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2016 (6) TMI 1047 - GUJARAT HIGH COURT

2016 (6) TMI 1047 - GUJARAT HIGH COURT - TMI - Reopening of assessment - reasons to believe - capital gain on sale of land - Held that:- Few facts are not disputable. The petitioner sold land to Kamal Gohil under registered deed dated 4.2.2007 at a sale consideration of ₹ 98 lacs. The land was re-sold by Kamal Gohil barely three months later for a sale consideration of ₹ 7.09 crores. Thus, there was more than seven times jump in the value of the land in about three months. As per the .....

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gains in the hands of the petitioner for the sale of the land in question. The Supreme Court in the case of Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers Pvt.Ltd. reported in [2007 (5) TMI 197 - SUPREME Court ] in the context of “reason to believe” held that if the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. The expression cannot be read to .....

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orrect value received by the petitioner, obviously were not part of assessment proceedings. At that stage, the Assessing Officer cannot be said to have applied his mind to these aspects of the matter which emerged lateron. The sale of land by Kamal Gohil three months after his purchase from the petitioner at a value more than seven times of the purchase cost was also not before the Assessing Officer. - Decided against assessee - SPECIAL CIVIL APPLICATION NO. 19435 of 2015 - Dated:- 22-6-2016 - M .....

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009, the petitioner had filed a return of income disclosing gross receipts from business and profession at ₹ 166.89 crores which included the long time capital gain arising out of the sale of landed properties. One of the sale transactions executed by the petitioner company was of sale of a nonagricultural land situated at Bhavnagar under registered sale deed dated 4.12.2007 for a sale consideration of ₹ 98 lacs. 3. The return of the assessee was taken in scrutiny. The Assessing Offi .....

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rded under section 148(2) of the I.T.Act. In this case the return of income for A.Y.2008-2009 of ₹ 10,34,32,100/- was filed by the assessee on 27.101.2009. Further assessment proceedings were completed vide order dated 30.12.2010 assessing the income at ₹ 16,08,84,047/-. As per the information received from ITO Wd. 3(1)(1), Vadodara vide letter dated 16.3.2015, Kamal Gohil has entered into a purchase transaction with M/s Palitana Sugar Mills Pvt.Ltd. (PSPL) of land of area 4946 sq.mt .....

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d in books of M/s. J.P.Infrastructure Pvt.Ltd., PAN AABCJ4936C, JP ISCOn Ltd.-IMC-Bhavnagar (ledger Plot Unit Holders A/c) as well as in books of accounts of PSPL(Ledger ISCON Mega City Scheme Deposit A/c. Asper order dated 11.8.2008 of the Hon'ble High Court of Gujarat for scheme of amalgamation, M/s. Palitana Sugar Mills Pvt.Ltd. Has been emerged and Iscon Megacity Division and Sundervans Bungalow land-Hotel Project Division of Palitana Sugar Mills Pvt. Ltd. Has been merged into M/s.J.P.In .....

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his A/c No. 003138230009754 maintained with Nutan Nagrik Sahakari Bank Ltd. (NNSBL) through Shroffs by issuing cheques of different amount. The ISCON group (M/s. PSPL is part of this group) has also used the same person i.e. Kamal M.Gohil in its transaction of land in A.Y.2009-10, which caused escapement of capital gain tax on amount of ₹ 8,44,69,500/-. During the assessment proceedings in the case of Shri Kamal Gohil for A.Y.2009-10, the A.O. Has observed that: Discrete Field enquiries c .....

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il's Bank account. Kamal Gohil makes payments to original land holders and original seller pays tax on the petty sum as decided in the agreement to sale. The substantial amount of capital gain tax was shifted in the hands of Kamal Gohil who is absconder as far as income tax proceedings are concerned. Thus, transaction undertaken by J.P.Infrastructure Pvt.Ltd. With Kamal Gohil is a sham transaction to evade tax in A.Y.2008-2009. Moreover, J.P.Infrasctucture Pvt.Ltd. Has shown sale considerati .....

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unications dated 4.6.2015 and 15.7.2015 and followed up with further objections dated 27.7.2015. Such objections were however rejected by the Assessing Officer by an order dated 27.10.2015. Hence the petition. 5. Inviting our attention to the reasons recorded by the Assessing Officer, learned counsel for the petitioner raised following contentions: (1) That the issue of capital gain arising out of sale of the said land was examined by the Assessing Officer in the original assessment proceedings. .....

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gathered in what manner income chargeable to tax in the hands of the petitioner can be stated to have escaped assessment. There was no material with Assessing Officer to form a belief that there has been an escapement of assessment of income. 6. On the other hand, learned counsel Shri Bhatt after taking us minutely through the recorded reasons submitted that the modus operandi employed by the petitioner in collusion with Kamal Gohil is apparent. The close proximity within which the land was purc .....

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abilities to the department is yet another relevant aspect. 7. Having heard learned counsel for the parties and having perused materials on record, we may notice that as per reasons recorded by the Assessing Officer, the land in question was sold by the petitioner to Kamala Gohil under registered sale deed dated 4.12.2007 for a sale consideration of ₹ 98 lacs. Within just about three months on 5.3.2008, Kamal Gohil re-sold this land to one M/s. Sterling Addlife India Private Ltd. for a sal .....

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9;s land activities where the Iscon group would ensure that there would be sale of land to Kamal Gohil for fraction of the actual value of the land, who, in turn, would sale the land to Iscon. Payments to Kamal Gohil would be routed to original land owner who in turn, would transfer capital gain liability on Kamal Gohil who is absconding. 8. Few facts are not disputable. The petitioner sold land to Kamal Gohil under registered deed dated 4.2.2007 at a sale consideration of ₹ 98 lacs. The l .....

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inal land owners-sellers reducing their capital gain tax liability and that Kamal Gohil is absconding. 9. In our opinion, the reasons cannot be said to be not germane to the question of assessable capital gains in the hands of the petitioner for the sale of the land in question. The Supreme Court in the case of Assistant Commissioner of Income-Tax vs. Rajesh Jhaveri Stock Brokers Pvt.Ltd. reported in 291 ITR 500 in the context of reason to believe held that if the Assessing Officer has cause or .....

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sment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude f .....

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tablished fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concerned at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO vs. Selected Dalurband Coal Co.P.Ltd. (1996) 217 ITR 597 (SC); Raymond Woolen Mil .....

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re Assessing Officer. It is also true that the assessee had placed the materials with respect to sale of land before Assessing Officer during such assessment proceedings. However, the question of true value of the land not being reflected in the sale consideration and the transaction itself not reflecting the correct value received by the petitioner, obviously were not part of assessment proceedings. At that stage, the Assessing Officer cannot be said to have applied his mind to these aspects of .....

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s under: 20. The Assessing Officer required jurisdiction to reopen under section 147 read with section 148 of the Act, where the information must be specific and reliable. As heldby the apex court in the case of Phool Chand Bajrang Lal (supra), since the belief is that of the Incometax Officer, the sufficiency of reasons for forming the belief, is not for the court to judge but is open to an assessee to establish that there exists no belief or that the belief is not at all a bonafide one or base .....

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