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2016 (5) TMI 475 - CALCUTTA HIGH COURT

2016 (5) TMI 475 - CALCUTTA HIGH COURT - [2016] 384 ITR 477 - Reopening of assessment - sale of land and building - Held that:- It is evident that the petitioners had asserted that they had sold their ownership rights in the New Delhi property, which was accepted by the relevant assessing officer and certain benefits were permitted to the petitioners on such basis. The deed of sale was available with the department and it was evident therefrom that the ownership rights were transferred by the pe .....

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of such opinion. The entirety of the valuation report was before the department in course of the previous reassessment or scrutiny assessment and the relevant assessing officer accepted the same. The present attempt to question the valuation report amounts to a change of opinion or a review of the assessment, which is impermissible. The assessee had disclosed all facts and the basis for the valuation. That was accepted by the department. That is not a matter which can be reopened by claiming th .....

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perty but co-lessors qua the occupant) an award was made for payment of damages on account of rent or occupation charges. It is nobody’s case that such amount was received in the relevant assessment year; at least that is not asserted in the recorded reasons. Further, in the context of what should be the consideration for the sale of a property or the assessment of any capital gain thereon, the occupation charges received is not a relevant factor and the omission to mention the same cannot be se .....

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ipt and not a revenue receipt. The department has rejected such contention and a revision is pending on such score. However, such aspect of the matter has no nexus either with the valuation of the property or with the relevant assessment. - Decided against revenue - Non disclosure of possession of the property - Held that:- Such assertion is demonstrably wrong since the information furnished pursuant to queries made in course of the previous reassessment covered such matter - Decided against .....

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such matter into consideration and any reassessment on such score would amount to a change of opinion or review which is impermissible. - Decided against revenue - WP 346 of 2015, WP 347 of 2015 - Dated:- 4-5-2016 - Sanjib Banerjee, J. For the Petitioners: Mr R. N. Bajoria, Sr Adv., Mr J. P. Khaitan, Sr Adv., Mr Akhilesh Gupta, Adv., Mr Deepak Jain, Adv For the Respondents: Mr S. B. Saraf, Adv., Mr Prithu Dudhoria, Adv JUDGMENT Sanjib Banerjee, J. These two petitions pertain to notices issued u .....

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first petition are referred to in this judgment since the facts are common in the sense that the matter pertains to the sale of an immovable property jointly owned by these petitioners with some others. 3. In the computation of total income for year ended March 31, 2007, the first petitioner filed the return claiming long term capital gain on the sale of a New Delhi property at 3, Tilak Marg. The sale consideration of such petitioner s one-fourth share in the property was indicated as ₹ 21 .....

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icated as ₹ 5,68,82,169/-. The petitioners also claimed the benefit under Section 54EC of the Act by investing in REC bonds of value of ₹ 50 lakh. Finally, both petitioners claimed to have invested in residential houses of value in excess of ₹ 6 crore, such that the net capital gain from the sale of the immovable property was covered by the investment made in the REC bonds under Section 54EC of the Act and in the investment in another residential house under Section 54 thereof. .....

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ice dated August 13, 2008 was issued under Section 148 of the Act for reassessment of the income in assessment year 2007-08. Upon such petitioner seeking the recorded reasons for reopening the assessment already made, the department furnished the following reasons under cover of a letter dated October 23, 2009: The assessee claimed to had invested in new assets and claimed deductions U/s.54EC and U/s.54F (sic, S.54) for ₹ 5,68,82,169/-. In the Balance Sheet ₹ 17,15,539.94 was found t .....

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tioner in the first matter responded to the reasons by a letter dated November 9, 2009 wherein such petitioner indicated that the Tilak Marg property was sold by a deed executed on December 21, 2006 for ₹ 86,25,00,000/- out of which such petitioner s share came to be ₹ 21,56,25,000/- as indicated in the return. A copy of the relevant sale deed was forwarded to the department. The petitioner in the first matter also informed the department that the property had been acquired on July 2 .....

