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2016 (8) TMI 683 - ITAT AHMEDABAD

2016 (8) TMI 683 - ITAT AHMEDABAD - TMI - Reopening of assessment - change of opinion - Held that:- Notice under section 148 was issued upon the assessee after the expiry of four years from the end of the assessment year. The proviso appended to section 147 of the Income Tax puts an embargo upon the power of the AO to issue notice under section 148 in the cases, where, scrutiny assessment was made and four years have expired after the end of the relevant assessment year. He cannot issue notice i .....

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finding that the AO has sought to reopen the assessment on the basis of change of opinion. After going through the well reasoned order of the ld.CIT(A), in the light of various authoritative pronouncements, we are of the view that no interference is called in the order of the ld.CIT(A). Accordingly, appeal of the Revenue is dismissed. - ITA. No. 357/Ahd/2013 - Dated:- 14-6-2016 - Shri Rajpal Yadav, Judicial Member And Shri N. K. Billaiya, Accountant Member For the Revenue : Shri Kamlesh Makwana .....

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s selected for scrutiny assessment and notice under section 143(2) of the Act was issued and served upon the assessee. The ld.AO has passed the assessment order under section 143(3) of the Act on 31.12.2007. He determined the total income of the assessee at NIL and computed the tax liability of the assessee under section 115JB of the Income Tax Act. The ld.AO thereafter recorded reasons and issued notice under section 148 of the Income Tax Act. The reasons recorded by the AO are reproduced by th .....

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ll the same by making plots. Out of total area i.e. 59,388 sq. mts., the company has retained with it plot admeasuring 12,043 sq. mts. for factory premises and it has sold 10,461 sq. mts. in the preceding assessment years. Further it has allotted 9357.96 sq. mts. for road and 3012.83 for common area. The break up or the treatment given of/to total plot area admeasuring 59.388 sq. mts. is as under:- Total Plot area. : 59,388 sq. mts. Less : Area retained for factory. : 12,043 sq. mts. 47,345 sq. .....

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the balance sheet. Further it is noted that the land was purchased before 1981. The said land was valued at ₹ 80 by the registered valuer on 24.11.1983. At the rate of ₹ 80 per sq. mts. the acquisition cost of saleable land of 34974.21 sq. mts. to Krishna Enterprises comes to Rs, 27,97,937/- whereas the assessee has worked out cost of land at ₹ 135,84 per sq. mts in the computation enclosed with the return of income. The rates applied by the assessee are incorrect. The cost of .....

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of Rs, 1, 11,76, 884/-, the assessee has claimed long term capital loss of ₹ 15,80,642/- by inflating cost of purchase applying rates of ₹ 135.84 per sq. mts. instead of ₹ 80/- per sq.mts. as per valuer report 24.11.83. The assessee has paid commission of ₹ 11,43,577/- to M/s. Krishna Enterprise. On verification of record it is observed that the Krishna Enterprise is the confirming party in the sale of land. It is mention that the Krishna Enterprise has purchased land 34 .....

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n the balance sheet. In view of the above, I have reason to believe that long term capital gain to the extent of ₹ 1,11,76,884/- and cost of land ₹ 1,26,560/- escaped assessment. Necessary approval for issue of notice u7s, 148 may be accorded." 4. The ld.CIT(A) on analysis of the record found that in the original assessment proceedings, the ld.AO has confronted the assessee with this issue. The assessee has filed a reply dated 24.12.2007 and it gave a note on the issue of long t .....

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provision of Road and Common Plot area. Therefore, net land admeasuring 43,882 sq. mt. (593883 - 15506 ) offered for sale. Out of this, total land admeasuring 7039 was sold during past two financial years to various persons. Therefore remaining 36843 sq. mt. land was sold during Financial year 2004-05 (Assessment Year 2005-06) at total consideration of ₹ 22532134/- to various pertson by registering 14 sale documents. Thus average price of ₹ 612 per sq. mt. (Rs. 57/- per sq. ft) was r .....

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ompany has no land in its asset as on 31.03.2005." 5. The ld.CIT(A), thereafter, observed that the assessee was not failed in disclosing all the material facts fully and truly in respect of assessment of its income in this assessment year. Therefore, reopening of the assessment is bad in law. 6. Before us, the ld.DR contended that the assessee did not challenge reopening of the assessment order before the AO. Therefore, it is precluded to take any such grounds in appeal before the ld.CIT(A) .....

