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2016 (9) TMI 1037 - GUJARAT HIGH COURT

2016 (9) TMI 1037 - GUJARAT HIGH COURT - TMI - Reopening of assessment - netting of interest for deduction under section 80P(2)(d) - Held that:- The petitioner had filed full details of such interest income along with the return itself along with the interest expenses. If the Assessing Officer was of the view that the same was not in order, he could have disallowed part of the claim. At any rate, this cannot be a ground for reopening the assessment beyond a period of four years since it cannot b .....

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n this respect. It was in this background the Assistant Director of Incometax (Inv), Surat, conveyed to the petitioner that the value of the property mentioned in the sale deed is lower than the value adopted by the stamp valuation authority. The petitioner was therefore, asked to explain whether capital gain was computed on the basis of section 50C of the Act. If yes, the petitioner would submit evidence, if no, the petitioner to show cause why adverse inference should not be drawn. This letter .....

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rs had been adopted. As noted, the petitioner had also replied separately to the said authority under letter dated 2.1.2008. - The stand of the petitioner in such reply was rather vague and general. The petitioner did not deny the higher valuation adopted by the stamp duty authority or application of section 50C of the Act but merely generally and vaguely opposed any proposal for action. . In reply to this, the petitioner again made similar averments without drawing any further light on why .....

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(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. The petitioner has challenged a notice dated 30.3.2011 issued by the respondent Assessing Officer to reopen the petitioner's assessment for the assessment year 2005-2006. 2. Brief facts are as under. The petitioner Surat District Cooperative Milk Producers' Union Ltd is a cooperative society registered under the Cooperative Societies Act. For the assessment year 2005-2006, the petitioner had filed return of income on 15.10.2005 declaring nil .....

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assessment, the respondent issued impugned notice which, as can be seen, was done beyond a period of four years from the end of relevant assessment year. In order to do so, he had recorded the following reasons : Reasons for the belief that the income has escaped assessment : The assessee has sold its land at Survey No.185 at Katagram, Surat city for ₹ 42,00,000/and offered long term capital gain only on sale value mentioned in the sale document. Information was received by this office fr .....

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assessment for AY 200607, 200708 and 200809 that the assessee has been claiming deduction u/s.80P of the IT Act without first deducing its interest expenses in contravention to section 80AB. It was held by the Assessing Officer in their assessment orders u/s.143(3) for the above three assessment years that the assessee did not adjust the interest expenses with the income deductible u/s.80P of the IT Act. The Assessing Officer had invoked section 80AB to net the income deductible u/s.80P with th .....

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see, then, notwithstanding anything contained in that section, for the purpose of computing the deduction under that section, the amount of income of that nature as computed in accordance with the provisions of this Act (before making any deduction under this Chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income. 3. On this issue the deduction u/s 80P was disallowed at ₹ 81,13,58 .....

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d to escapement of income to the extent of ₹ 79,11,629/on this issue. 4. In view of the above, I am of the opinion that the assessee's income has escaped assessment within the meaning of section 147 of the IT Act. Hence, the case needs reopening u/s 147 of the IT Act 1961. 3. The petitioner thereafter, raised objections before the Assessing Officer to the notice of reopening under a communication dated 15.12.2011. Such objections however, were rejected by an order dated 16.12.2011. 4. .....

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essment were part of the record during the original assessment proceedings. The assessee had not withheld the relevant facts and that therefore, notice of reopening issued beyond a period of four years from the end of relevant assessment year was invalid. With respect to the long term capital gain, counsel drew our attention to a letter dated 28.11.2007 written by the Assistant Director of Incometax, Surat, in which he pointed out to the assessee that the valuation of the property mentioned in t .....

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tself, the Assessing Officer passed the order of assessment. Thus the fact that sale consideration was lower than the stamp valuation assessment was known to the income tax authorities even during the original assessment. Notice for reopening therefore, beyond a period of four years, could not have been issued. Regarding the netting of interest also, counsel submitted that full facts were on record. The petitioner had not withheld any relevant facts. The Assessing Officer therefore, could not ha .....

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the Revenue opposed the petition contending that the Assessing Officer had recorded proper reasons. The petitioner had not made true and full disclosures. The fact that the stamp valuation of registration of the sale deed was higher than the sale consideration indicated in the deed was known to the petitioner all along. Even in response to queries raised by the Assessing Officer, this important element was not disclosed. Reopening even beyond a period of four years was therefore, permissible. 6. .....

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aim. At any rate, this cannot be a ground for reopening the assessment beyond a period of four years since it cannot be stated that the petitioner had not disclosed true and full facts. 7. The first ground however, needs a closer scrutiny. In the reasons recorded, the Assessing Officer is contending that the petitioner had sold the land for ₹ 42 lacs and offered long term capital gain on such sale value mentioned in the sale deed. He however, received information from the Stamp Duty Valuat .....

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cs. However, it appears that when the document was presented for registration, the stamp duty authorities had dispute about such valuation. On 9.4.2007, Deputy Collector, Stamp Duty, passed an order assessing the value of land for the purpose of registration at ₹ 71.07 lacs and demanded the deficient stamp duty of ₹ 2.44 lacs. This was conveyed to the purchaser of the land by the said order. It appears that upon the purchaser paying the deficient stamp duty as per such order, the doc .....

