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Mavany Brothers Versus Commissioner of Income-tax, Panjim

2015 (10) TMI 1093 - BOMBAY HIGH COURT

Reopening of assessment - determination of the capital gains in place of the loss - Held that:- The revised return of income filed on 17/11/2000 wherein the appellant had specifically mentioned that the profit and loss account and the balance sheet was enclosed to the original return of income filed on 22/09/1997. The Assessing Officer had on 20/11/2000 called upon the appellant to produce the balance sheet and profit and loss account for the assessment year 1996-97 as the same were not attached .....

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he authorities under the Act, including the Tribunal. The impugned order of the Tribunal while rejecting the appellant's plea of the notice being without jurisdiction has not dealt with the appellant's above contention but merely upheld the order of the CIT(A).

In view of the above the impugned order of the Tribunal holding that the notice dated 13/11/2000 was issued under Section 148 of the Act was within jurisdiction has to be set aside. However, the same is being restored to the T .....

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s such could have relied only upon its earlier return of income. - TAX APPEAL NO. 8 OF 2007 - Dated:- 17-4-2015 - F.M. REIS AND M.S.SANKLECHA, JJ. For The Appellant : D.E. Robinson, Adv. For The Respondent : Ms.Asha Desai, Adv. JUDGMENT M.S. Sanklecha, J. - This appeal under Section 260A of the Income Tax Act, 1961 (the Act) impugns the order dated 15/01/2007 passed by the Income Tax Appellate Tribunal (Tribunal). This appeal relates to assessment year 1996-97. 2. This appeal was admitted on 26/ .....

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ble to be assessed? (3) Whether alternatively the payment of ₹ 66 lakhs should be deducted from out of the consideration for the transfer received by the appellant' or should go to enhance the cost of acquisition of the land and only to view order, not for print the cinema building and accordingly the capital gains if any should be reduced by the aforesaid sum of ₹ 66 lakhs? (4) Whether on the facts and in the circumstances of the case, the assessment of the appellant for the AY .....

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king to reopen the assessment for assessment year 1996-97. In response to the notice dated 13/11/2000 the appellant on 17/11/2000 filed a fresh return of income and indicated therein that the other documents namely balance sheet and profit and loss account have already been filed with the original return of income and consequently the same is not being filed. On filing the return of income the appellant also sought that the reasons in support of the notice dated 13/11/2000 be communicated. (c) O .....

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income did contain the documents now sought by the Revenue namely balance sheet and profit and loss account. It was also emphasized that there is no difference between the original return of income filed in 1997 and the present return of income filed on 17/11/2000. Thus, strictly speaking there was no reason for the appellant to file any fresh return of income. 4. The reasons recorded in support of the reopening notice dated 13/11/2000 as communicated to the appellant read as under : 'On ref .....

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ir successors inherited the disputes. When the decision was made to sell the theatre along with the land appaurtenant thereto to M/s. Sapna Real Estate, these successors formed a Partnership, by name and style of "M/s. Mavani Brothers" on 8.8.95. This partnership firm owned the theatre Cine El-dorado along with the land appaurtenant thereto. An agreement for 'Restructuring, Reconstruction and/or Remodelling and/or Development of the premises of the threatre was entered into on 8.8. .....

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land at which it is situated. The contract for the so called remodelling provided for the assessee to give M/s. Sapna Real Estate uninterrupted access to the theatre building and the land. After taking possession of the threatre along with the land, the builder demolished the theatre and constructed another building, which is being sold as a commercial space. In return for this, the consideration has been fixed and paid to the firm (in the form of payments to the partners). M/s. Sapna Real Esta .....

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that transfer as per sec. 2(47) of the I.T. Act is complete and the assessee is liable for capital gains tax. Inspite of this, it is seen that the firm has not declared the sale of theatre and the land. The so called contract in remodelling etc., is nothing but the sale agreement and therefore capital gains on this transfer should have been declared, which has not been done. The transfer as defined in Section 2(47) has taken place when the contract dtd. 08.08.95 was performed i.e. when possessio .....

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he Act and therefore no occasion for capital gains arose. Without prejudice it was also contended that the payment of ₹ 66.00 lakhs which was paid to some of its partners was paid in their individual capacity and the same cannot be considered as a consideration received by the appellant - firm. So also, if the 35% amount retained by one of the partners of the appellant - firm in the building to be constructed is excluded while computing the respondents' case considering the indexed val .....

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the appellant. Besides, the Assessing Officer had held that transfer had taken place by virtue of the agreement dated 8/08/1995 between M/s. Sapna Real Estate and the appellant for reconstructing the theater premises and the possession of the property was also handed over to M/s. Sapna Real Estate. In view of the above, it was held that the transfer in terms of Section 2(47) has taken place and there has been profit on account of the aforesaid transaction of ₹ 72.28 lakhs being the capita .....

