amount of Rs. 2.50 crores by way of buy back of the part of the owner's allocation in the property at the rate mutually settled between parties. Developers has also agreed to pay to owner a sum of Rs. 2.00 crores (Rupees Two Crores Only) as consideration money (Non adjustable, no Refundable). 5. That the owner shall provide access to the developers to the said plot to carry out survey work to demarcate the necessary lay out, to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per at its own cost. 14. That Developers shall get all necessary permissions sanctions and building plans and designs approved by the concerned authorities using its own resources and at its own costs and expenses. The building plans and designs on being duly prepared shall be treated as a part and parcel to this agreement and the developer shall act strictly in accordance with the approved building plans and in conformity with all statutory laws, regulations, rules, by laws etc. The development and construction shall be done of "A" class and entire responsibility in this respect shall be that of Developer who shall keep the owners indemnified in all respects in the matter of development of property in accordance with approved building plans and statutory requirements. The constituted attorney of owner, however shall assist the Developer as and when so required by filing affidavits signing requisite forms/ giving statements and providing the legal documents as are required for construction and completion of new building in connection with the development work. 27. That if during the course of construction the building is damaged or destroyed by earthquake, natural calamity, Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to the arbitration of a sole Abritrator to be mutually agreed upon by the parties hereto. In the event the parties are unable to arrive at an agreement with regard to the name of the sole Arbitrator in that event the said dispute will be referred to three arbitrators the owner and Developer each being entitled to appoint one arbitrator and the third arbitrator to be appointed by the owner and Developer." (iv) Thus, it is evident from the above referred terms of the development agreement that it is the responsibility of the developer to demolish the existing cinema hall, get the plans sanctioned from the appropriate authority, to construct the building with its own funds and be responsible for all the acts relating to the construction of the commercial complex. The appellant has just got converted its land use from "Cinema Hall" to "Commercial" and executed the development agreement with the developer. In the assessment order, in view of the change of land use from "Cinema Hall" to "Commercial" and in view of clause 2 of the development agreement, it was observed by the AO that: "the change of land use was done as part of your deliberate, preplanned issue to enter into an adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts incorporation. 1. To carry on the business of film manufacturers, film apparatus manufacturers cinematograph film producers, financiers, exhibitors and distributors, both sound and silent, theatrical performances, circus plays, open air theatres, dancers, musical and other entertainments of all kinds, games and sports, both indoor and outdoor and dramatic and other performances of all kinds whatsoever. 2. To carry on the business of exhibiting cinematograph films and of organising the production, management and performances of plays, dramas, comedies, operas, operettas, burlesques, pantomimes, musical and other pieces, ballets, shows, radio and television entertainments, sunet lu cmiere, and other amusements and entertainments of every kind and of organising, managing and holding concerts, recording sessions and dances. 3. To carry on the business of proprietors, managers and renters of cinema halls, theatres, picture places, concert halls, music halls, dance halls, discotheques, picture places, studios or other machinery, apparatus, buildings or structures for purposes of use, exhibition, display of films, dramatic or theatrical performances, concerts or other entertainme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r its land thereof as its stock in trade. It would be relevant to discuss some of the judicial pronouncement as under:- (a) In the case of PCIT vs. Rungta Properties (P) Ltd. [2017] 83 taxmann.com 106 (Calcutta), the similar issue was before the Hon'ble High Court of Calcutta, the relevant extracts of the said judgment are being reproduced as under:- x x x x (b) In the case of Amrit Corp Ltd. vs. Addl. CIT [2017] 88 taxmann.com 255 (Delhi-Trib.), it was held by the Hon'ble ITAT, Delhi that: x x x x (c) In the case of CIT vs. Sohan Khan & Mohan Khan [2008] 304 ITR 194 (Rajasthan), it was held by the Hon'ble jurisdictional High Court of Rajasthan that: x x x x (d) It may be mentioned that in a recent judgment dated 20.12.2017 in the case of Vikash Solvextracts Pvt. Ltd., the Hon'ble ITAT, Kolkata in ITA No. 1925 to 1929/Kol/2014 has considered the similar issue and has held that: x x x x (e) It may be mentioned that in the case of Shanti Banerjee (deceased) by LRs vs. DCIT in ITA No. 299/2003, vide its order dated 17.11.2015, it was held by the Hon'ble High Court of Delhi that: x x x x (x) In view of the above discussion, it is held that the provisions of section 45( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Court in the case of M.V. 'Vali Pero'' vs Fernandeo Lopex, AIR 1989 (SC) 2206 wherein it has been held that the outcome and fairness of the procedure have been forwarded, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvertently omitted in a particular case. Additional Ground No 4: Whether on the facts and circumstances of the case and in law the ld. CIT(A) has erred in not appreciating that commission to disclose material facts in Income Tax Return, Tax Audit or during the course of assessment proceedings confers jurisdiction of the Assessing Officer to re-open the assessment as the assessee only disclosed LTCG on land and STCG on sale of shops in his Return of Income but as per accounting standards and provisions of Income Tax Act, the act of coverting capital asset into stock in trade clearly required assessee to declare business income and LTCG in the Return of Income, which was actually not done by assessee. Additional Ground No 5: Whether on the facts and circumstances of the case and in law the ld. ciT(A) has erred in holding that reopening of the case u/s 148 is merely c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0% shares in the constructed commercial complex and were free to sell the same. The assessee also received inter alia a sum of Rs. 2.00 crores as on the date of agreement which is non-refundable. The commercial complex was completed during the year under consideration and there was sale of shops and showrooms by the assessee. The assessee filed its return of income on 29-03-2010 as belated return u/s 139 of the Act and declared the total income at Rs. 2,00,29,760/-. The assessment was completed u/s 143(3) of the Act on 3-12-2010 whereby the AO accepted the returned income of the assessee. Thereafter the AO reopened the assessment by issuing notice u/s 148 of the Act on 31-03-2015. In response, the assessee submitted that return of income filed on 29- 03-2010 should be treated as returned income filed in response to notice issued u/s 148 of the Act. The AO completed the reassessment on 30-03- 2016 whereby addition on account of Long Term Capital Gain of Rs. 9,69,04,854/- u/s 45(2) of the Act was made to the total income of the assessee. The AO has also assessed the business income of the assessee at Rs. 2,32,10,026/- as against business income declared by the assessee at loss (-) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... constitutes the tangible material to form the belief that income assessable to tax has escaped assessment. It is contended that the ld. CIT(A) has failed to appreciate these facts while arriving to the conclusion that reopening of the assessment is based on same facts and material already available in the assessment record. Thus it is submitted that order passed by the ld. CIT(A) ignoring the relevant material facts is not sustainable in law. It is evident from the reasons recorded by the AO as well as the audit objection that there was a tangible material which came to the knowledge of the AO to show that the assessee had converted the capital asset into stock in trade and thereby the income assessable to tax has escaped assessment. 2.4.2 Hon'ble Supreme Court in Owners & Parties Interested in M.V. "Vali Pero" v. Fernandeo Lopex, AIR 1989 (SC) 2206 (Para 18) observed that Rules of procedure are tools to achieve justice and are not hurdles to obstruct the pathway to justice. Where the outcome and fairness of the procedure have been followed, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings. In the instant case assessee only disclosed LTCG on land and STCG on sale of shops in its return of income but as per Accounting Standards and provisions of Income Tax Act, the act of converting capital assets into stock in trade clearly instruct to show business income and LTCG in the return of income, however, at this stage assessee failed in disclose fully and truly all material facts necessary for its income. It is relevant to mention that omission to disclose material facts in income tax return, tax audit or during the course of assessment proceedings confers jurisdiction on the Assessing Officer to re- open the assessment u/s 148. Reliance is placed on Honda Siel Power Products Ltd. Vs DCIT & Arr. (Del) 340 ITR 53 upheld in 340 ITR 64 (SC) 2.4.5 The Ld. CIT(A) has also recorded a factually incorrect observation by stating that "Further, the AO has not stated in the reason recorded for reopening the case of the appellant, what material facts were not disclosed by the appellant at the time of the original assessment proceedings." Whereas, in fact not only in the reason recorded failure to disclose fully and truly all material facts on the part of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm and short term capital gain on shares, capital gain on sale of shops etc. During the course of scrutiny it was revealed that the assessee is doing the business of advancing loans to parties and yielding interest income thereon. During the year under, consideration the assessee had earned an interest income of Rs. 57,48,187.57 which is duly reflected in the profit and loss account of the assessee. As such the turnover of the assessee got exceeded the limit prescribed by the section 44AB of Income Tax Act, 1961. The assessee had not furnished the tax audit report as required by section 44AB of the Income Tax Act, 1961. As such I am satisfied that the penalty provisions under section 271B of Income Tax Act, 1961 are applicable against the assessee. Penalty proceedings u/s. 271B of the Income Tax Act, 1961 are initiated separately. It was further noticed during the course of scrutiny that the assessee had filed its return of income on 29.03.2010 and was having a taxable income for the relevant assessment year. By virtue to third proviso to section 139(1) of Income Tax Act, 1961 the assessee was required to file its return of income on or before 30 th September, 2008 but the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Consolidated Photo and Finvest Limited versus Assistant Commissioner of Income Tax, (2006) 281 ITR 394(Del.) and (iii) Yuvraj v. Union of India (2009) 315 ITR 84. (Bom.). 