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2015 (12) TMI 198 - GUJARAT HIGH COURT

2015 (12) TMI 198 - GUJARAT HIGH COURT - TMI - Reopening of assessment - disallowance of a portion of the claim under section 80IB(10) - Held that:- While considering the claim for deduction under section 80IB(10) of the Act, the Assessing Officer has called for details of the land in question which was brought as capital of Shri Babubhai Desai, the amount of land brought as capital and the value considered, the detailed working of profit/gain offered for income-tax when land was brought as capi .....

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above years which clearly showed that capital gain on such lands amounting to ₹ 1,08,60,381/- was offered for tax in assessment year 2007-08. Thus, the Assessing Officer, after calling for the above material, did not deem it fit to assess capital gain under section 45(2) of the Act nor has the aspect of capital gains been discussed in the assessment order. Therefore, it is evident that while examining the claim under section 80IB(10) of the Act, the Assessing Officer has also called for m .....

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- MS. HARSHA DEVANI AND MR. A.G.URAIZEE, JJ. FOR THE PETITIONER : MR RK PATEL, ADVOCATE FOR THE RESPONDENT : MR NITIN K MEHTA, SR. STANDING COUNSEL ORAL JUDGMENT (PER : HONOURABLE MS. JUSTICE HARSHA DEVANI) 1. This petition under Articles 226 and 227 of the Constitution of India is directed against the notice dated 31st March, 2014 issued by the first respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ), whereby the assessment of the petitioner for the .....

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ction 80IB(10) of the Act. Subsequently, by the impugned notice, the assessment is sought to be reopened, which has given rise to the present petition. 3. Mr. R.K. Patel, learned advocate for the petitioner invited the attention of the court to the reasons recorded for reopening the assessment to submit that the same clearly reveal that the Assessing Officer seeks to reopen the assessment on verification of the case record and that there is no new tangible material for the purpose of reopening t .....

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er section 80IB(10) of the Act, the petitioner had preferred appeal before the Commissioner of Income-tax (Appeals) who had decided the issue against the petitioner by an order dated 20th March, 2014 and the petitioner s appeal against such order is pending before the Tribunal. In the meanwhile, the present notice has been issued under section 143(3) of the Act. Strong reliance was placed upon the decision of this court in the case of Cliantha Research Ltd. v. Deputy Commissioner of Income-Tax, .....

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query as regards the allowability of the claim on the premise that the petitioner was doing scientific research for and on behalf of the companies. The court, however, was of the opinion that merely for the failure of the Assessing Officer to raise such a question, would not authorise him to reopen the assessment even within a period of four years from the end of the relevant assessment year. Any such attempt on his part would be based on mere change of opinion. To reiterate, when a claim was pr .....

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ldcon Ltd. v. Income-tax Officer, (2012) 21 taxmann.com 83 (Gujarat), wherein the court had noted that on the same set of facts and material available on record, the successor Assessing Officer had come to form a different opinion and recorded reasons thereupon without establishing any lapse on the part of the petitioner or any fresh information. The court reiterated the principles enunciated by the Supreme Court in the case of CIT v. Kelvinator of India Ltd., (2010) 320 ITR 561, and held that t .....

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im for deduction under section 80IB(10) of the Act after making detailed enquiries, he could not initiate reassessment proceedings on the basis of the same material taking a view that the said claim was wrongly allowed. 3.2 Reliance was placed upon an unreported decision of this court in the case of Sai Consulting Engineers Pvt. Ltd. v. Deputy Commissioner of Income-Tax, Special Civil Application No.1118/2015 rendered on 29th April, 2015 wherein the court had followed the earlier decision of thi .....

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im when he undertook the original assessment. Reliance was also placed upon the decision of this court in the case of Heavy Metal & Tubes Ltd. v. Deputy Commissioner of Income-tax, Ahmedabad, Circle - 4, (2014) 364 ITR 609 (Gujarat), for the proposition that reopening of assessment made on the very same claim on the basis of the same material, is a mere change of opinion and impermissible. Reliance was also placed upon the decision of this court in the case of Commissioner of Income-tax v. F .....

