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Devendra Somabhai Naik Versus Asst. Commissioner of Income tax

2015 (5) TMI 88 - GUJARAT HIGH COURT

Reopening of assessment - long term capital gain was to be added to the income of the said assessee firm or not? - reopening of the assessment for AY 2005-06 seems to be on the basis of the directions issued by the learned CIT (Appeals) in the case of one M/s Devrekha Engineers [another assessee] - Held that:- The basis on which the reassessment proceedings were sought to be initiated to reopen the assessment for AY 2005-06 itself has been set aside by the learned Tribunal and further confirmed .....

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that it can be argued that to give effect to direction issued by the learned CIT (Appeals) in the order dated 25.6.2013 in the case of M/s Devrekha Engineers considering section 150 of the Act, assessment/reassessment might be permissible. However, when the direction of which the effect was to be given while initiating assessment/ reassessment proceedings for AY 2005-06 itself has been set aside, there was no question of giving any effect to the said direction which has been set aside by the lea .....

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arned advocate Shri Sudhir Mehta waives service of notice of rule on behalf of the respondent. 2. With the consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing today. 3. By way of present petition under Article 226 of the Constitution of India, the petitioner has prayed for an appropriate writ, direction and order to quash and set aside the impugned notice dated 30.7.2013 issued under section 148 of the Income Tax Act (for short "the Ac .....

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It appears that in the case of one M/s Devrekha Engineers Private Limited, assessment for AY 2005-06 was sought to be reopened beyond the period of four years and the question arose whether the amount of ₹ 1,46,00,000/- alleged to have been received by the said assessee as long term capital gain was to be added to the income of the said assessee firm or not? The Assessing Officer passed an order against the assessee and in favour of the revenue. However, on an appeal before the learned CI .....

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ls) in the case of another assessee M/s Devrekha Engineers and the directions issued in the order dated 25.6.2013 in Appeal No.CAS-l/282/11-12, by which the learned CIT (Appeals) observed and directed that notice under section 148 of the Act for AY 2005-06 has to be issued in the case of the present assessee - Devendra S. Naik, the Assessing Officer extended the period of limitation as provided under section 150 of the Act and has issued the impugned notice to reopen the reassessment for AY 2006 .....

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nder Article 226 of the Constitution of India challenging the impugned reassessment proceedings. 6. At this stage, it is required to be noted that in the meantime, an order was passed by the learned CIT (Appeals) dated 25.6.2013 in which the learned CIT (Appeals) issued direction to reopen the assessment for AY 2005-06 in the case of the present assessee and even on merit also, the said assessee M/s Devrekha Engineers carried the matter before the learned Income Tax Appellate Tribunal (for short .....

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ct in the case of the present assessee for AY 2005- 06 by invoking the provisions of section 150 of the Act. 7. It is reported and it is not in dispute that the order passed by the learned Tribunal dated 27.3.2014 has been confirmed by the Division Bench of this Court vide order passed in Tax Appeal No.1059 of 2014. 8. Shri B.S. Soparkar, learned advocate appearing on behalf of the petitioner has vehemently submitted that in the present case, admittedly, the assessment for AY 2005-06 has been re .....

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n the direction issued by the learned CIT (Appeals) to reopen the assessment for AY 2005-06 in the case of the present assessee itself has been set aside by the learned Tribunal and the same has been confirmed by the Division Bench of this Court, there was no question of invoking section 150 of the Act. It is submitted that section 150 of the Act can be invoked to give effect to the order passed by the appellate authority and/or any other authority and on the eventuality, as mentioned in section .....

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reopening the assessment proceedings on the basis of the direction issued by the learned CIT (Appeals) issued in the order dated 25.6.2013 (subject to his submission that the effect of any order must be in the case of the very assessee). However, it is submitted that in the present case, the direction/order of which the effect is given in exercise of powers under section 150 of the Act by reopening the assessment for AY 2005-06 itself has been set aside by the learned Tribunal and confirmed by t .....

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the Assessing Officer. He has tried to submit on merits, however, as this Court is required to consider whether the reopening proceedings, which are admittedly beyond the period of six years issued by invoking section 150 of the Act, are justified or not. Unless and until it is found that assumption of jurisdiction for reopening is justified and/or permissible, this Court is not required to go into the merit of the claim/case at all. He has submitted that at the relevant time, when the Assessin .....