2.4.8 The ld. CIT(A) has decided this issue by presuming the fact that no new facts were brought to the knowledge of the AO after completing the scrutiny assessment u/s 143(3) of the Act. The relevant concluding para's Nos. (xii) and (xiii) of ld. CIT(A)'s order on this issue are as under:- (xii) Therefore, in view of the above discussion and looking to the totality of facts and circumstances of the case, it is held that the initiation of proceedings u/s 147 of the Act by the AO for the year under consideration was not in conformity with the provisions of section 147 of the Act. Further, the assessment was reopened after 4 years from the end of the relevant assessment year, which was earlier completed u/s 143(3) of the Act, therefore, proviso to the section 147 of the Act is clearly applicable to the facts of the instant case under consideration. The AO has neither stated that there was default on the part of the appellant to disclose material facts truly and fully, which are necessary for its assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 7: Whether on the facts and circumnstances of the case, the Ld. CIT(A) is right in quashing the reopening proceedings of AO ignoring the fact that the assessee has converted its capital reopening proceedings of AO ignoring the fact that the assessee has converted its capital asset into stock in trade by converting the land use after demolition of Cinema Hall building and entered into a Development Agreement for construction of multistoried commercial complex, therefore, the provisions of Section 45(2) of the I.T. Act are applicable and the income ought to be taxed as Business Income. and not a Capital Gains?" These grounds of the Revenue are regarding the addition made by the AO u/s 45(2) of the Act on account of conversion of capital asset into stock in trade which was deleted by the ld. CIT(A). 2.6 Comment: 2.6.1 It is submitted that when the assessee was having the business assets in the form of Cinema Hall and was engaged in exhibiting the films then the decision taken by the assessee to discontinue the earlier business by dismantling the cinema hall building and converting the land use for development of commercial complex amounts to conversion of capital asset into st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were given to it in lieu of its land. It is very much clear that the assessee has made conversion/treatment of its land followed by agreement with Golcha Group thereby changing the land to stock in trade of its new business of selling of shops. 2.6.3 There is no dispute that business of exhibiting films in the cinema hall ceased to exist when the assessee decided to demolish the building and converted the land use for development of commercial complex. In order to develop the commercial complex on the land, the assessee entered into a Development Agreement dated 12-12-2001 with GBT. The assessee also obtained the permission to change the land use from cinema hall to commercial complex which establishes the intention of the assessee not to use the land in question for its erstwhile business of exhibiting films. To ascertain the true and real intentions of the parties to the Development Agreement dated 12-12- 2001, it is essential to consider various clauses of the said agreement. The purpose and object of the conversion of land use for development of multistoried commercial complex is stated in clause 2 of the agreement as under:- ''2. WHEREAS looking to the deman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ratio of 50:50 respectively. The left half of the building will be earmarked for and belong to Owners (Owner's allocation) and Right hall of the building will be for and belong to the Developer (Developer's allocation). However, when the final plans are approved by the concerned authorities actual areas will be demarcated according to the above theme by different colours in the approved building plans i.e. Owner's allocation shall be marked in Red Colour and the Developer's allocation shall be marked in Green Colour. However, it is further made clear that before completion of the structure, no sale deed will be executed of the Developers share.'' 2.6.6 Thus, the clause 11 of the agreement set out the manner in which the constructed commercial complex will be divided between the assessee and the Developer. The share of each party was also proposed to be marked in different colour of Red and Green. Apart from the constructed area, the assessee also received Rs. 2.00 crores as consideration. As per clause 12 of the said agreement, the assessee was free to sell / transfer its share in the built up area of new building including the parking space and spa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carved out by the parties under the development agreement manifest the substantial and material facts of doing the activity of adventure and therefore, it was never the intention of the assessee to keep the commercial complex so developed with itself or to exploit the same by maintaining or use as an apparatus for earning the income. Even it was not the intention of the assessee to sell the commercial complex as the capital asset under the development agreement. The parties were to sell each and every shop/ office as well as other space as a separate unit. The exercise of development of multistoried commercial complex was a well preplanned venture of the assessee and developer which shows the adventurous act on the part of the assessee except the activity of development and selling of shops/ offices and other space of commercial complex, there was no other business activity of the assessee. Therefore, all these undisputed facts of conversion of land use, demolition of cinema hall building and discontinue of business of exhibiting films and development of commercial complex for the purpose of sale of shops/ offices and other commercial complex establishes the fact that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spite of the request.'' Through the CO, the assessee has raised the issue of validity of service of notice u/s 148 of the Act as well as the copy of the reasons was not supplied to the assessee. 2.8 Comment: (1) In this regard, it is submitted that the Income Tax Act in section 149 provides that notice u/s 148 must be issued upon the assessee in the time limit prescribed. In the instant case of assessee, the time limit as prescribed u/s 149 of the Act was 31.03.2015. It is pertinent to state that the notice u/s 148 was issued on 31.03.2015 and the same was sent through speed post No. B RR 1447990261N on 31.03.2015 itself. Further, in recent judgment of Hon'ble Gujrat High Court in the case of Kanubhai M Patel HUF vs Hiren Bhatt in Special Civil Application No. 5295/2010, the Hon'ble High Court has held that "the date of issue would be the date on which the same were handed over for service to the proper officer, which in fact of the present case would be the date on which the said notices were actually handed over to the post office for the purpose of booking for the purpose of effecting service on the assessee" Here in the instant case of assessee, the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epartmental appeal is bad in law as well as on facts and is liable to be dismissed.'' It is clear that the assessee has not raised any independent issue but simply supported the order of the ld. CIT(A) hence, the C.O. of the assessee is required to be dismissed. The assessee has not produced any facts or quoted any legal principle or precedent in support of the cross objection, and hence the CO is not maintainable and is required to be quashed. 3.3 Additional Ground no. 2 in CO No. 12/JP/2018 for AY 2009-10: ''That the impugned notice dated 31.03.2016 issued u/s. 148 of the Act was granted sanction by the sanctioning authority mechanically, without application of mind and thus entire reassessment proceedings are vitiated, is bad in law, is void-ab-initio, a nullify and the same deserves to be quashed and set-aside. '' It is submitted that notice dated 31.03.2016 u/s 148 of the Act was issued after following the due procedure as per law. The assessee has not produced anything on record to support his assertion that the sanction was granted mechanically. Hence the aforesaid additional ground is not maintainable and is required to be dismissed. 4. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opers (P.) Ltd. v.Assistant Commissioner of Income-tax 23 [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) 24 [2012] 18 taxmann.com 83 (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singh v.Income-tax Officer 25 [1995] 83 TAXMAN 194 (MAD.)HIGH COURT OF MADRAS Panchugurumurthy v. Commissioner of Income-tax 26 [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 27 [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 28 [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 29 [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax 30 [2021] 128 taxmann.com 229 (Gujarat) HIGH COURT OF GUJARAT Bhanuben Mansukhlal Khimashia v.Income Tax Officer Ward 3(1) 31 [2021] 129 taxmann.com 48 (Gujarat) HIGH COURT OF GUJARAT Kaushaliya Sampatlal Dudani v.Income-tax Officer, Ward 1(3) 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to get the existing building demolished. The parties have agreed to have 50% share each in the constructed commercial complex. The Developer was not permitted to the execute sale deed before completion of construction. However, due to certain litigations over the Plot including filing of Public Interest Litigation before the Hon'ble Court, the parties decided to modify the terms with relation to security deposit by way of deed for modification dated 15.05.2004 [PB 71-75] by which it was decided that the assessee were to receive a total sum of Rs. 1.68 crores as interest free refundable security deposit instead of earlier agreed Rs. 2.50 crores as interest free refundable security deposit and Rs. 2.00 crores as non-refundable security deposit. 2. That between Financial Year 2001-02 and FY 2007-08, the developer demolished the Cinema Hall and constructed a commercial complex. During the financial year 2007-2008, i.e., assessment year 2008-2009 the commercial complex was completed and assessee's share was handed over to it on 14.04.2007. The assessee got the cost of shops & offices from registered valuer who valued it at Rs. 18,49,76,342/- and the same was shown under the head I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted relevant documents in support thereto [PB 70]. 4. That the Assessing Officer after passage of 4 years & after carrying out scrutiny assessment assumed jurisdiction to again reassess the assessee and issued a notice dated 31.03.2015 u/s. 148 of the Act for the assessment year 2008-2009 by taking sanction of the PCIT, Jaipur 1, Jaipur. However, no such notice was received by the assessee. Vide letter dated 20.04.2015, the Assessing Officer enclosed the notice dated 31.03.2015 [PB 76-77]. The assessee in response to the notice dated 20.04.2015 vide letter dated 18.05.2015 [PB 78] intimated that no such notice dated 31.03.2015 was served upon it and further requested that the return of income filed by the assessee earlier on 29.03.2010 be treated as return in response to reassessment notice. The assessee also sought reasons for initiating reassessment proceedings. The reasons recorded were never conveyed to the assessee though in the remand report to CIT(A) it is stated to have been issued by the Assessing Officer vide its notice dated 29.09.2015 and was served through Affixture (copy of affixture report was never provided to the assessee). Interestingly notice issued u/s.143(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e query and simply furnished the copy of reasons recorded earlier [Page 41 CIT(A), para 3.1.2. (ix), (x)]. 