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ant Commissioner of Income-tax, (2012) 20 taxmann.com 750 (Gujarat) was cited for a similar proposition of law. Reliance was also placed upon an unreported decision of this court in the case of Lanxess ABS Limited v. Deputy Commissioner of Income-Tax rendered on 11th April, 2012 in Special Civil Application No.17530/2011. 3.3 The decision of this court in the case of Vodafone Essar Gujarat Ltd. v. Assistant Commissioner of Incometax, (2012) 344 ITR 447 Gujarat, was cited wherein the original ord .....

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the said order. It could not give rise to reopening of the assessment as there was no failure or omission on the part of the petitioner nor could it be said that there is a change of opinion. Reliance was also placed upon a decision of this court in the case of National Dairy Development Board v. Deputy Commissioner of Income-Tax, (2013) 353 ITR 538 (Guj.), for the proposition that by virtue of the second proviso to section 147 of the Act, income involving matters which are the subject matters .....

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f United Phosphorus Ltd. v. Additional Commissioner of Income-Tax rendered on 8th March, 2011 in Special Civil Application No.3352/2001 for a similar proposition of law. 3.4 Mr. Patel submitted that the claim under section 80IB(10) having been considered by the Assessing Officer and such claim to the extent the same was partly disallowed having been subject matter of appeal before the Commissioner (Appeals), stood merged with the order of the Commissioner (Appeals), under the circumstances, inso .....

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e respondent invited the attention of the court to the reasons recorded for reopening the assessment to submit that there was no change of opinion in the present case and that the issue had not been considered from the angle of section 45(2) of the Act. It was pointed out that one Babubhai J. Desai, a partner of the firm had transferred the land in question to his capital account in the assessee firm s books on 7th December, 2006. The assessee firm had claimed expenditure of ₹ 1,91,84,250/ .....

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outcome of the proceedings. The only question is whether there is any change of opinion in the facts of the present case. It was submitted that the facts as emerging from the record clearly show that the entire aspect of capital gains was neither raised nor considered at the relevant time. Insofar as the contention that the claim under section 80IB of the Act having been examined by the Assessing Officer, the order of the Assessing Officer having merged with the Commissioner (Appeals), it was su .....

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d true disclosure is immaterial. 4.1 It was pointed out that the land in question had been transferred in the petitioner s books of account on 7th December, 2006 and the cost of land was shown at ₹ 1,91,84,250/-. However, the same was converted into stockin- trade in the financial year 2008-09 relating to assessment year 2009-2010. Under the circumstances, the difference between the cost of investment and fair market value on the date of conversion was the capital gain accrued to the petit .....

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e receipt was not part of the queries raised by the Assessing Officer and, therefore, the angle of taxability of such a receipt being a receipt of revenue in nature, cannot be stated to be a part of the query raised by the Assessing Officer. The court observed that if the inquiry of the Assessing Officer was not with respect to the question of taxability of such a receipt, his action of not taxing such amount without assigning any reasons, cannot be seen as an act on his part of having formed an .....

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ation to the issue in question. It was an undisputed position that there was no reference to the claim of depreciation in the assessment order and the only issue discussed therein pertained to disallowance under section 14A of the Act. The court held that insofar as the assessment order was concerned, it did not reflect any application of mind by the Assessing Officer to the claim of depreciation on coal fire boiler building while framing the assessment. The court, accordingly, held that the mat .....

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sment and not whether the omission/failure and the escapement of income is established. Since the belief is that of the Income-Tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge. Reliance was also placed upon the decision of this court in the case of Gruh Finance Limited v. Joint Commissioner of Income Tax (Assessment), (2000) 243 ITR 482, for the proposition that when no conscious consideration of the material was made, it would not create an embargo or .....

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ginal assessment has not applied his mind to the issue in question. It was, accordingly, urged that the petition be dismissed and the respondent be permitted to go ahead with the reassessment. 5. By the impugned notice dated 31st March, 2014, the respondent - Income Tax Officer seeks to reopen the assessment for the assessment year 2009-2010. Since the reopening is within a period of four years, the question of there being any failure on the part of the petitioner to disclose fully and truly all .....

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her details for assessment year 2009-2010, whereby he had inter alia called for further details regarding the supplementary partnership deed dated 1st September, 2007 whereby Shri Babubhai Desai had brought land as his capital. Various queries have been put with regard to the land brought as capital with supporting evidence and detailed working of profit/gain offered for income-tax when the land was brought as capital as also the income computation of Babubhai Desai for financial year 2006-07 an .....

