Tax Management India. Com
                        Law and Practice: A Digital eBook ...

Category of Documents

TMI - Tax Management India. Com
Case Laws Acts Notifications Circulars Classification Forms Manuals SMS News Articles
Highlights
D. Forum
What's New

Share:      

        Home        
 

TMI Blog

Home

2019 (12) TMI 154

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... u/s 147 of the Act is, therefore, invalid. The impugned notice under section 148 of the Act, therefore, cannot be sustained. Petition succeeds and is, accordingly, allowed. - R/Special Civil Application No. 16767 of 2018 - Dated:- 7-10-2019 - HONOURABLE MS.JUSTICE HARSHA DEVANI AND HONOURABLE MS. JUSTICE SANGEETA K. VISHEN MR. HARDIK V VORA(7123) FOR THE PETITIONER(S) NO. 1 MRS KALPANAK RAVAL(1046) FOR THE RESPONDENT(S) NO. 1 ORAL JUDGMENT PER : HONOURABLE MS.JUSTICE HARSHA DEVANI 1. Rule. Mrs. Kalpana Raval, learned senior standing counsel, waives service of notice of rule on behalf of the respondent. 2. Having regard to the controversy involved in the present case, which lies in a very narrow compass, the matter was taken up for final hearing today. 3. By this petition under article 226 of the Constitution of India, the petitioner has challenged the notice dated 23.03.2018 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) seeking to reopen the assessment of the petitioner for the assessment year 2012­13. 4. The petitioner is engaged in the business of real estate development and is also a partner in M/s. Sai Royal Pr .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ng Officer is without authority of law. 6.1 The attention of the court was invited to the reasons recorded for reopening the assessment, to submit that the Assessing Officer seeks to reopen the assessment on two grounds, firstly, in relation to an amount of ₹ 2,47,62,500/­ shown by the petitioner in its return of income as capital gain on the ground that the same should have been assessed as income of the petitioner under section 28(iv) of the Act; and secondly, that the petitioner had created a provision for future development expense of ₹ 3,59,48,400/­ and had debited the same under the head cost of materials , which was created on estimation basis and hence, this was a provision which was required to be added to the net profit for computing book profit as per the provisions of section 115JB of the Act. 6.2 Reference was made to the notice dated 19.11.2014 issued by the Assessing Officer under section 142(1) of the Act during the course of scrutiny assessment, to point out that he had specifically called upon the petitioner to state as to why the provision for future development expenses of ₹ 2,51,86,534/­ have been debited to the profit and loss acc .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ich was issued in the original assessment proceedings under Section 143 makes it clear that the point on which the re­assessment proceedings were initiated, was well considered in the original proceedings. In fact, the very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details tiled do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocation should be done. All these things leads to an unavoidable conclusion that the question as to how and to what extent deduction should be allowed under Section 10A of the IT Act was well considered in the original assessment proceedings itself. Hence, initiation of the re­assessment proceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... cer on his own where such information is passed on to him by the audit that income has escaped assessment. In the present case, by scrupulously analysing the audit objection in great detail, the Assessing Officer has demonstrably shown to have held the belief prior to the issuance of notice as well as after the issuance of notice that the original assessment was not erroneous and so far as he was concerned, he did not believe at any time that income has escaped assessment on account of erroneous computation of benefit under section 80HHC. He has been consistent in his submission of his report to the superior officers. The mere fact that as a subordinate officer he added the suggestion that if his view is not accepted, remedial actions may be taken cannot be said to be belief held by him. He has no authority to surrender or abdicate his function to his superiors, nor the superiors can arrogate to themselves such authority, It needs hardly to be stated that in such circumstances the conclusion is irresistible that the belief that income has escaped assessment was not held at all by the officer having jurisdiction to issue notice and recording under the office note on February 8, 1997 .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... rpose of business. It was submitted that the issue of allowability of such unascertainable expense while calculating book profit under section 115JB of the Act was never discussed during the original assessment proceedings and therefore, it cannot be said that the Assessing Officer had formed an opinion on this issue. Under the circumstances, it cannot be said that the reopening is based upon a mere change of opinion. 7.1 As regards the contention raised by the learned advocate for the petitioner that the reopening of assessment is based upon an audit objection, it was submitted that there is no mention of any audit objection in the reasons recorded for reopening the assessment. Therefore, the question of borrowed satisfaction on the part of the Assessing Officer while reopening the assessment would not arise. It was submitted that the Assessing Officer, after duly applying his mind to the facts of the case and forming the requisite belief that income chargeable to tax has escaped assessment, has assumed jurisdiction under section 147 of the Act and that there being no infirmity in the action of the respondent, there is no warrant for interference by this court. 8. This court has c .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... to be added to the net prof1t for computing Book Profit under section 115JB. 9. Thus, it is on the above referred two grounds that the Assessing Officer seeks to reopen the assessment of the petitioner for the assessment year under consideration. Since it has been contended on behalf of the petitioner that the reopening is based upon a mere change of opinion, it would be necessary to examine as to whether the Assessing Officer, at the time of scrutiny assessment, has applied his mind to the said issues. In this regard, a perusal of the notice dated 19.11.2014 issued under section 142(1) of the Act reveals that the Assessing Officer had specifically stated that the provision for future development expenses of ₹ 2,51,86,534/­ have been debited to the Profit and Loss Account, but have not been added back to the computation of income; and that the provision is not an expense incurred for the purpose of business and is unascertainable in nature. He had, accordingly, called upon the petitioner to explain as to why the said amount should not be added back to the returned income. The Assessing Officer had further called upon the petitioner to explain as to why the gain on retire .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... in it has been held that initiation of re­assessment proceedings under section 147 by issuing notice under section 148 merely because of the fact that now the Assessing Officer is of the view that deduction under section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings. 15. In the opinion of this court, the above decisions would be squarely applicable to the facts of the present case inasmuch as insofar as the first issue is concerned, the Assessing Officer had called for details and after considering the explanation given by the assessee, had accepted the same. As regards the other issue, namely the provision for future development expenses, the assessment is sought to be reopened merely for examining the same issue from a different angle. Therefore, on both the counts on which the assessment is sought to be reopened, it would amount to mere change of opinion on the part of the Assessing Officer and hence, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act, lacks validity. 16. Another aspect .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... e as information on the basis of which the Income Tax Officer can act, ultimate action must depend directly and solely on the formation of belief by the Income Tax Officer on his own where such information is passed on to him by the audit that income has escaped assessment. 20. In the present case, from the audit para it emerges that upon the audit department bringing the above two issues to the notice of the Assessing Officer, the Assessing Officer did not agree with the objections raised by the audit department and expressed the opinion that the original assessment was not erroneous. However, it appears that on the insistence of the audit department, which found that the reply of the Assessing Officer was not tenable, the respondent­Assessing Officer has reopened the assessment. In the aforesaid premises, it is evident that the Assessing Officer did not form the requisite belief that income chargeable to tax has escaped assessment, but the reasons have been recorded on the basis of borrowed satisfaction of the audit department and not that of the Assessing Officer. Therefore, the basic requirement for assumption of jurisdiction under section 147 of the Act, namely the formati .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

 

 

 

 

|| Home || About us || Feedback || Contact us || Disclaimer || Terms of Use || Privacy Policy || Database || Members || Refer Us ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.
|| Site Map - Recent || Site Map ||