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forwarded a copy of the REC bond of value of ₹ 50 lakh in respect whereof deduction had been claimed under Section 54EC of the Act. In connection with the deduction claimed under Section 54F of the Act, the said petitioner forwarded a photocopy of the capital gain deposit account opened by him at Indian Bank, Strand Road Branch and a photocopy of the purchase deed in respect of the new residential property acquired at 18G Alipore Road, Kolkata. 7. In connection with the first reassessment .....

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e of such agreement 90 per cent of the agreed consideration was received by each of the co-owners in proportion to their shares in the property; that the agreement permitted the buyer to take steps for conversion of the leasehold rights to freehold rights in the names of the vendors; and, the conversion was effected on November 13, 2006 upon a public notice being issued by the government. The said petitioner also explained that since the share in the property came to the petitioner upon a family .....

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ithin the meaning of Section 147 of the Act. At such petitioner s request, the reasons recorded under Section 148 of the Act were forwarded to the assessee under cover of a letter of May 21, 2014. 9. Clause (a) of the reasons noticed that the assessee had claimed to have sold the land and building, but the assessee had actually sold only the leasehold rights in respect of the relevant property. The entirety of the deed of conveyance of December 21, 2006 was set out under clause (a) of the reason .....

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t rates. A further limb of clause (d) claimed that the possession of the property was with the Delhi Government and the fair market value of the property had been overstated since it was a case of sale of rights in leasehold property. The same clause concluded that an income of ₹ 15,45,32,250/- claimed by the assessee and allowed by the assessing officer as indexed cost of acquisition of property has escaped assessment on account of failure of the assessee to disclose truly and fully all t .....

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ssessee never disclosed that the possession of the property was with him till the date of sale. The officer alleged that since the assessee was not in possession of the property, such assessee could not take any advantage under Section 23 of the Act for the annual valuation of such property to be taken as nil. The officer then proceeded to indicate the annual valuation of the Tilak Marg property and alleged that an income in excess of ₹ 1 crore had escaped assessment on such count. In fina .....

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e relevant assessment year. 12. The petitioners and the department have referred to various provisions of the Act, particularly pertaining to capital gains. The parties have also referred to several judgments, some dealing with Section 147 of the Act as applicable in the present matters and others dealing with the essence of the provision in its previous form. The principal contention of the petitioners is that under the first proviso to Section 147 of the Act there is a pre-condition to any act .....

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that a fact which would have had a material bearing on the assessment had not been disclosed by the assessee prior to the previous assessment; or, that any false or misleading information had been furnished by the assessee in course of the assessment to materially affect the same. 13. The petitioners first refer to the celebrated case of Calcutta Discount Company Limited v. Income-tax Officer reported at (1961) 41 ITR 191 where the majority opinion rendered on the comparable Section 34 of the A .....

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n Calcutta Discount Company Limited was applicable to the corresponding provision in the present Act and the essence of the majority view therein would govern the tests under the provision as it stood at the time of the judgment. Though Section 147 of the Act has since been amended, the tests may still be as recognised in the report: "In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know .....

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he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences, whether of facts or law, should be drawn." 15. A more recent judgment, reported at (2010) 320 ITR 561 (Commissioner of Income-tax v. Kelvinator of India Limited), has also been carried by the petitioners for .....

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Lever Limited v. R. B. Wadkar) and (2015) 372 ITR 421 (Asiatic Oxygen Limited v. Deputy Commissioner of Income-Tax) for the proposition that the reasons recorded under Section 148 of the Act cannot be improved upon in a subsequent affidavit or oral submission. Such proposition is not questioned by the department. 17. Finally, the petitioners have placed a Supreme Court judgment reported at (2003) 259 ITR 19 (GKN Driveshafts (India) Limited v. Income Tax Officer) where it was held that where a n .....

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aking order cannot improve on the recorded reasons and the object of the Supreme Court dictum in affording the noticee the right to object to the reasons is to bring to the notice of the assessing officer that there may be no reason to believe that any income had escaped assessment; or in a case where the first proviso to Section 147 of the Act applies, to question the belief of the assessing officer if the recorded reasons do not reveal that the assessee had failed to disclose fully and truly a .....