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h. 10. Along with this letter, the petitioner produced a ledger account of the long term capital asset which recorded merely the credit of ₹ 41.72 lacs for the sale of land in question. 11. On 28.11.2007, the Assistant Director of Incometax, Surat, wrote to the petitioner as under : Details regarding immovable property transactions made by you in the above mentioned year have been gathered by this office. It is seen from the details that the value of property mentioned in the sale deed is .....

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letter. If you wish to be represented by your authorized representative, then it is requested to furnish your letter of authorization in this regard. 12. It is undisputed that this letter was received by the petitioner on 4.12.2007 and promptly replied by the petitioner on 2.1.2008 as under : That apart, you will agree with the contention the seller has nothing to do with the payment of stamp duty as per valuation made by that authority because in every transaction of immovable property, it is t .....

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level and therefore, there is no question of suppression of consideration of immovable property so transferred as presumed by you. However, as stated above, in the absence of the relevant details as required as above, my client is not in the position to understand about the transaction as relied upon by you. In the light of the above facts and circumstances of the case, I have once again to request you to supply the details/ documents/information/ materials if any, gathered and intended by you t .....

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directly from Surat District Co. Operative Milk Producer's Union Ltd. (SUMUL). b. Property purchased was of agriculture land - Copy of Zoning Certificate is enclosed. c. The SUMUL the seller party has carried out valuation of the said property from H.T. Shah, Govt. Approved Valuer dated 29/08/2005 & he had adopted the rate of ₹ 275 per sq. mtr where as we had adopted the rate of ₹ 297/sq. Mtr (Rs.4200000/14113 sq. mtr.) while executing the sale deed hence there is no question .....

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Hence it cannot be adopted as the valid basis for valuation of the property. Copy of Notice objection Reply filed by the assessee is enclosed. 3. Assessee has shown the value of property in the balance sheet on the basis of sale deed. In our opinion no adverse inference can be drawn taking into consideration the facts stated in point No.2 (a to e). 14. On 4.12.2007, the Assessing Officer framed assessment without disturbing the long term capital gain declared by the petitioner. 15. Few facts th .....

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sclosed receipt of ₹ 42 lacs for transfer of such capital asset. Even in reply to the queries raised under communication dated 23.11.2007 regarding details of long term capital gain, the petitioner made no further disclosure, except for producing ledger account of long term capital gain which contained only the figure of ₹ 41.72 lacs towards sale of this land. d) On 4.12.2007, the Assessing Officer passed the order of assessment accepting such declarations. 16. Section 50C of the Act .....

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eferred to as the "stamp valuation authority") for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed [or assessable] shall, for the purposes of section 48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. (2) Without prejudice to the provisions of subsection (1), where- (a) the assessee claims before any Assessing Officer that the value adopted or assessed [or assessable] by the stamp .....

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subsections (2), (3), (4), (5) and (6) of section 16A, clause (i) of subsection (1) and subsections (6) and (7) of section 23A, subsection (5) of section 24, section 34AA, section 35 and section 37 of the Wealthtax Act, 1957 (27 of 1957), shall, with necessary modifications, apply in relation to such reference as they apply in relation to a reference made by the Assessing Officer under subsection (1) of section 16A of that Act. [Explanation 1].-For the purposes of this section, "Valuation O .....

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ntained in subsection (2), where the value ascertained under subsection (2) exceeds the value adopted or assessed [or assessable] by the stamp valuation authority referred to in subsection (1), the value so adopted or assessed [or assessable] by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer.] 17. In terms of subsection (1) of section 50C of the Act, thus wherever the consideration received or accruing as a result of the tran .....

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such valuation is higher than the sale consideration. On the other hand under subsection( 2) of section 50C, it would be open for the assessee to question before the Assessing Officer the valuation adopted by such stamp duty authority. 18. Thus in terms of subsection( 1) of section 50C, the assessed value of the land at ₹ 71.07 lacs by such stamp duty authority would be deemed to be full sale consideration and therefore, assessable for capital gain on such basis, unless such valuation is q .....

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aser paying the deficient stamp duty on 12.4.2007. It was only after that, that during assessment, the Assessing Officer had asked the petitioner to supply the details of long term capital gain under a letter dated 23.11.2007. In reply to such letter, the petitioner provided no further information, except for pointing out that the land was sold for ₹ 42 lacs, by which time, we may recall the revised valuation by the stamp duty authority was already available. 20. It is by now well settled .....

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free or exempt income, which were claimed as a deduction under the cumulative head expenditure . It is pleaded and stated that the petitioner was not required to disclose the said fact as when they had filed the return, section 14A was not in the statute book. Sequitur there was no omission and failure on the part of the assesseepetitioner to make full and true disclosure. The term failure on the part of the assessee is not restricted only to the incometax return and the columns of the incometax .....

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ired and under an obligation to disclose. Burden is on the assessee to make full and true disclosure. This view was reiterated in case of Dalmia P. Ltd. v. Commissioner of Income tax and another reported in (2012) 348 ITR 469 (Delhi). 21. The contention of the petitioner that the Assessing Officer was aware about such difference in two valuations based on the letter dated 28.11.2007 cannot be accepted. The said letter was written not by the Assessing Officer but by the investigation wing of the .....

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e, if no, the petitioner to show cause why adverse inference should not be drawn. This letter was received by the petitioner on 4.12.2007. On 6.12.2007, it appears that the purchaser of the land had in respect to a similar letter from investigation wing contended that the Government approved valuer had assessed rate of land at ₹ 275/per square meter at which the land was sold. It was further pointed out that stamp valuation authority had earlier adopted market value of ₹ 1.42 crores .....

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