6.4. The ld. CIT(A) decided the issue of reopening of the assessment in favour of the assessee and quashed the reopening of the assessment for the following reasons: * All material facts were there before the Assessing Officer at the time of original assessment proceedings and no adverse inference was drawn by the Assessing Officer thereof. Therefore on the basis of reappreciation of facts already on record, the Assessing Officer has initiated proceedings u/s. 147 of the Act which tantamounts to change of opinion which is not permissible in eyes of law [Page 22 CIT(A) para 3.1.2. (vii), Page 67 CIT(A) para 3.1.2. (xiii)]; * Since assessment was reopened after a period of 4 years and the assessment was carried out u/s. 143(3), the 1st proviso to section 147 is triggered and in the reasons recorded by the Assessing Officer there is no whisper that the assessee has not disclosed all the material facts for the purpose of assessment. The Assessing Officer has not stated what material facts were not disclosed truly and fully by the assessee at the time of original assessment [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciating the law laid down by the Hon'ble Supreme Court in the case of M.V. "Vali Pero'' vs Fernandeo Lopex, AIR 1989 (SC) 2206 wherein it has been held that the outcome and fairness of the procedure have been followed, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvertently omitted in a particular case. 8. That on perusal of order dated 25.01.2018 passed by the ld. CIT(A) it is discernible that the reasons on which the reassessment order dated 30.03.2016 was quashed by him was: * All material facts were there before the Assessing Officer at the time of original assessment proceedings; * On the basis of reappreciation of facts already on record, the Assessing Officer has initiated proceedings u/s. 147 of the Act which tantamounts to change of opinion which is not permissible; * In the reasons recorded by the Assessing Officer there is no whisper that the assessee has not disclosed all the material facts for the purpose of assessment; * In the reasons recorded the Assessing Officer has not stated what material facts were not disclosed truly and fully by the assessee at the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 dated 26.08.2019] confirming Nupower Renewables Pvt. Ltd. v. ACIT 2019 (3) TMI 1125 (Bombay) * ACIT v. Dhirendra Hansraj Singh [2018 (11) TMI 1499 (Supreme Court)] confirming Dhirendra Hansraj Singh v. ACIT [2018 (5) TMI 1386 (Gujarat High Court)] * ACIT v. CEAT Ltd. [2023 (1) TMI 73 (Supreme Court)] confirming CEAT Ltd. v. ACIT [2022 (2) TMI 298 (Bombay High Court)] * ITO v. Sanjeev Ghei [2019] 104 taxmann.com 81 (SC) confirming Sanjeev Ghei v. ITO [2019] 94 taxmann.com 80 (Delhi) * Rampal Samdani v. UOI 2023 (1) TMI 575 (Rajasthan High Court) * ACIT v. Marudhar Hotels Pvt. Ltd. 2019 (7) TMI 607 (Rajasthan High Court) * Asha Kala v. ACIT 2017 (8) TMI 195 (Rajasthan High Court) * CIT v. Hindustan Zinc Ltd. [2016] 70 taxmann.com 262 (Rajasthan) * CIT v. Vaishali Avenue 2014 (2) TMI 1220 (Rajasthan High Court) * CIT v. Manish Ajmera 2010 (11) TMI 686 (Rajasthan High Court) * Akum Drugs and Pharmaceuticals Ltd. v. DCIT 2024 (1) TMI 289 (Delhi High Court) * Bajaj Energy Ltd. v. ACIT 2024 (1) TMI 1139 (Bombay High Court) * Adani Enterprises Ltd. v. ACIT 2023 (10) TMI 136 (Gujarat High Court) * Amrit Corp. Ltd v. Addl. CIT 2014 (5) TMI 19 (Allahabad High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the owner of a capital asset into, or its treatment by him as stock-in-trade of a business carried on by him shall be chargeable to income-tax as his income of the previous year in which such stock-in-trade is sold or otherwise transferred by him and, for the purposes of section 48, the fair market value of the asset on the date of such conversion or treatment shall be deemed to be the full value of the consideration received or accruing as a result of the transfer of the capital asset. 16. It is undisputed fact that no financial entry was made in the books of accounts of the assessee from 2001 to 2008 reflecting transfer from capital asset to stock-in-trade. The shops have been consistently shown under the head 'Investment'. There change on land use from Cinema Hall to Commercial Complex does not tantamount to conversion of capital asset into stock-in-trade. To maximize the Gains does not mean that the intention of the assessee is to carry out business. The intention is not the necessary criteria for invoking section 45(2) of the Act but entries in books of accounts is relevant. The object clause of the assessee has been referred by the CIT(A) in detail. The assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any of Government Authorities to act as a colonizer - It was further opined that by developing infrastructural facilities to make land saleable would not change intention of assessee in absence of any material contrary to facts - Tribunal thus taking a view that assessee had no intention to convert land owned by him as stock-in-trade, accepted assessee's claim that profit in question was taxable as capital gain - Whether it is always prerogative of assessee to how to dispose of property - Held, yes - Whether, therefore, findings recorded by Tribunal being findings of fact based on material available on record, did not require any interference - Held, yes * Hon'ble Calcutta High Court in the case of CIT v. Surjeet Kaur (2018) 3 TMI 796 (Calcutta) wherein it was held: Sale of asset - Whether a particular transaction would constitute adventure in the nature of trade or would be the normal sale of assets attracting long term capital gain? - Held that:- No material from records to suggest that at the time of acquisition of the properties such acquisition was for the purpose of undertaking a business venture. What we are to look at now is as to whether there was a business venture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the property was not an adventure in the nature of trade - hence the transaction could not come within the ambit of adventure in the nature of trade - also the gain from sale of such property cannot be held as business income - Decided in favor of assessee. * Hon'ble ITAT Jaipur Bench in DCIT v. Ravindra Mittal (2021) 3 TMI 819 has held: In the present case, there is nothing to show that the land was purchased with the intention to sell at a profit or with requisite intention to bring it within the para meters of "stock-in-trade". As not shown that the assessee is a regular dealer in real estate. Rather, it appears that the land was not purchased by the assessee, but was inherited by him from his father and the development agreement was entered into even after lapse of around 12 years thereafter. As per the Development Agreement, the developer had all the obligation of execution of work. Even the assessee was debarred from interfering in the working of the developer. On the contrary, no funds of the assessee were deployed rather he received security deposit from the developer. Therefore, after considering the terms and conditions as contained in Development Agreement and followi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2011 & reply dated 07.10.2014 filed by the assessee including Modification Agreement dated 15.05.2004. 69 70 71 69 70 75 8 Copy of letter dated 20.04.2015 alongwith notice dated 76 76 31.03.2015 issued by the Assessing Officer. 77 77 9 Copy of letter dated 18.05.2015 filed by the assessee. 78 78 10 Copy of letter dated 08.03.2016 issued by the Assessing Officer. 79 82 11 Copy of letter dated 11.03.2016 filed by the assessee. 83 83 12 Copy of letter dated 14.03.2016 issued by the Assessing Officer. 84 86 13 Copy of letter dated 21.03.2016 filed by the assessee. 87 91 14 Copy of letter dated 22.03.2016 filed by the assessee. 92 95 15 Copy of written submissions filed before the CIT(A) for A.Y. 2008-2009. 96 103 109 102 108 112 Case laws relied upon: COMPENDIUM INDEX S. No. DESCRIPTION PB PB Reassessment proceedings on change of opinion & failure to disclose truly all material facts 1. New Delhi Television Ltd. v. DCIT 2020 (4) TMI 133 (Supreme Court): Whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts? - Extension of limitation period - HELD THAT:- Assessee di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) - unexplained investment made by a Mauritius based Company towards share allocation money in Compulsory Convertible Cumulative Preference Shares - genuineness and creditworthiness of the foreign entity - information received from the investigation wing - beyond limitation - no failure on the part of the assessee to declare fully and truly all material facts - no new or additional material - desire to carry out enquiries - HELD THAT:- SLP dismissed. 13 13 3. ACIT v. Dhirendra Hansraj Singh 2018 (11) TMI 1499 (Supreme Court): Reopening of the assessment u/s 147 - as per AO income chargeable to tax had escaped the assessment - the assessee had already tabulated necessary details as were required by the Assessing Officer at the time of original assessment - there was no failure on the part of the assessee to disclose fully and truly any material facts which were necessary for assessment - Held that:- No reason to interfere in the matter. The special leave petition is, accordingly, dismissed. 14 14 4. ACIT v. CEAT Ltd. 2023 (1) TMI 73 (Supreme Court): Reopening of assessment u/s 147 - Notice beyond four years - conditions precedent for reopening - HELD THAT:- Having g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned notice is declared to time barred and cannot be saved by proviso to Section 147 of the Income Tax Act. In addition thereto, the reassessment is being resorted to only on account of 'change of opinion' of the Assessment Officer without there being any fresh tangible evidence for reopening the assessment proceedings. Hence also, the impugned notice u/s 148 runs foul of the Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT] and thus, the same cannot be sustained and is liable to be struck down. 17 22 7. ACIT v. Marudhar Hotels Pvt. Ltd. 2019 (7) TMI 607 (Rajasthan High Court): A reading of the impugned order would show that the original assessment order was framed under Section 143 (3) i.e. after scrutiny of all the claim by the assessee. It is thus apparent that the declarations and claims made, received careful consideration by the A.O.. In terms of Calcutta Discount Ltd. Co. Vs. I.T.O., (1961) 41 ITR 191 (SC) the job of the A.O. essentially is to consider the claims in accordance with law and not in accordance with what an assessee states. Likewise, that an assessee might not claim a benefit would not deny it that relief, conversely, since the A.O is bound to adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amended Section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same. 25 35 9. CIT v. Hindustan Zinc Ltd. [2016] 70 taxmann.com 262 (Rajasthan): Reopening of assessment - claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA - Held that:- The assessee had made true and full disclosure of all relevant facts relating to the claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA. A separate audit report in the prescribed form 10CCB in support of the claim for deduction under Section 80IA/80IB was also duly submitted. The assessee had also submitted reply pursuant to all queries made by AO during the assessment proceedings under Section 143(3) of the Act. In this view of the matter, the contention sought to be raised by the Revenue about non-disclosure on the basis of the failure on the part of the assessee in mentioned bifurcated amount of additional depreciation allowable in the depreciation chart is absolutely base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me. It was further suggested that ₹ 33,48,915 was debited to the registration and stamp charges and sale of plot though registration charges are generally borne by the purchaser and not by the seller. Hence, according to the AO, these expenses were wrongly claimed by the assessee. Evidently, all the observations by the successor AO were only of the expression of another opinion on the same set of facts. In the given circumstances, the Tribunal cannot be faulted in finding that the reassessment was based only on change of opinion and hence, unsustainable. 