TMI Blog2018 (7) TMI 1816X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer to the petitioners must be the same reasons furnished to the competent authority for seeking approval under section 151 of the Act of 1961, as the Assessing Officer cannot modify, add to or delete from such reasons to suit her own purposes at different points of time. Further, when the reasons recorded by the Assessing Officer are the only material that can be looked into by the competent authority for granting approval under section 151 of the Act of 1961, the absence of such jurisdictional conditions therein would invariably vitiate the approval, if any, by the competent authority, as he could not have recorded the requisite satisfaction under section 151 of the Act of 1961, when the fundamental jurisdictional conditions justifying the reopening of the assessments beyond the normal four-year period did not even find mention in the reasons recorded by the Assessing Officer. On the above analysis, this court finds that reopening of the petitioners' assessments for the assessment year 2010-11 by way of the notices dated March 31, 2017 issued under section 148 of the Act of 1961 and the rejection of their objections thereto by the letters dated November 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or ₹ 1,50,00,000. Prasad claimed deductions/exemptions in respect of the above investments of ₹ 50,00,000 in bonds, under section 54EC of the Act of 1961, and ₹ 1,50,00,000 in house property, under section 54F of the Act of 1961, in his return of income. Ramana claimed a deduction/exemption on the investment of ₹ 15,00,000 in bonds, under section 54EC of the Act of 1961, in his return of income. 4. Their claims were accepted and assessment orders dated January 16, 2013 (re Prasad) and March 28, 2013 (re Ramana) were passed, duly accepting their returns. These assessment orders were passed under section 143(3) of the Act of 1961. 5. However, the Commissioner of Income-tax at Visakhapatnam suo motu exercised power under section 263 of the Act of 1961 and issued show- cause notices to both petitioners on June 19, 2014. Revisionary power was sought to be exercised in relation to the deductions/exemptions claimed by the petitioners in the context of their capital gains arising out of the sale of shares. In the case of Prasad, the Commissioner observed that under section 54EC of the Act of 1961, the investment had to be made within six months, while under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s therefor, i.e., September 10, 2009, was held to be irrelevant for this pur pose. Taken from the date of transfer, viz., November 24, 2009, the investments made by both petitioners, on the strength of which they had claimed deductions, were found to be well within the time stipulations in sections 54EC and 54F of the Act of 1961. The Commissioner was held to be incorrect in assuming jurisdiction under section 263 of the Act of 1961 as no prejudice was caused to the Revenue by allowing the assessees such deductions/exemptions. The Appellate Tribunal accordingly restored the original assessment orders passed in both cases. 7. It appears that pursuant to the earlier orders passed by the Commis sioner of Income-tax-1, Visakhapatnam, in exercise of powers under section 263 of the Act of 1961, directing the Assessing Officer to redo the assessments, orders were passed afresh by the said Assessing Officer under section 143(3) read with section 263 of the Act of 1961. Assessment order dated December 17, 2015 was passed in the case of Prasad, while assessment order dated January 6, 2016 pertained to Ramana. The Assessing Officer, for the first time, opined that the date of the investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; that the date of the investment agreement, being the date of actual transfer, was not one of the questions for adjudication brought before the Appellate Tribunal and the common order dated December 9, 2016 of the Appellate Tribunal was silent on the issue of considering the date of the investment agreement as the date of transfer, as it had only held that the date of receipt of monies was not the date of actual transfer. 9. At this stage, both petitioners filed these writ petitions. 10. Sri K. V. Simhadri, learned counsel for the petitioners, would inform us that the common order dated December 9, 2016 passed by the Appellate Tribunal in ITA Nos. 177 and 178 of 2015 was subjected to appeal by the Revenue, under section 260A of the Act of 1961, before this court. ITTA No. 742 of 2017 pertained to ITA No. 178 of 2015 relating to Prasad, while ITTA No. 751 of 2017 arose out of ITA No. 177 of 2015 relating to Ramana. 11. It may be noted that one of the substantial questions of law framed by the Revenue in the appeals reads as under : (i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in law in holding that in the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Appellate Tribunal was not available earlier, either during the original assessment proceedings or during the revisionary proceedings under section 263 of the Act of 1961, and therefore, the relevance of this agreement was not adjudicated by the Appellate Tribunal in the context of the actual date of transfer. She relied upon Central Board of Direct Taxes Circular No. 704 dated April 28, 1995 which states to the effect that when transactions take place directly between the parties and not through stock exchanges, the date of the contract of sale as declared by the parties shall be treated as the date of transfer, provided it is followed by actual delivery of shares and the transfer deeds. She pointed out that though the Appellate Tribunal made a passing reference to this circular, it did not discuss its applicability to the cases on hand. She asserted that the investment agreement constituted fresh tangible evidence which gave reason to believe that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act of 1961. She claimed that as the petitioners had willfully suppressed facts and there was failure on their part in disclosing all the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessful in its appeals against the said common order dated December 9, 2016. It is indeed surprising that the Revenue resorted to suppression of this material fact when one of the main issues raised in these writ petitions and addressed at length in the counters was the common order dated December 9, 2016 passed by the Appellate Tribunal in favour of the petitioners. The Revenue would be well advised not to resort to such dubious tactics in future. 