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he learned CIT (Appeals) in the case of M/s Devrekha Engineers, the income of ₹ 1,46,00,000/- is to be taxed in the ends of the present assessee in the nature of long term capital gain and therefore, for the reasons recorded, the Assessing Officer is justified in issuing the impugned notice under section 148 of the Act and is justified in reopening the assessment for AY 2005-06. 10. It is submitted that in the present case, section 150 of the Act has rightly been invoked and that too in vi .....

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sons recorded for reopening of the assessment for AY 2005-06 has been communicated to the petitioner - assessee vide communication dated 22.8.2013, which reads as under: "Sub: Reasons recorded for re-opening the assessment for A.Y.2005-06 Reg: Your letter dt.17.08.2013. - As requested, the reasons recorded for reopening the assessment is communicated as under: "In the case of M/s. Devrekha Engineers Pvt; Ltd., assessment u/s.143(3) r.w.s 147 of the I.T.Act was completed on 29.12.2011 a .....

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mit any proof of payment to GIDC or any document copy in support of its claim regarding cost of purchase of land and thus the indexed cost of acquisition of ₹ 59,20,188/- cannot be permissible. The property rights in question were vested in the sister concern and therefore, LTCG/STCG is to be taxable only in the hands of sister concern. The Ld.CIT(A) has given directions u/s.150(1) to issue notice. u/s.148 of the I.T.Act in the case of Shri Devendra S. Naik for A.Y.2005-06 . iii. M/s. D.S. .....

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.Y.2005-06 after its conversion into proprietorship concern. iv. The agreement between M/s. DV.S. Synthetics or M/s. R.D. Dyg & Ptg. Mills Pvt ltd is an unregistered notorized agreement and shows M/s. D.S. Synthetics Prop. Shri. Devendra S. Naik as transferor and owner/ lessor. This unregistered agreement was not reported to GIDC apparently to evade higher payment of unearned incremental value in land. v. The issue of cost of acquisition is to be examined and deemed dividend as some payments .....

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; 1,46,00,000/- has this is a fit case for issue of notice u/s. 148 of the LT. Act." 13. Thus, from the reasons recorded, it appears that reopening of the assessment for AY 2005-06 seems to be on the basis of the directions issued by the learned CIT (Appeals) in the order dated 25.6.2013 in the case of one M/s Devrekha Engineers. It is to be noted that while considering the appeal in the case of one M/s Devrekha Engineers, the learned CIT (Appeals) observed and directed as under: "As d .....

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for taking necessary action. As per case records, the PAN of Devendra S Naik is AAIPN4664K. The erstwhile firm M/s D.S. Synthetics was converted into Proprietorship concern of Devendra S Naik during A Y 2005- 06 or earlier as application before GlDC was filed vide letter dated 16.10.2004 requesting for change in Constitution of M/s D.S. Synthetics from partner - ship to Proprietorship concerned. Even earlier the change in the constitution of the firm M/s D S Synthetics had taken place in FY 199 .....

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n Asstt Year 2005-06. It needs to mentioned that as per GlDC records total payment is of ₹ 39,02,001/- only (para 7.8 supra):" 14. Further, it is required to be noted and it is not in dispute that the aforesaid order passed by the learned CIT (Appeals) in the case of M/s Devrekha Engineers came to be challenged by the said assessee before the learned Tribunal by way of ITA No.2090/Ahd/2013 and not only the reassessment in the case of the aforesaid assessee came to be held to be beyond .....

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ion was not a property of the assessee, therefore, the Long Term Capital Gain was not to be assessed in the hands of the assessee but to be assessed in the hands of M/s D.S. Synthetics. It appears that the learned CIT(A) wanted to step into shoes of AO while recording reasons for issuance of notice u/s.l48 of IT Act. The same is not permissible in the eyes of law. The reasons recorded for issuance of notice u/s.148 was not that the Long Term Capital Gain did not arise to the assessee, but to Ms. .....

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s no occasion on the part of the learned CIT(A) to twist the reasons of reopening and thereupon upheld the action u/s. 148 of- IT Act. We are of conscientious view that learned CIT (A) went wrong in upholding the action of the AO; hence, his findings is hereby reversed." 15. The aforesaid decision of the learned Tribunal has been confirmed by the Division Bench of this Court in the apeal preferred by the revenue vide order dated 1.12.2014 in Tax Appeal No.1059 of 2014. Under the circumstanc .....

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