42 44 11. CIT v. Manish Ajmera 2010 (11) TMI 686 (Rajasthan High Court): Assessment u/s 143(3) read with section 148 of the Act - the assessment was reopened essentially not because of escapement of income, but because of change of opinion, which was not permissible even in the amended provisions under section 147 - The sole basis on which the assessment has been reopened is that while framing the original assessment order, the Assessing Officer has accepted the system of accounting adopted by the assessee as valid, whereas in the re-assessment made under section 147, the system of accounting adopted by the assessee has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on a mere change of opinion. It is settled law that reopening of assessment proceedings on the basis of escapement of income is not permissible on the ground of change of opinion of the AO. Once a query is raised during assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query itself. This Court in its decision in the matter of Aroni Commercials Limited [2014 (2) TMI 659 - BOMBAY HIGH COURT] has expounded the law in this regard. In the present case, the queries raised by the AO in the course of the original assessing proceedings followed by replies given by the Petitioner clearly show that the entire material was before the AO and applying his mind to the said material, the AO has passed the Assessment Order dated 20th July 2018. The statement of accounts regarding details of expenses and investment relating to earning of exempt income was accepted by the AO. The letter dated 4th August 2017 issued by Petitioner alongwith the fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s 147 r.w. section 148 of the Act - Sale of land - Failure to disclose material facts - Mere change of opinion - Bar of limitation - Held that:- The proceeding u/s 147 cannot be initiated on account of change of opinion - Change of opinion and review of the assessment is not permissible - Relying upon Commissioner of Income Tax, Delhi Versus M/s. Kelvinator of India Limited [2010 (1) TMI 11 - SUPREME COURT OF INDIA] - the duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts - Once he has done that his duty ends - It is for the Income-tax Officer to draw the correct inference from the primary facts - It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts - If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment - under Section 147, the assessing authority has no power to review and the proceeding cannot be taken on account of change of opinion. There is no failure on the part of the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... OURT], we are of the considered view that the assessee deserves to succeed and the impugned order of the ld. CIT (A) for A.Y. 2010-11 is set aside. 78 91 Reassessment not permissible on the ground that reasons are not reflected in assessment order 17. ACIT v. Marico Ltd. (2020) 6 TMI 436 (Supreme Court): Reopening of assessment u/s 147 - validity of reasons to believe - HC set aside the notice for reopening - HELD THAT:- Reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September2017 during the assessment proceedings and the Petitioner had responded to the same by its letters date d 10 December 2017 and 21 December 2017 justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. No reason to interfere in the matter. This special leave petition is, accordingly, dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer notice under Section 147/148 of the Act is not permissible - Once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment -It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised - If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. The notice dated 28 March2013 under Section 148 of the Act seeking to reopen the assessment for A.Y.2008-09 and the order dated 20 November 2013 rejecting the petitioner's objection to reopen the assessment for A.Y. 2008-09 are not sustainable in law- The entire proceeding for reopening the assessment for A.Y. 2008-09 had emanated only on account of change of opinion on the part of the Assessing Officer - thus, the assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centive. Further the impugned order of the Tribunal also reproduced the audit objections as well as the reasons recorded and on comparing the two comes to a view that in substance both of them are identical. In the above view, it cannot even be remotely suggested that the impugned order of the Tribunal is perverse. Thus there is no merit in this objection of the Revenue. 109 112 22. FIS Global Business Solutions India Pvt. Ltd. v. PCIT (2019) 102 taxmann.com 471 (Delhi): Reopening of assessment - reasons for reopening the case - reassessment notice is solely based on an audit opinion - Held that:- This Court is of the opinion that Carlton [2009 (8) TMI 57 - DELHI HIGH COURT] concludes the issue in the present case; the audit objection merely is an information. As reiterated in Kelvinator [2010 (1) TMI 11 - SUPREME COURT OF INDIA] by the Supreme Court, change of opinion is impermissible. The Revenue was clearly barred by provisions of Section 147/148 of the Act. In the present case, the reassessment notice is solely based on an audit opinion. Having regard to the fact that the assessee's challenge to the previous year's re-assessment orders was successful - in FIS Global Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectly and solely done by the assessing officer. The audit party can furnish information which leads the assessing officer to realise the need for reassessment - information / material provided by the audit or any external agency must give birth to the realisation on the part of the assessing officer of the need to exercise its power of reassessment - information cannot be the realisation. If the distinction between the two is lost sight, there is a grave danger of powers of reassessment being usurped by external agency and abdication of its quasi-judicial function/power by the assessing officer, both of which are impermissible and would prove fatal to the validity of any proceedings which suffers from the above vice. 117 135 24. Himachal Aluminum and Conductors v. State of Himachal Pradesh (2021) 2 TMI 481 (Himachal Pradesh High Court): Re-assessment of tax - demand of tax - HELD THAT:- The power of re-assessment, of, under-assessed or escaped assessment, of, tax as borne in the apposite returns, filed by the taxable unit, becomes visibly vested in the assessing authority, through statutory empowerment, becoming conferred, upon the assessing authority. In sequel thereto, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e payment of deposit of TCS is already forming part of the records. The issue raised by the Revenue is nothing but a change of opinion and the law does not permit the change of opinion on the same issue which has been examined by the ld. AO while passing the assessment order. As the issue on depreciation and interest payment has already been verified in the original assessment proceedings and the AO has already considered the claim of the assessee based on the submission placed before him. We also take note of the fact that in the reasons recorded in this case is that assessee has paid interest payment of TCS and claim on higher rate of depreciation is already decided based on the submission made by the assessee. Therefore, reopening is done merely based on the same material already on record. 141 145 Treatment of capital asset u/s 45(2) of the Act 26. CIT v. Sohan Khan (2008) 304 ITR 194 (Raj.) (Rajasthan High Court): AO holding transaction of disposal of large extent of land under site plan, in nature of trade - nothing to show, that the land was purchased with intention to sale it at a profit, or with requisite intention, to bring it within the parameters of "stock in trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertaking a business venture. What we are to look at now is as to whether there was a business venture simultaneously with the development agreement. Major portion of the developed building was to remain with the assessee after construction. Sale of one unit therefrom per se would not have constituted an adventure in the nature of trade. Materials available on record do not show that building construction formed part of normal activity of the Assessee. Determining factor in this appeal, as urged by Revenue, becomes the intervening arrangement of agreement for sale and its subsequent cancellation when the property fetched better price. Revenue's stand is that pursuit of higher profit by itself would confer on the transaction the character of business venture. We are, however, unable to agree with this submission. It might be natural for a person, who is not undertaking any business venture, to seek higher return from sale of his assets. That would be a rational pursuit and in our view reflects normal human behaviour and not a special attribute for a trader or a businessman. Just because for a particular unit, an intervening transaction is aborted for the reason that the property woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he received security deposit from the developer. Therefore, after considering the terms and conditions as contained in Development Agreement and following the decisions referred above, we are also of the view that the gains in the present case is to be chargeable to tax under the head "capital gains". In the present case, it has nowhere been shown that the land was purchased by the assessee with the intention to sell at a profit or with requisite intention to bring it within the parameters of "stock-in-trade". Therefore, after considering the factual position as enumerated hereinabove, we found that the ld. CIT(A) has rightly concluded that the gains are to be charged to tax under the head "capital gains". No new facts or circumstances have been brought before us by the ld. DR in order to controvert or rebut the findings so recorded by the ld. CIT(A), therefore, we find no reason to interfere into or deviate from the findings of the ld. CIT(A). Accordingly, we uphold the same. 174 180 Mechanical Sanction by the Sanctioning Authority invalidates the reassessment 31. Ram Niranjan Tibra v. ITO (2020) 4 TMI 283 (ITAT Jaipur Bench): Sanction accorded by the ld. CIT for issuing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts or that there was any basis for interfering on account of the said reason there had been any escapement of income. In fact, the primary jurisdictional requirement for reopening any assessment beyond a period of four years must be fulfilled strictly, otherwise it would be an arbitrary exercise of power. In the instant case, on perusing the reasons recorded dated 15.3.2016 we do not find anything to the effect that the assessee had not disclosed fully and truly all material facts or that the assessee had not disclosed the fact that he was a developer. In fact the assessment for the assessment year 2010-11 was made on the basis that the respondent/assessee was a developer. If that was so, the impugned proceeding initiated on the premise that the assessee was a works contractor and not the developer is only a change of opinion and therefore does not fulfill the essential requirements of Sections 147/148 of the Act. As speaking through the Hon'ble Chief Justice, opined that the concept of 'change of opinion' must be treated as an inbuilt limitation on the power of the Assessing Officer; that 'mere change of opinion' on consideration of the very same material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs - HELD THAT:- This Court must ask the question whether the allegation that there is failure to disclose material fact fully and truly should be stated in the exact words that are found in the statute, and then the answer is obvious. In law it is not mere repetition of the requirement in the exact words but a disclosure of the requirement as would be justified in the facts and circumstances of the case. It is obvious that the respondent alleges that the material facts are detected in scrutiny and survey proceedings under the relevant provisions of the I.T. Act. This Court must opine that the opening statement as extracted would satisfy the requirement of an allegation, and hence the petitioner cannot succeed on the ground that there is no allegation. As such, the petitioner is not granted any indulgence on the first ground. 