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s well as of the Hon ble Supreme Court, the ITAT in the case of Neptune Textile Mills Pvt. Ltd. Vs. ACIT passed in ITA No.2195/Ahd/2009 had made a lucid enunciation of the scope of section 147. We cannot do better than extracting the discussion made by the Tribunal in this regard. It reads as under: 7. We have considered the rival submissions and perused the material on record. In our considered view the reopening of the assessment is bad in law. For the sake of convenience we reproduce section .....

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case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of .....

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requirements of the section are as under :- (1) The AO has reason to believe; (2) That an income chargeable to tax has escaped assessment; (3) If four years have expired from the end of the relevant Asst. Year then such escapement was due to failure on the part of the assessee- (i) to file a return u/s 139; (ii) to file a return in response to notice u/s 142(1) or section 148; (iii) to disclose fully and truly all material facts necessary for the assessment. All these aspects must come in the re .....

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four years from the end of the relevant Asst. Year; (vii) in particular, whether there is any the failure of the assessee to disclose material facts fully and truly necessary for the assessment for that assessment year. (viii) if assessment is done u/s 143(1), then whether the provision of section 149 are applicable. 8. If reasons recorded did not reflect these ingredients then reopening cannot be sustained. On the aspect of necessity to mention the failure of the assessee to disclose truly and .....

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! of the assesses to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. From the perusal of the reason recorded it is apparent that no case has been made out that the assesses had failed to disclose fully and truly all material facts necessary for his assessment and no observation has been made in this regard, On the basis of t .....

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book and also computation of income filed along with return, a copy of which is placed at pages 33 to 35 of the paper book. This finding of the Tribunal has not been disputed by raising any question and during the course of the argument by the learned counsel for the appellant. Therefore, we are of the view that on the facts and circumstances, no substantial question of law arises for consideration by this court. Learned counsel for the appellant cited a decision of the Bombay High Court in the .....

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opined on the above item. Therefore, there was no change of opinion. While in the present case, complete details were furnished along with the return and during the course of the assessment proceedings and after an application of mind, the deduction under section 36(1)(viii) of the Act was allowed. In the reason recorded no case has been made out that there was failure to disclose any material particular on the part of the assessee. Therefore, limitation beyond the period of four years was not .....

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0IB(10) for ₹ 3.85 crores which was allowed by the AO vide order u/s 143(3) and assessment was sought to be reopened after expiry of four years on the ground that the claim of deduction u/s 80IB(10) included ineligible items of other income such as society deposits, street parking charges, sundry balances, etc. Hon. Bombay High Court in the case of Bhavesh Developers vs. A.O. & Others (supra) observed as under :- Held, allowing the petition, that ex facie, the reasons which had been di .....

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ar 2002-03. Significantly, the reasons that had been disclosed to the assessee did not contain a finding to the effect that there was a failure to fully and truly disclose all necessary facts, necessary for the purpose of assessment. In these circumstances, the condition precedent to a valid exercise of the power to reopen the assessment, after a lapse of four years from the relevant assessment year, was absent in the present case. The notice was not valid and was liable to be quashed. Hon. Supr .....

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apement of income of the assessee for that particular year because of his failure to disclose fully and truly all material facts. Even though Court cannot go into sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point as to whether action should be initiated for reopening of the assessment, but at the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far fetched, which wo .....

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pinion would not justify the course of action u/s 147. Unless the AO has tangible material fact to reopen the assessment, power u/s 147 cannot be validly exercised. 9. In the present case there is a clear case of change of opinion. Even though reliance has been placed on the decision of Hon. Supreme Court in Ballimal Navalkishore and others vs. CIT (supra), that judgment existed at the time when the AO took the decision u/s 143(3) and held the expenditure as current repairs allowable in the prof .....

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urt in the case of ICICI Prudencial Life Insurance Co. Ltd. vs. ACIT (2010) 325 ITR 471 (Bom) also held that when there is no material on record and without there being any allegation of failure of the assessee to disclose such material fact, assessment cannot be reopened after four years. Hon. Gujarat High Court in Inducto Ispat Alloys Ltd. vs. ACIT (2010) 320 ITR 458 (Guj) and Nikhil K. Kotak vs. Mahesh Kumar (2009) 319 ITR 445 (Guj) also held that where the period of four years has expired fr .....

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the reasons do not show any such failure which could be inferred even if not so mentioned specifically in the reasons. In our considered view when neither there is any allegation of failure nor the AO has brought any material on record to suggest escapement of income then it is only a change of opinion and therefore assessment cannot be reopened after expiry of four years. 9. A bare perusal of the reasons recorded by the AO for reopening of the assessment would reveal that he has just re-appreci .....

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