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or revision, the perceived wrong can be redressed at such stage. The department refers to the recorded reasons and says that sufficient indication has been given therein that material facts may not have been disclosed or a false impression as to the state of facts may have been given. 20. The department emphasises on two aspects of the matter: that the valuation of the property was erroneous and that material facts pertaining to the property had not been disclosed in the relevant return or in co .....

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epartment refers to a judgment reported at (1993) 203 ITR 456 (Phool Chand Bajrang Lal v. Income-Tax Officer) to rely on the reading of the scope of Section 147 of the Act by the Supreme Court therein. The appellant before the Supreme Court claimed that it had borrowed a sum of ₹ 50,000/- from a Calcutta company in assessment year 1963-64. The loan was said to have been received in cash and it was repaid subsequently in 1968. In course of the assessment, the appellant firm was called upon .....

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company had made a confession to the effect that the Calcutta company was only a name-lender and that it had never advanced any loans to any person; and that such statement was accepted in completing the assessment of the Calcutta company for the assessment years 1962-63 to 1964-65. It was this subsequent discovery of the stand taken by the Calcutta company that prompted a notice for reassessment to be issued to the appellant firm. 22. It was in such context that the Supreme Court observed at a .....

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(1996) 9 SCC 534 (Srikrishna Private Limited v. I.T.O., Calcutta), investigations conducted by the department revealed that the assessee had relied on bogus hundi loans and the like. It was recorded as such in the reasons penned under Section 148 of the Act. It was in such factual background that the Supreme Court observed that it was the obligation of the assessee to disclose the material facts - or what are called primary facts - and such disclosure must necessarily be true and complete. 24. T .....

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that what weighed with the appellate court was that the notice under Section 148 of the Act was challenged after the reassessment was completed. 25. The authorities carried by the parties instruct that where the first proviso to Section 147 of the Act applies, the reason to believe that any income had escaped assessment in the relevant assessment year must be founded on the failure on the part of the assessee to disclose all primary facts relevant for the assessment at the time thereof upon the .....

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for the assessment had been suppressed or that any false assertion on the part of the assessee in respect of the facts relevant for the assessment had been discovered, a reassessment on the relevant ground cannot be undertaken. 27. It is, thus, left to ascertain whether the reasons recorded by the relevant officer, as forwarded under cover of the letter dated May 21, 2014, make out that any material fact relevant for the assessment had been suppressed or that any false assertion had been made o .....

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rights were transferred by the petitioners and not merely their leasehold rights, since the leasehold rights in the property had been converted to ownership rights between the agreement for sale and the deed of conveyance. Clause (c) of the recorded reasons covers the same ground and, thus, cannot be seen to be making out any allegation of non-disclosure of any material fact or false disclosure of any relevant fact. 29. Clauses (b) and (d) of the recorded reasons refer to the valuation of the pr .....

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nts to a change of opinion or a review of the assessment, which is impermissible. The assessee had disclosed all facts and the basis for the valuation. That was accepted by the department. That is not a matter which can be reopened by claiming that there was a mistake in the valuation report. 30. In clause (e) of the recorded reasons, the officer claimed that the amount received on account of rent or occupation charges ought to have been taken into account for assessing the cost or sale price of .....

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year; at least that is not asserted in the recorded reasons. Further, in the context of what should be the consideration for the sale of a property or the assessment of any capital gain thereon, the occupation charges received is not a relevant factor and the omission to mention the same cannot be seen to be any failure to disclose any material fact pertaining to the relevant assessment. Indeed, it is such amount as was collectively awarded to the petitioners and the co-sharers by the arbitral a .....

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operty or with the relevant assessment. 31. Clause (f) for the recorded reasons is, again, on the basis of the petitioners allegedly not disclosing that the possession of the property was with the petitioners at the date of the sale. Such assertion is demonstrably wrong since the information furnished pursuant to queries made in course of the previous reassessment covered such matter. Finally in clause (g) of the recorded reasons, the officer perceived that the deduction claimed under Section 54 .....

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