213 216 5. CIT v. City Union Bank Ltd. (2019) 5 TMI 1206 (Madras High Court): Reopening of assessment u/s 147 - Income escaping assessment - disallowance made u/s 14A - HELD THAT:- In this case, there is no failure on the part of the assessee. On the other hand, there appears to be a failure on the part of the assessing officer to make an appropria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the petitioner had been triggered based on the audit objections - eligibility to deduction u/s 80-IC - HELD THAT:- AO while triggering the reassessment proceedings had not applied his mind independent of what the auditor had flagged. As a matter of fact, the AO did not even examine the reply given by his counterpart to the audit objection. Petitioner is right that this very aspect concerning claim of deduction under Section 80-IC of the Act was examined in the scrutiny proceedings and it was only when the AO was satisfied that the assessment order dated 30.01.2014 was framed. The logical sequitur of this assessment order was that the petitioner obviously had truly and fairly disclosed all material facts. There is not a whisper in the reasons to believe which would point in the direction that the petitioner had failed to disclose truly and fairly all material facts. Since the reassessment proceedings were triggered after four years, the AO ought to have indicated as to what were those material facts which the petitioner had failed to disclose. Thus, the impugned proceedings are flawed on various grounds, i.e., borrowed satisfaction, reasons to believe not adverting to the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment. A perusal of the reasons extracted above would evince that the AO had failed to make any specific reference to the circumstances which had triggered the Revenue to take a fresh view. The satisfaction note in the instant case finds a close resemblance with the factual matrix in Donaldson India [2015 (1) TMI 831 - DELHI HIGH COURT] as the reasons herein also vaguely refer to the expression "on perusal of records", rather than disclosing the foundation of "reasons to believe". A plain reading of the aforesaid extract of the order of the CIT(A), which has sustained the reopening of assessment on the basis of revenue audit report, in juxtaposition with the reasons to believe would manifest that there is apparently no live link between the reasons recorded and the formation of belief to take action u/s 147 of the Act. Interestingly, while deleting the additions on merits, CIT(A) has upheld the action of reassessment by the Revenue on the ground that the factum of giving away of 75 vehicles to dealers for achieving sale targets under the guise of incentives was not disclosed in the original assessment proceedings. However, according to the CIT(A), the said fact cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11(1) and 11 (3) of the Act. Hon'ble Apex Court, in case rendered in case titled as FIS Global Business Solutions India Pvt. Ltd. Versus Principal Commissioner of Income Tax-3, New Delhi and another decided on 16.11.2018 in [2018 (12) TMI 130 - DELHI HIGH COURT], (i) wherein it has been expostulated that the expostulations of law, borne in a judgment rendered in case title as Carlton Overseas Pvt. Ltd. v. Income Tax Officer & Ors [2009 (8) TMI 57 - DELHI HIGH COURT] (ii) inasmuch as the reassessment of the completely assessed tax, upon, apposite tax returns, filed by the taxable unit, being valid, only upon, tangible material being made available to the revenue, and, also that hence an audit objection or an audit report issued by the revenue rather not constituting potent material - The afore expostulations of law borne in the judgment, for all the hereinabove reasons, is pointedly and squarely applicable to the factual matrix available here at, and, in consonance therewith, this Court proceeds to set aside the impugned Annexures, through its invoking the power of judicial review, invested under Article 226 of the Constitution. 258 273 Mechanical Sanction by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose fully and truly all material facts necessary for such assessment, income chargeable to tax had escaped assessment for that assessment year or the income tax officer had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment for any assessment year, the income tax officer could reopen an assessment. But with effect from 01.04.1989, the requirement of law underwent a change. Section 147 as it stood at the relevant point of time provides that if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may assess or re-assess such income and such other income which has escaped assessment and which comes to his notice subsequently in the course of proceedings u/s 147. Section 148 says that before making an assessment, re-assessment etc. under Section 147, the assessing officer is required to issue and serve a notice on the assessee calling upon the assessee to file a return of his income in the prescribed form etc., setting forth such particulars as may be called upon. Such a notice is subject to the time limit prescribed u/s 149. Under sub-Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax has escaped assessment. Such reasons must be based on material and specific information obtained subsequently and not on the basis of surmises, conjectures or gossip. The reasons formed must be bona fide. That being the position, the assessing officer could not have placed reliance on such balance sheet submitted by the assessee allegedly for the assessment year 1989-90 to the South Indian Bank for obtaining credit. Dehors such balance sheet, there were no other material in the possession of the assessing officer to come to the conclusion that income of the assessee for the three assessment years had escaped assessment. Once the primary facts are disclosed by the assessee, the burden shifts onto the assessing officer. It is not the case of the revenue that the assessee had made a false declaration. On the basis of the "balance sheet" submitted by the assessee before the South Indian Bank for obtaining credit which was discarded by the CIT(A) in an earlier appellate proceeding of the assessee itself, the assessing officer upon a comparison of the same with a subsequent balance sheet of the assessee for the assessment year 1993-94 which was filed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place to reopen an assessment tangible material should be there. - Decided in favour of assessee. 295 301 3. PCIT v. Onkareshwar Properties Pvt. Ltd. 2016 (5) TMI 1484 (Delhi High Court): Correct head of income - sale of land - business income or capital gain - Held that:- A small portion of the land was sold and the loss therefrom was declared as a capital loss and was not set off against any other income. The ITAT held that a mere fact that a development agreement was entered into by the Assessee with Vatika Ltd. would not change the nature and character of the land since in terms of the agreement it was the developer who would undertake the work of development upon being paid a fee by the Assessee. It was also observed that although the main object of the Assessee may be to carry on the business of real estate, that would not prevent the Assessee from holding th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase where the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars. 2 Temple of Thakurji 22. In view of the above, I reach the following unescapable conclusions: I. The petitioner-temple was shown as Khatedar of the land in dispute and the Khatedari rights accrued in favour of Sri Mangha Ram Pujari would not be legal because of the application of the provisions of Section 46 of the 1955 Act. II. The provisions of Section 46 of the 1955 Act are based on public policy and have been enacted to secure a laudable object. The provisions of any other act cannot override the special protection accorded to the class of persons mentioned therein. Thus, the protection/ exemption granted to deity a perpetual minor/ permanently disabled/infirm person cannot be taken away by the provisions of any other Act. III. It is the solemn duty of and legal obligation on the State Administrative Authorities and Courts to protect the interest of minor, disabled person and the deity being perpetual minor, physically disabled and infirm, is entitled to special protection of law. IV. The en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Revenue authorities have inherent jurisdiction to decide the issue * No limitation period is involved. * Hence, not applicable in the instant case where the ld. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars. 3 Jai Jai Ram Manohar lal Power to grant amendment of the pleadings - Held that:- Appeal allowed. The power to grant amendment of the pleadings is intended to serve the ends of justice and is not governed by any such narrow or technical limitations. Since the name in which the action was instituted was merely a misdescription of the original plaintiff, no question of limitation arises the plaint must be deemed on amendment to have been instituted in the name of the real plaintiff, on the date on which it was originally instituted the order passed by the Trial Court in granting the amendment was clearly right. The order passed by the High Court cannot be sustained. Rules of procedure are intended to, be a handmaid to the administration of justice. A party cannot be refused just relief merely because of some mistake, negligence, inadvertence or even infrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the "State" is the applicant praying for condonation of delay. In fact, experience shows that on account of an impersonal machinery (no one in charge of the matter is directly hit or hurt by the judgment sought to be subjected to appeal) and the inherited bureaucratic methodology imbued with the note-making, file- pushing, and passing-on-the-buck ethos, delay on its part is less difficult to understand though more difficult to approve. In any event, the State which represents the collective cause of the community, does not deserve a litigant non grata status. The courts, therefore, have to be informed of the spirit and philosophy of the provision in the course of the interpretation of the expression "sufficient cause". So also the same approach has to be evidenced in its application to matters at hand with the end in view to do even-handed justice on merits in preference to the approach which scuttles a decision on merits. * The Hon'ble Court was dealing with the terminology 'sufficient cause' * In such cases, justice on merits should be decided rather than technicalities * Hence, not applicable in the instant case where the Id. Assessing Officer has himself not rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal to consider whether section 147(b) is applicable or not. * Change of opinion can be seen from the assessment order/assessment record. * In the instant case assessment record reveals that due disclosure with regards to the transactions were made by the assessee appellant. * On the contrary the judgment is in favour of the assessee's contention. 7 Consolidated photo & Finvest Ltd. In view of these facts, I have reason to believe that expenses of Rs. 16,55,50,292 require disallowance and the same has escaped the assessment in terms of clause (c) of Explanation 2 to section 147 of the Income-tax Act, the assessee has failed to disclose fully and truly all material facts necessary for assessment." By its letters dated April 25, 2005 and September 15, 2005, the petitioner objected to the initiation of reassessment proceedings, inter alia, on the ground that the reopening of the assessment was bad in law inasmuch as the proposed reassessment was based on a mere change of opinion. Respondent No. 1 rejected the said objection in terms of an order dated October 21, 2005, in which the respondent observed that the reassessment had become necessary as the assessee had fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at income chargeable to tax has escaped assessment amounting to Rs. 98.46 lakhs on account of the amount not offered for tax under section 41 of the Income-tax Act, 1961. Further, the assessee has reduced the gross dividend income from its income for computing the taxable income instead of reducing the net dividend income after accounting for the expenses related to earning the dividend income and, therefore, the income of the assessee is also underassessed on this account. The above income has escaped taxation by reasons of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 2000- 01. It is therefore, proposed to reopen the assessment by issue of notice under section 148 after seeking necessary sanction." 10. Thus, the petitioner has accepted and admitted that he had not given details with regard to proportionate expenses relatable to tax-free or exempt income, which were claimed as a deduction under the cumulative head "expenditure". It is pleaded and stated that the petitioner was not required to disclose the said fact as when they had filed the return, section 14A was not in the statute boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts had been fully and truly disclosed in the assessment proceedings and there was no omission or failure on the part of the petitioner * Hence, not applicable in the instant case where the ld. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 10 Shri Pravinchandra R Patel 3. The first issue raised by the assessee is that learned CIT(A) erred in holding the reopening under section 147 of the Act as valid. 4. At the outset, the learned AR for the assessee at the time of hearing submitted that he has been instructed by the appellant not to press this ground of appeal. Hence, the ground of appeal raised by the assessee is dismissed being not pressed. * Not relevant since, the legal issue was not pressed by the A/R 11 Kanubhai M Patel (HUF) Reopening - Validity of notice - That section 149 of the Act speaks of time limit for issue of notice and categorically prescribes that no notice under section 148 shall be issued after the prescribed limitation has lapsed - It is submitted that in the facts of the present case, it is apparent that the notices have been dispatch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs. * Matter was not decided on the ground of alternate remedy * No opinion expressed on assessee's submission qua suppression of material facts by the assessee * Hence, not relevant in the instant case * The Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 13 Saif II Mauritius Company Ltd. Reopening notice within four years - eligibility of reason to believe - HELD THAT:- Section 148 notices have been issued within four years from the end of the relevant Assessment Years. Also no scrutiny assessment has been taken place in the present cases. Consequently, the test to be applied for re-assessment in the present cases is whether there is 'reason to believe' that income chargeable to tax has escaped assessment. * Reassessment initiated within 4 years * No scrutiny assessment had taken place * 1st Proviso to section 147 does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rm before respondent No. 2 at Mumbai who has the jurisdiction in the matter. There cannot be any reason to accept the contention that the Assessing Officer of the petitioners shall have the jurisdiction. Therefore, it cannot be said that any integral part of the cause of action has arisen within the jurisdiction of this High Court. * The Hon'ble Court was dealing with challenge by the Assessee primarily to the jurisdiction of the Assessing Officer. * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 16 Akshat Pramodkumar Chaudhary 3.1 The assessee received income from business and profession and interest income for the year 2012-13. The assessee also received proceeds from sale from share of Twenty First Century (I) Limited. The assessee filed its return of income for the assessment year 2012-13, by declaring gross total income at Rs. 16,56,922/-. 3.2 On 26.03.2019, the respondent authority issued a notice u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the part of the AO while recording the reasons for reopening of the assessment. It also cannot be said that his conclusion was merely based on the observations and information received from the Investigation Wing. AO could be said to have applied his mind to the same. AO could not be said to have merely concluded without verifying the facts that it is the case of reopening of the assessment. We have examined the belief of the AO to a limited extent to look into whether there was sufficient material available on record for the Assessing Officer to form a reasonable belief and whether there was a live link existing of the material and the income chargeable to tax that escaped assessment. The case on hand is not one where it could be argued that the Assessing Officer, on absolutely vague or unspecific information, initiated the proceedings of reassessment without taking the pains to form his own belief in respect of such materials. Writ application dismissed. Reasons 4. The reasons assigned by the Assessing Officer for the purpose of reopening are as under; "Brief details of the Assessee. The assessee company filed its return of income on 20.10.2014 showing total income of 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued during the assessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s.147 of the Act. * Reassessment initiated after 4 years after material gathered during survey at third person * The survey material was not before the Assessing Officer * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 18 Amit Polyprints P. Ltd. Reopening of assessment information received from Investigation Wing of Kolkata making reference of shell companies which had given accommodation entries for share premium as assessee company as one of the beneficiary - proof of seeking mandatory sanction signed by the Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghly complex nature of assessment proceedings involving large number of assessee's 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 cannot be reopened on a mere change of opinion. It is stated that power to reopening cannot be equated with review." * Reassessment initiated after 4 years * The alleg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , who is the Karta of the Petitioner's Hindu Undivided Family ('HUF'), seeking quashing of the order dated 18th July, 2022 passed under Section 148A(d) ('impugned order') of the Income Tax Act, 1961 (the Act') and the notice dated 18th July, 2022 passed under Section 148 (impugned notice) of the Act, by the Income Tax Officer, Ward 54(1), Delhi, for the Assessment Year ('AY") 2016-17. 2. The brief facts giving rise to the present case are that the Petitioner Assessee was served with a Show Cause Notice ('SCN') dated 23rd May, 2022 under Section 148A(b) of the Act by the Assessing Officer ('AO') wherein it was stated that a search was conducted by the Investigation Wing, Rohtak on Tradenext Securities Ltd. (Earlier known as Lifeline Securities Limited) and the said entity is involved in providing accommodation entries through the modus operandi set out in the notice. It was stated that the said Tradenext Securities Ltd. ('Tradenext Securities') operates several dummy demat accounts to provide accommodation entries and one such account is of Mridul Securities Private Ltd. ('Mridul Securities'). It was further stated that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s received by the assessee from a foreign entity information has been received from DIT (Intell. & Cr. Inv.) valid "reasons to believe" - Assessment after merger of company - scope of section 170 - No separate notice issued for the amalgamated company - HELD THAT:- In the present case, new facts, material or information have come to the knowledge of the Assessing Officer by way of the report of DIT (Intelligence and Criminal Investigation) with regards to the doubtful source of the investments made into the petitioner companies. At the time of original assessment, the AO was not aware of or in possession of information which could have indicated that the introduction of share capital from outside India has been routed through a doubtful entity. DIT (I&CI) Delhi had also made detailed enquiries regarding origin of funds which were used for introduction of share capital and premium. This information was received much later after the original assessment had been completed, and is germane and relevant to the subjective opinion formed by the AO in regard to escapement of income. In the present case, the AO's reasons to believe are fortified with the tangible material in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company Experion Developers International Private Limited, which in AY 2012-13 was a separate entity. * Reassessment initiated after 4 years * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * The disclosure made by the assessee was subsequently found to be untrue. * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars * There is no allegation that the disclosure made by the assessee was untrue 23 Jayant Securities & Finance Ltd. The reasons recorded show that the Assessing Officer had received information from the Investigating Wing in connection with advances of Rs. 10.25 Crores [rounded off] received by the assessee from M/s. East West Finvest India Limited during the FY 2009-10 which is relevant to AY 2010-11. M/s. East West Finvest India Limited works as an entry operator and earns bogus funds to provide advances to various persons. Out of the loan of Rs. 10.25 Crores received by the assessee from M/s. East West Finvest India Limited, repayment of 1.45 Cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the assessee to fully and truly disclose all material particulars * The disclosure made by the assessee was subsequently found to be untrue. * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars * There is no allegation that the disclosure made by the assessee was untrue 24 Ms. Rainee Singh This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. P. Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC)). The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat capital gain was not disclosed in the regular return filed by the assessee and thus the question of forming any opinion on that matter for the Assessing Officer did or could not otherwise arise. We, therefore, reject this contention of the assessee. * No scrutiny assessment had taken place * 1st Proviso to section 147 does not apply if reassessment was initiated within 4 years or if the case was not covered u/s. 143(3) * Hence, not relevant in the instant case since, reassessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 25 Panchugurumurty This is a case where, as noticed earlier, against the perfunctory order passed assessing the petitioner on his own return filed under section 143 of the Act, the authorities have initiated action for reassessment. The petitioner also apparently to keep the authorities bill (sic) have waited for nearly three years before making the claim for return. The materials furnished in the counter-affidavit would go to show that the petitioner was really the mouthpiece of somebody else and he has been giving prevaricating statements conflicting with each other at every stage and at times the Department was finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operation of Kayans to the extent of Rs. 127.94 lacs (accommodating co. Agnes Bruno Ltd.) pertaining to A.Y.2008-09 and based upon this material, the authority has issued notice under Section 148 of the Act for reopening of assessment as from the material, the authority found that there is a reasonable belief that income of the petitioner assessee has escaped assessment and therefore, it is justified to reopen the assessment. It is also emerging from the order passed by the authority rejecting the objections submitted by the petitioner dated 21.1.2016 that each and every material submitted by the petitioner has been extensively dealt with and a detailed order came to be passed and the said order is supported by cogent reasons, the decision arrived at to reopen the assessment appears to be just and proper. From the material available, the authority prima facie found that petitioner assessee is also the beneficiary of those Kayans brothers, who are well known entry operators across the country and to the extent of sizable amount, the petitioner has also been benefited and this part of the income appears to have been escaped assessment in the belief of the authority, the said belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appraisal report. The search had been conducted in the case of Barter Group and Shri Pradip Birewar. Search had also been conducted in case of the main beneficiaries of accommodation entries, one being SCS [Shirish Chandrakant Shah]. The material on record shows that Shri Pradip Birewar had paid Rs. 70 crores in cash to SCS. Such cash payment was made to arrange LTCG/Loss entries in the scrip of (i) Shri Ganesh Spinners Ltd. and (ii) Praneta Industries Ltd. The modus operandi is discussed in detail in the appraisal report. The material on record shows that bogus LTCG entries were made to the beneficiaries to whom shares were allotted through private placement of convertible shares recorded as "PHY" in the "pradeep abad sheet". "PHY" refers to the transactions where shares of SGSL (Shri Ganesh Spinners Ltd.) have been acquired by the beneficiary clients in physical certificate form. That in this case, the shares are not purchased through exchange. A perusal of the entries recorded shows that the assessee has received payout of Rs. 60,89,495/- for Rs. 3,62,000 shares in assessment year 2011-12. On the basis of the evidence found during the course of search and the appraisal repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment was carried out u/s. 143(3) 29 Tarasafe International Pvt. Ltd. 6.2. Brief facts of the case are that the assessee has filed its return of income on 26.09.2011 declaring total income of Rs. 1,21,426/-. This return of the assessee was processed under section 143(1). The assessment was reopened by issuance of a notice under section 148 of the Income Tax Act on 05.11.2015, which was duly served upon the assessee. The Id. Assessing Officer has issued the notice on the ground that an information was received from the Director (Investigation), Kolkata vide letter No. 75/2015 dated 05.10.2015, in which it has been pointed out that assessee is a beneficiary of bogus donation. The Id. Assessing Officer found that assessee has given a donation of Rs. 3,00,000/- to M/s. Horticulture Harbal Healthcare Bio-Harbal Research Foundation (in short 'HHBRF') and it claimed weighted deduction of Rs. 5,25,000/-. The Id. Assessing Officer has confronted the assessee with regard to the material unearthed during the course of search by the Investigation Wing in the case of recipient of the donation, but the assessee failed to give any plausible reply to rebut such donation except by submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the notice and requested the respondent to supply the copy of the reasons for reopening and same was supplied vide communication dated 25.04.2019. The writ applicant vide letter dated 25.06.2019 raised objections and the same came to be disposed of by the revenue vide order dated 14.11.2019. 8. Applicability of the provision of section 147/151 to the fats of the case: In this case, return of income was filed for the year under consideration but all the material facts have not been disclosed, accordingly, in this case, the only requirement to intimate proceedings u/s. 147 is reason to believe which has been recorded above in paras 6 & 7. It is pertinent to mention here that in this case the assessee has chosen not to disclose all material facts truly and fully during her assessment for the year under consideration. In view of the above, the provisions of clause (a) of Explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a fit case where income chargeable to tax has escaped assessment. * No scrutiny assessment had taken place * 1st Proviso to section 147 does not apply if reassessment was initiated within 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of the assessee to disclose fully and truly all material facts relevant to the assessment. * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 33 34 Sameer Gulabchand Shah HUF 2. The writ applicant being individual assessee, filed return of income on 14.10.2013, declaring total income of Rs. 14,000/-. The assessee sold 20,000/-. shares of Tuni Textiles Limited and earned long term capital gain of 40,37,009/- and claimed it as 'exempt income' under Section 10(38) of the Act. The return was processed under Section 143(1) of the Act and no scrutiny assessment was made under Section 143 of the Act. 3. The Assessing Officer, reopened the assessment under Section 147 of the Act by issuing impugned notice dated 28.03.2019 under Section 148 of the Act. The writ applicant filed his return of income in response to the notice and requested the respondent to supply copy of the reasons for reopening and same was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reassessment was initiated after 4 years and the assessment was carried out u/s. 143(3) 37 Zaveri & Company 7. At the outset, it may be noted that as per the settled legal position, two conditions have to be satisfied before the Assessing Officer invokes his jurisdiction to reopen the assessment under section 147 of the said Act after the expiry of four years from the end of the relevant assessment year firstly, that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment for the concerned assessment year, and secondly, such escapement of assessment was by reason of failure on the part of the assessee to make the 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 the material facts necessary for his assessment for that assessment year. So far as the case of the present petitioner is concerned, the assessment for the A.Y. 2012-13 is sought to be reopened by the Assessing Officer under section 147/148 of the said Act, on his having arrived at a satisfaction that the income for the said assessment year had escaped assessment by reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fully and truly disclosed all the material facts necessary for his assessment for the relevant assessment year and prima facie his income chargeable to tax had escaped assessment, he was fully justified in initiating the proceedings under section 147/148 of the said Act. * Reassessment initiated on the basis of evidence gathered during the course of search at a third persons premises * The search material was not before the Assessing Officer * The allegation was that there was failure on the part of the assessee to fully and truly disclose all material particulars * In the instant case, the Id. Assessing Officer has himself not recorded any satisfaction that there was failure on the part of the assessee to fully and truly disclose all material particulars 37 Alapati * Mr. Rajagopala Sastri however urges in the alternative that even if no sale took place before April 1, 1948, the assets had been transferred to the company before that date. He says that "transfer " is a wide word and had been used in section 12B to cover those cases where rights in assets have been transferred in such a manner as to give rise to capital gains. He further urges that in this case possession of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax Act, 1961. * Supreme Court order in respect of Item No. 9 39 Larsen & Toubro 16) In the instant case, an audit team of the Auditor General, audited assessment order dated 24.01.1996 and found that the dealer was allowed an exemption of Rs. 3,12,47,916/- being the amount for goods consumed by the appellant-Company during the course of execution of works contract. It is the claim of the appellant- Company that those goods were purchased on payment of tax but no declaration in Form IX-C along with other evidence was submitted. The same fact was brought to the notice of the assessing authority which in furtherance thereof issued a show cause notice to the appellant-Company. The production of Form IX-C was held to be mandatory and the claim of the appellant-Company was disallowed and an order of re-assessment dated 27.02.2006 was passed by the competent authority for an additional amount of tax of Rs. 35,72,475/- after following the due procedure of law. 19) In view of the above, it is relevant to quote Section 19 of the Bihar Finance Act, 1981 which is as under:- "19. Turnover of registered dealer escaping assessment - (1) If upon information which has come into his possessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized upon the terminology 'Information' which would include information from Audit Wing, the said terminology is not there under the Income Tax Act. * The Hon'ble Court has observed: We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute 'information' for the purposes of the State Act. 40 Distributors (India) 26. The reasons recorded by the A.O. for initiating the process of re-assessment state that on examination of the documents on record and 26 AS, it was noticed that the petitioner has received payments under Section 194 J also, but it has not shown the said receipts in his P&L account and has not given any explanation for the same. The petitioner has not disclosed the amount of reimbursement of expenses claimed by it and the actual amount received by it towards reimbursement. It has not submitted the details of expenses incurred by it for verification during the assessment proceedings. It did not produce any ledger, bills and vouchers of expenses incurred on behalf of the Principal Companies. As per 26 AS, the total receipts of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... close all the material facts, because of which income amounting to Rs. 1,07,24,386/- has escaped assessment. We are satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148. The order dated 23-03-2022 passed by the National Faceless Assessment Centre rejecting the petitioner's objections against issuance of the notice, does not suffer from any such illegality as to warrant interference by this Court in exercise of its Writ Jurisdiction, * Receipts were not reflected in P&L A/c. * Reimbursement details were not submitted by the assessee * Assessee had not produced any ledger, bills and vouchers of expenses incurred on behalf of the Principal Companies * This material which came to light upon investigation conducted subsequent to passing of the assessment order, would certainly amount to a fresh tangible material. * Thus the petitioner did not make a "full and true" disclosure of all the material facts which resulted in an income of Rs. 1,07,24,386/- having escaped assessment * Exercise of Writ Jurisdiction denied by the Hon'ble Court 18. We have heard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed a commercial complex thereon. During the financial year 2007-2008, i.e., assessment year 2008-2009 the commercial complex was completed, and assessee's share was handed over to it on 14.04.2007. The assessee got the cost of shops & offices valued from registered valuer who valued it at Rs. 18,49,76,342/- and the same was shown under the head Investment in the Balance Sheet. The Gain earned on revaluation has been shown under the head Capital Reserve in the Balance Sheet. The indexed gain arrived at the time of receipt of constructed complex was shown as Long Term Capital Gains. Subsequent sale of shops and gain earned on the same was shown as Short Term Capital Gains. 20. The return of income was selected for scrutiny assessment and query notice dated 23.09.2010 was issued to which the assessee filed replies from time to time vide letters dated 04.10.2010, 08.10.2010, 13.10.2010 & 18.11.2010. Copies of valuation reports and development agreement were also annexed along with the replies. Method of arriving at Long Term Capital Gains & Short Term Capital Gains was duly disclosed in the replies. The Assessing Officer after being satisfied & perusal of record passed assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment Agreement, all the expenses regarding approvals from competent authorities etc were to be borne by the developer from the time of signing of agreement upto handing over of assessee's portion of commercial complex. If the assessee company had sold the entire land of cinema hall as such, then the assessee company could be said to have earned income from capital gain. In the present case, it got the land use changed from 'cinema hall' to 'commercial' with a deliberate intent to enjoy the benefits of the said land through construction and subsequent sale of shops and showrooms thereon. Clause 2 of the Development Agreement dated 12 December, 2001 states as follows: 2. Whereas looking to the demand for showroom and offices in multistoried buildings situated at good location, Owner herein decided to develop a multistoried commercial complex on the said plot of land in accordance with the rules, regulation and building bye laws of the local authorities, and the State Government The above clause clearly shows that the intent of the assessee (i.e. the owner) was to develop its property into a commercial complex to harvest the demand for showrooms and offices In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id property is a commercial complex, profit arising out of sale of shops situated in the complex should have been declared as