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ing 46957 square metres, however, he had got final plot admeasuring 37763 square metres out of which he brought 30856.1 square metres of land as stock-in-trade. The balance land admeasuring 6906.9 square metres was retained by him. The price of the land is shown to be ₹ 1,91,84,250/- and it is stated that the same is entered in the books. 6. At this stage, it would be germane to refer to the reasons recorded by the Assessing Officer for reopening the assessment:- In this case, on verificat .....

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318, 327/1, 327/2 and sub plot No.3 to his capital account in the assessee firm s books on 07/12/2006. While transferring his land at Tragad, Shir Babubhai J Desai has taken the value of land at ₹ 1,91,84,250/- against the actual value of land at ₹ 2,34,78,500/-. The said land becomes the capital of the firm from the date of transfer i.e. 07/12/2006. In view of this, the claim of the firm that it has made an expenditure of ₹ 1,91,84,250/- towards purchase of land at Tragad und .....

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the assessee firm. The assessee Firm has developed the land under the project named Anand Vihar. The said land is transferred by the partner to the firm on 7/12/2006 and the firm has sold the same after developing, to different purchasers, in the previous year relevant to A.Y. 2009-10, the firm has sold this land to each Unit holder with super structure thereon and the profit arising out of such sale is considered by the Firm as business income and has claimed u/s. 80IB(10) of the I.T. Act, as f .....

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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. The assessee should have paid short capital gain on the capital asset which is transferred as stock in trade and the profit arising out of this should have been charged to tax under the head capital gains , on the date of such transfer. The assessee has failed to do so. 7. In connection .....

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ject, survey numbers, ownership for capital gains, taxation, etc. for eligibility of deduction under section 80IB(10) of the Act. Therefore, the reopening was based upon a mere change of opinion. 8. A perusal of the order disposing the objections reveals that the Assessing Officer has merely referred to various decisions without adverting to the facts of the case and has not discussed as to why the objections raised by the petitioner are not acceptable to him. In the entire order, there is no re .....

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same by a speaking order. A speaking order would mean an order dealing with objections raised by the assessee. In the present case, the Assessing Officer has clearly failed to deal with the objections raised by the petitioner as contemplated in the above decision. 9. Be that as it may, a perusal of the material on record as discussed hereinabove shows that the Assessing Officer, at the time of scrutiny assessment, verified the material on record and called for the explanation of the petitioner o .....

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ccrued to the petitioner being the difference between the cost of investment and the fair market value on the date of such conversion. 10. In this regard, it may be germane to refer to the decision of this court in the case of Cliantha Research Limited v. Deputy Commissioner of Income-tax, (supra) wherein the court has held thus:- 18. In addition to such queries with respect to the entire claim, he also raised pointed queries with respect to sample storage income and miscellaneous income for whi .....

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research for and on behalf of the companies. However, merely for the failure of the Assessing Officer to raise such a question, in our opinion, would not authorize him to reopen the assessment even within the period of 4 years from the end of the relevant assessment year. Any such attempt on his part would be based on mere change of opinion. To reiterate when a claim was processed at length and after calling for detailed explanation from the assessee, the same was accepted, merely because a cert .....

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, it is evident that all the material was there before the Assessing Officer, who after duly considering the same did not deem it fit to assess capital gain under section 45(2) of the Act. Under the circumstances, what the Assessing Officer now seeks to do is to examine the same material from a different angle. As held by this court in Cliantha Research Limited (supra), mere failure on the part of the Assessing Officer to raise a question would not authorise him to reopen the assessment even wit .....

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(P) Limited vs. Assistant Commissioner of Income-Tax (supra) on which reliance has been placed by the learned counsel for the respondent is concerned, in the facts of the said case, there was nothing to show that the Assessing Officer had examined the taxability of the entrance fees received from the members. The court, accordingly, held that the question of treating such entrance fees as either capital receipt or revenue receipt was not part of such a query and, therefore, angle of taxability .....

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ty of deduction under section 80IB(10) has been duly examined by the Assessing Officer at the time of framing the original assessment. While considering the claim for deduction under section 80IB(10) of the Act, the Assessing Officer has called for details of the land in question which was brought as capital of Shri Babubhai Desai, the amount of land brought as capital and the value considered, the detailed working of profit/gain offered for income-tax when land was brought as capital asset, as .....

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