16. The crux of the controversy lies in the deductions/exemptions claimed by the petitioners in relation to their capital gains from sale of shares. Section 54EC of the Act of 1961 provides for a deduction/exemption when capital gains arising from the transfer of a long-term capital asset are invested, in whole or in part, in certain bonds within a period of six months from the date of such transfer. Section 54F thereof provides for a deduction/exemption in relation to capital gains arising from the transfer of a long-term capital asset, not being a residential house, when the whole or part thereof are invested in a residential house in India within two years from the date on which the transfer took place. It may be noted that sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby they could rightfully claim deductions/exemptions, be it under section 54EC and/or section 54F of the Act of 1961. 19. Before this court, in appeal under section 260A of the Act of 1961, the Revenue specifically took the ground that the date of transfer should be taken to be the date of execution of the investment agreement, i.e., August 12, 2009. The appeals were however dismissed by this court holding that the view taken by the Assessing Officer that the date of transfer was November 24, 2009 was a plausible one. 20. This being the chronological narrative, the question that arises is whether the Revenue is entitled at this stage to reopen the petitioners' assessments under section 147 of the Act of 1961. 21. Section 147 deals with income escaping assessment. It states to the effect that if the Assessing Officer has reason to believe that any income chargeable to tax escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income. The first proviso thereto stipulates that where an assessment under section 143(3) or under section 147 has been made for the relevant assessment year, no action sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 22. On facts, it is clear that the notices dated March 31, 2017 under section 148 of the Act of 1961 were issued to the petitioners on the very last day of the six-year period prescribed under section 149(1)(a) of the Act of 1961. The reason now put forth by the Revenue to justify this step is that the investment agreement dated August 12, 2009 is new found evidence which was suppressed by the petitioners and therefore, it is entitled to the extended limitation of six years from the end of the assessment year 2010-11. 23. It is however to be noted that the investment agreement dated August 12, 2009 already fell for consideration before this court in the appeals filed by the Revenue under section 260A of the Act of 1961 against the common order dated December 9, 2016 of the Appellate Tribunal. Sri K. Raji Reddy, learned senior standing counsel, has no information as to whether any appeals have been preferred therefrom to the Supreme Court. That being so, the orders of dismissal of these appeals filed by the Revenue are binding and it is not open to it to once again seek to reagitate any issue that stands covered by the said adjudication. As already pointed out, relevance of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it petitions. 27. It is also to be noted from the counters that the main ground on which the Assessing Officer sought to reopen the assessments was that the petitioners had willfully suppressed material facts. However, the petitioners pointed out that there was no such suppression as the investment agree ment dated August 12, 2009 was produced by the Revenue itself as additional evidence before the Appellate Tribunal and no attempt was made by the Revenue to clarify as to wherefrom they got the said agreement, if it was not produced by the petitioners. The Appellate Tribunal's order also bears out that the original assessment was made after the Assessing Officer perused the details furnished by the petitioners, upon being issued show- cause notices dated December 13, 2012 and December 28, 2012 calling for specific details about their share transfers, computation of capital gains and proof of investments to claim exemptions. The Appellate Tribunal also recorded that the petitioners had filed detailed replies along with supporting documents to justify the exemptions claimed and it was only then, that the Assessing Officer completed the assessments and accepted the returns. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay High Court in Hindustan Lever Ltd. v. R. B. Wadkar, Asst. CIT (No. 1) [2004] 268 ITR 332 (Bom) ; [2004] 190 CTR (Bom) 166 and the observations made therein, which read as under (page 337 of 268 ITR) : The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his rea sons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kely to be rupees one lakh or more, which is an essential ingredient for seeking the approval that is to be accorded by the competent authority under section 151 of the Act of 1961. 33. On the same lines, in Mahesh Kumar Gupta v. CIT [2014] 363 ITR 300 (All), another Division Bench of the Allahabad High Court held that it is imperative for the Assessing Officer to record his reasons that the escaped income is likely to be rupees one lakh or more so that the Chief Commissioner or Commissioner may accord his satisfaction under section 151 of the Act of 1961. It was further held that if the said reason is not recorded by the Assessing Officer, initiation of the reassessment proceedings after more than four years would be barred by time. 34. Relevant to note, in Sahkari Khand Udyog Mandal Ltd. v. Asst. CIT [2015] 370 ITR 107 (Guj) Special Civil Application No. 3955 of 2014, dated March 31, 2014, a Division Bench of the Gujarat High Court issued certain directions in the context of reopening of assessments under section 147 read with section 148 of the Act of 1961. One such direction was that the Assessing Officer, after serving a notice for reopening under section 148 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 151 of the Act of 1961, the absence of such jurisdictional conditions therein would invariably vitiate the approval, if any, by the competent authority, as he could not have recorded the requisite satisfaction under section 151 of the Act of 1961, when the fundamental jurisdictional conditions justifying the reopening of the assessments beyond the normal four-year period did not even find mention in the reasons recorded by the Assessing Officer. 36. On the above analysis, this court finds that reopening of the petitioners' assessments for the assessment year 2010-11 by way of the notices dated March 31, 2017 issued under section 148 of the Act of 1961 and the rejection of their objections thereto by the letters dated November 17, 2017 cannot be sustained on grounds more than one. The attempt on the part of the Revenue to do so is an abuse of power as the facts demonstrate that the very basis for such reopening was the subject matter of the appeals before the Appellate Tribunal and, thereafter, before this court. That apart, the jurisdictional conditions precedent that there must be failure on the part of the petitioners to disclose fully and truly all material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X
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