business income rather than Short Term Capital Gain. Hence, the business income that would arises from selling the shop will be Rs. 36,25,870/- not Rs. 10, 12.630/- as shown by the assessee, and this income would be treated as business income and not income from short term capital gain as claimed by the assessee. Hence, I have reason to believe that income of Rs. 16,48,06,855/- +Rs.36.25.870/- Rs. 16,84,32,725/- has escaped assessment. Thus It is a fit case for issue of notice u/s 148 of the Act." 24. Based on the reasons so recorded the ld. DR demonstrated that the ld. Assessing Officer has correctly entertained the view that the date of entering into the Development Agreement would be treated as an act of conversion of Capital Asset into Stock-in- Trade and that provisions of section 45(2) of the Act would be attracted. Thus, since there was escapement of income, proceedings under section 148 have rightly been initiated. He has further submitted that on perusal of the assessment order u/s. 143(3) it can be noticed that the ld. Assessing Officer has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated that even if the said allegation was recorded, then too, the Assessing Officer would have to demonstrate as to what was a failure on the part of the assessee. He further submitted that the reason that no such allegation was recorded by the Assessing Officer was that all material particulars and documents were indeed submitted by the assessee. He further submitted that it is settled law that the reasons are required to be read as they are recorded by the Assessing Officer and that no substitution or deletion is permissible thereto; no addition can be made to those reasons and no inference can be allowed to be drawn based on these reasons which is not recorded. He further highlighted that the ld. CIT(A) vide his letter dated 21.12.2017 called for remand report from the Assessing Officer to justify non-recording of any allegations against the assessee in the reasons, however, the ld. Assessing Officer vide its letter dated 22.12.2017 chose not to respond to the query raised and simply furnished the copy of reasons recorded. Ld. AR, based on that aspect of the matter submitted that the ld. CIT(A) correctly come to the conclusion that in absence of any allegation against the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the ld. DR and submitted that the same are inapplicable in the instant case. 26. When was a query paused to the parties that whether the assessee had in past ever shown the impugned asset as stock in trade? In response the ld. AR denied that it is since beginning capital assets of the assessee. Ld. DR did not controvert this fact. Secondly the assessee was questioned whether the demolition of Cinema Building was undertaken by the Developer or by the assessee. Ld. AR submitted that the same was done by the developer & not by the assessee. Ld. DR did not controvert this fact also but stated that demolition of cinema hall by the assessee or by the developer is not material, it is the intention of the assessee which is determinative factor to test whether or not section 45(2) is applicable or not. Ld. DR in the rejoinder further stated that assessee was required to pass necessary entries in the year 2001 itself and reflect the same as stock-in-trade, i.e., when the development agreement was entered into by it and non- passing of entries in books of account would not be determinative test to find out as to whether the transaction is in the nature of business income or that of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment, the limitation for reassessment proceedings would be restricted to 4 years and benefit of 6 years which is ordinarily available to initiate reassessment proceedings as per section 149(1)(b) would not be available to the ld. Assessing Officer, (v) non-allegation by the Assessing Officer of any failure on the part of assessee to disclose fully & truly all material facts is a 'jurisdictional fact' and in absence of same, entire reassessment proceeding would be vitiated, (vi) reasons are required to be read as they are recorded by the Assessing Officer and that no substitution or deletion is permissible thereto; no addition can be made to those reasons and no inference can be allowed to be drawn based on these reasons which is not recorded, (vii) Information / Opinion received from the Audit Wing per se does not constitute tangible material more particularly when it is in the nature of reappreciation of material particulars already on record, (viii) Finance Act, 2021 by inserting Explanation 1(ii) to section 148 for the first time gives statutory recognition to the information received from Audit Wing as valid source to initiate reassessment proceedings. The said inser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cisions including that of our jurisdictional high court in the case of CIT vs. Hindustan Zinc Ltd. [2016] 70 taxmann.com 262 (Rajasthan), it has been held by our Hon'ble jurisdictional High Court of Rajasthan that: 12. In the backdrop of the settled position of law noticed hereinabove adverting to the facts of the present case, it is to be noticed that the assessee had made true and full disclosure of all relevant facts relating to the claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA. A separate audit report in the prescribed form 10CCB in support of the claim for deduction under Section 80IA/80IB was also duly submitted. The assessee had also submitted reply pursuant to all queries made by AO during the assessment proceedings under Section 143(3) of the Act. In this view of the matter, the contention sought to be raised by the Revenue about non-disclosure on the basis of the failure on the part of the assessee in mentioned bifurcated amount of additional depreciation allowable in the depreciation chart is absolutely baseless. It is to be noticed that all that has been said by the AO is that after scrutiny assessment, it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income but as per accounting standards and provisions of Income Tax Act, the act of converting capital asset into stock in trade clearly instruct to show business income and LTCG in the Return of Income which was actually not reflected by assessee at all." As the explanation of the ld. AO was not sufficient ld. CIT(A) again given him an opportunity vide letter dated 21.12.2017 to submit its comments on the contention of the assessee wherein he has just relied upon the reasons recorded for opening the case but chose not to comment on the contention of the assessee that there in fact any failure on its part to disclose fully and truly all material facts necessary for its assessment for the year under consideration. He noted and we also perused that aspect of the matter in the reasons so recorded there is not a single averment about the failure on the part of the assessee to disclose all the material facts at the time of original assessment proceedings. We get support for this aspect of the matter from the decision of our jurisdictional high court in the case of CIT vs. Manish Ajmera [2011] 13 taxmann.com 132 (Rajasthan), wherein our Hon'ble jurisdictional High Court held that: 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision relied upon by the ld. DR were distinguished by ld. AR and has filed his comments on each of the decision. We have also gone through the said comments and have also gone through the judgments and orders and found that they are distinguishable on facts and in law and they do not help the cause of the revenue in the instant case supporting the re-opening of the case of the assessee. Accordingly the Ground No. 1, 2, 4, 5, & 6 raised by the Revenue is devoid of any merits and we do not see any infirmity in the detailed finding of the ld. CIT(A) in quashing the reassessment proceedings on the ground of change of opinion as well as on ground of limitation as per 1st proviso to section 147 in absence of any allegation against the assessee of failure at its end and according the reopening in the case was not in accordance with law. Accordingly, the appeal filed by revenue has no merits and deserves to be dismissed vide ground no. 1, 2, 4, 5, & 6. 31. Ground no. 3 and 7 [ additional ground] raised by the revenue relates to the merits of the issue. On these grounds Ld. AR stated that ld. CIT(A) has apart from quashing the reassessment proceedings has further held that invocati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stinguish between shares held as stock-in-trade and shares held as investments. This distinction is crucial because it affects how the income from the sale of these shares is taxed. Shares held as stock-in-trade are considered business income, while shares held as investments are treated as capital gain. The Calcutta high court in the case of Gyan Traders Ltd. Vs. CIT [ 143 taxmann.com 42 (Calcutta) ] while referring to the circular held that ; 9. As pointed out above, the second principle is a guide for determining the nature of transactions whether there were substantial transactions, the magnitude, maintenance of books of account and ascertaining the ratio between purchases and sales. With regard to the third principle, it was pointed out that where the object of investment in shares of the companies is to derive income by way of dividend etc. the transactions of purchases and sale of shares would yield capital gains and not business profits. The above circular was taken note of in Avinash Jain case (supra) and it was held that the intent and purport of the circular is to demonstrate that a tax payer could have two portfolios, namely an investment portfolio and a trading portf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure, approval of maps, etc., was of the Developer and the assessee had simply handed over the Land owned by it for the purpose of construction of commercial complex. There is no positive act which indicates that the assessee has treated capital asset as stock-in-trade. As discussed herein above if that version of the revenue is accepted then no one would be in a position to enter into Development Agreement, since it would amount to carrying on the business, which otherwise it is not permitted to do so to the even based on object also in the case of the assessee. The arguments advanced by ld. DR purely narrow down and without seeing the other facts as discussed as to decide the issue in a holistic manner. On the issue of merits of the case also, we intend to avoid repetition and are not referring to all the judgments relied upon by the rival parties as the same are reproduced hereinabove. In short while deciding the merits of the issue, ld. CIT(A) perused the object clause, various clause of the development agreement, consistently followed the accounting entries to demonstrate that the asset was considered as capital assets. He also touched upon the aspect of the subsequent action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of LTCG without deciding it on merit?" 36. Ground no. (i) raised by the Revenue is similar as to the Ground No. (iii) as raised by the Revenue in A.Y. 2008-2009. In light of our detailed findings given in A.Y. 2008-2009 in Ground No. (iii) we do not see any infirmity in the findings of the ld. CIT(A) whereby he had held that provisions of section 45(2) are not applicable, and which have been upheld by us in A. Y. 2008-09 and that finding shall apply mutatis mutandis and accordingly the Ground No. (i) of the Revenue stands dismissed. 37. Ground No. (ii) raised by the Revenue is consequential to Ground No. (i). Since, we have dismissed the Ground No. (i) in light of our detailed findings given in A.Y. 2008-2009, we do not see any infirmity in the finding of the ld. CIT(A) and the same is upheld and accordingly the Ground No. (ii) of the Revenue is also dismissed. 38. Now, coming to the Cross Objection No. 1 has as not been pressed by the learned AR and the same is thus treated as dismissed. The assessee also raised the Additional Ground No. (2) of the Cross Objection being purely legal in nature has been admitted by us. Though we have already dismissed the appeal of the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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