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be no occasion for the Assessing Officer to have any reason to believe that income chargeable to tax has escaped assessment. In support of this the appellant placed reliance upon an inspection of the records of the Revenue with regard to the appellant on 8/09/2004. In the absence of the original return there was no basis for issuing the impugned notice. Besides, the appellant also raised various contentions with regard to the issue of no capital gains being attracted in the facts of the present .....

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long with handing over of the possession of the property did amount to part performance of the agreement and was therefore a transfer in terms of Section 2(47) of the Act. Besides the CIT(A) also held that the amount of ₹ 66.00 lakhs which was paid to some of the parties was not in their individual capacity but as partners of the appellant - firm. The same is evidenced by the fact that the books of account of the appellant - firm showed the receipt of ₹ 66.00 lakhs in its account. Ac .....

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this issue will the other issues arise. 11. Mr. Robinson, learned Counsel for the appellant in support of the appeal submits as under : (A) So far as substantial question (4) is concerned the reopening of the notice dated 13/11/2000 is completely without jurisdiction as on that day the Assessing Officer did not have on record the original return of income filed by the appellant. It is submitted that only on examination of the same could the Assessing Officer have a reason to believe that income .....

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indicated that profit and loss account and balance sheet were part of the original return and therefore were not being separately attached. The return as filed on 17/11/2000 was identical to one filed on 22/09/1997. Inspite of the same on 20/11/2000 the Assessing Officer called for the profit and loss account and balance sheet on the ground that the same is not attached to the return of the income filed on 17/11/2000. It is submitted that if the return of income was available with the Assessing .....

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sue notice under Section 148 of the Act before the first appellate authority. This is particularly so as the appellant had submitted to the jurisdiction of the Assessing Officer and had made no grievance with regard to lack of jurisdiction of the Assessing Officer. Even otherwise it is submitted the fact that income chargeable to tax has escaped assessment need not necessarily flow out to examination of return of income and the same could be from any other source. Thus, the requirement of having .....

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13. We have considered the rival contentions. The jurisdiction under Section 147/148 of the Act is an extra ordinary jurisdiction and can only be exercised when condition precedent as provided in Sections 147/148 of the Act are satisfied. It is the appellant's case that the aforesaid conditions are not satisfied inasmuch as in the absence of the Assessing Officer having the original return of income available it would not be possible for him to have a reasonable belief that income chargeable .....

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ct this Court in CIT (Central) v. ITSC [2014] 365 ITR 68 has held that mere participation by a party in proceedings without jurisdiction will not vest/confer jurisdiction on the authority. Reason to believe that income chargeable to tax has escaped assessment is a jurisdictional fact and only on its satisfaction does the Assessing Officer acquire jurisdiction to issue notice. Thus this lack of satisfaction of jurisdictional fact can never confer jurisdiction and an objection to it can be raised .....

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on can be raised at any time even in appeal or execution. Reliance in this regard could usefully be made to Indian Bank v. Manilal Govindji Khona [2015] 3 SCC 712. Paras 22 of the said judgment read as under : "22. In Sushil Kumar Mehta case [Sushil Kumar Mehta v. Gobind Ram Bohra, [1990] 1 SCC 193] this Court has elaborately considered the relevant factual and legal aspect of the case and has laid down the law at para 10, after referring to its earlier decision of a four-Judge Bench of thi .....

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or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the court to pass any decree, and such a defect cannot be cured even by consent of parties. If the question now under consideration fell to be determined only on the application of general principles governing the matter, there can be no doubt that the .....

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this reason to believe could also arise on information received from any other source. This however, has not been the contention of the respondent - Revenue before the authorities under the Act. They have proceeded on the basis that the return of income filed in 1997 was available with the Assessing Officer at the time when the notice dated 13/11/2000 was issued under Section 148 of the Act to the appellant. Nothing in support of the submission now being made was placed by the Revenue before the .....

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erein the appellant had specifically mentioned that the profit and loss account and the balance sheet was enclosed to the original return of income filed on 22/09/1997. The Assessing Officer had on 20/11/2000 called upon the appellant to produce the balance sheet and profit and loss account for the assessment year 1996-97 as the same were not attached to the return of income filed on 17/11/2000. In case the Revenue had in its possession the 1997 Return of Income then it would have had relied upo .....

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ng without jurisdiction has not dealt with the appellant's above contention but merely upheld the order of the CIT(A). In view of the above the impugned order of the Tribunal holding that the notice dated 13/11/2000 was issued under Section 148 of the Act was within jurisdiction has to be set aside. However, the same is being restored to the Tribunal to consider afresh the contentions of the appellant as well as the Revenue with regard to the existence of the original return of income filed .....

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of reopening notice dated 13/11/2000 and restore the issue to Tribunal for fresh consideration. The appellant and the Revenue are granted liberty to lead such other evidence before the Tribunal as may be necessary to establish the existence/non-existence of the return of income filed originally on 22/09/1997. The Tribunal is also directed to examine all other contentions raised by the respondent - Revenue or appellant - Assessee on the issue of reopening notice. The Tribunal would also examine .....

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