TMI Blog2023 (6) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction and reflects no independent application of mind. At the best, the authority could have initiated Section 263 proceedings but that having not been done and after unreasonable period trying to reopen the assessment is not step which may be recognized in law. If we peruse the reasons which are recorded it reflects no independent application of mind and as such we do not recognize this routine exercise of reopening of assessment and thereto after a period of almost two years. The authority is sufficiently couched with the power of revision u/s 263 and as such when the authority has resorted to Section 147 is appearing to be impermissible especially when there appears to be no subjective satisfaction independently arrived at that any income chargeable to tax has escaped the assessment for any assessment year. This reason to belief contemplated u/s 147 of the Act requires proper application before initiating the step which here appearing to be missing and as such we are quite satisfied that case is made out by the petitioner to call for any interference. The conclusion of an authority on the issue as to whether income is escaped from the assessment is also not so cogent e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er alongwith other co-owners executed an agreement to sale on 16.12.2015. Eventually, sale deeds were executed on 30.06.2017 for the sale of these lands by the petitioner alongwith other co-owners. [3.1] It is the case of the petitioner that petitioner has filed her original return of income for Assessment Year 2016 - 2017 on 17.03.2017 declaring total income of Rs.9,10,000/- and claimed exemption on income from compulsory acquisition of land totaling around Rs.2,74,83,074/-. The said of return of the petitioner was duly processed and detailed scrutiny was undertaken. Notice under Section 142(1) of the Income Tax Act was also issued on 13.07.2018 whereby the petitioner was asked for correctness of the claim of exempt income alongwith necessary document / evidence regarding such claim. In response to the said notice under Section 142(1) of the Act, the petitioner provided all the necessary details as demanded by virtue of reply dated 24.08.2018 as well as 18.10.2018 and later on, after having satisfied, the respondent authority has passed an assessment order under Section 143(3) of the Act on 31.10.2018 wherein the assessing officer has accepted the claim of the petitioner and wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kar, learned advocate appearing for the petitioner has vehemently contended that the impugned action i.e. notice as well as order passed by respondent Nos. 1 and 2 respectively are totally impermissible and it violates the relevant proposition of law and the issue. It has been submitted that respondent No.1 authority has recorded practically only one reason to believe that income has escaped assessment. The petitioner alongwith three more co-owners have claimed that their land was compulsorily acquired by GIDC and they have received consideration against the same and such consideration is claimed exempt from taxation under Section 10(37) of the Act. In case of other two co-owners, namely, Mr. Rohit Chinubhai Modi and Mr. Saurabh Rohitbhai Modi, subsequent to the assessment, an order under Section 263 of the Act is passed by the Principal Commissioner of Income Tax holding that the claim of exemption requires greater examination. But, according to Mr. Soparkar, learned advocate, the same cannot said to be denied completely. As such, on the basis of such, a notice for reopening is issued and the objections also came to be rejected and this is a fundamental error committed by an autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iny at length has been undertaken and thereafter assessment order has been passed and as such under this circumstance, the action is not sustainable in the eye of law. It has further been contended that apart from this, the assessment order has been passed way back in year 2018 wherein the present action which is sought to be initiated is in the year March, 2021 which is beyond the reasonable period as it is approximately around two years down the line. Hence, at such a belated stage, no power can be exercised in view of settled position of law. [6.3] Mr.Soparkar, learned advocate has further reiterated that parameters of revision under Section 263 of the Act are altogether different as compared to Section 147 of the Act. Respondent No.1 authority believes that there is an error which is prejudicial to the interest of revenue then to correct the course of action the authority would have to revive the assessment under Section 263 of the Act. But once the opinion in the original assessment has already been framed, the same can be corrected by revising under Section 263 of the Act but the remedy or the provisions of Section 147 of the Act is impermissible since there is well recogn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Janaki Mohan versus Income-tax Officer, Non- Corporation Ward - 15(2), Chennai reported in (2021) 132 taxmann.com 109 (Madras) as well as in the case of Cliantha Research Ltd. versus Deputy Commissioner of Income-tax, Ahmedabad Circle-I reported in (2013) 35 taxmann.com 61 (Gujarat). [6.6] So far as the proposition that in the absence of no new tangible material reopening is impermissible, Mr.Soparkar, learned advocate has made a reference to in the case of Shanti Enterprise versus Income-tax Officer, Ward 2 reported in (2016) 76 taxmann.com 184 (Gujarat) as well as in the case of Principal Commissioner of Income-tax versus NESCO Ltd. reported in (2023) 146 taxmann.com 325 (Bombay). [6.7] In respect of non application of mind and borrowed satisfaction, Mr.Soparkar, learned advocate for the petitioner has referred to cases of Nila Infrastructures Ltd. versus Assistant Commissioner of Income-tax reported in (2023) 146 taxmann.com 154 (Gujarat) as well as Kantibhai Dharamshibhai Narola versus Assistant Commissioner of Income Tax, Ward 3(2)(4). reported in (2021) 125 taxmann.com 348 (Gujarat). [6.8] Mr.Soparkar, learned advocate has further made a reference to the decision in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... change of opinion does not apply when in respect of other co-owners the order is passed under Section 263 of the Act. It has been contended that if this order could have been placed on record probably even co-ordinate bench could not have passed any order in favour of the petitioner. Hence, the action deserves to be corrected. [7.1] Mr. Patel, learned advocate has submitted that an assessment order has been passed in favour of the petitioner by not adding the income but then that itself is not a circumstance which can prevent the authority from exercising jurisdiction. In fact in case of this very property and in respect of claim, similar to present one, the authority could not found favour with those co-owners and an order came to be passed on 18.03.2021 under Section 263 of the Act and as per the said order, the assessment order has also been passed on 17.12.2018 for both those coowners wherein the claim of exemption was not considered and therefore, when that be so, the petitioner cannot not contend that the authority is not empowered to initiate the action of reopening. [7.2] Mr. Patel, learned advocate has further submitted that in the case on hand if the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange of opinion would not help out the petitioner. In fact, according to Mr. Patel, learned advocate, the taxability is not examined by an authority and there was no such specific query and as such it is always open for an authority to reopen the assessment even if it has been well scrutinized. [8] At this stage, Mr. B. S. Soparkar, learned advocate appearing for the petitioner in rejoinder has submitted that as said earlier the contours of Sections 147 and 263 of the Act are altogether different and in case of Ms. Poonamben Modi, one of the co-owner of the land, the case is dropped for this very property on 22.06.2021. By referring to page 190, it has been submitted that the sole reason was based upon a mere belief that appropriate remedy is under Section 147 of the Act as can be seen from later part of paragraph 2 at page 190 but then this may not be a valid reason for reopening of the assessment and it has further been submitted that in case of other co-owners to the reasonable knowledge of him the said order of ITAT has been made the subject matter of challenge and therefore, the said observations cannot be treated as final. Hence, in this background of fact, according to Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific form and later on the opinion is formulated to reopen the assessment since in respect of proceedings under Section 263 of the Act in case of other co-owners the claim of the exemption was not allowed and as such this is not an independent exercise of power but it is based upon the very same material and on information the different opinion is now to be formed once having accepted while passing an assessment order and therefore, to some extent, the learned advocate for the petitioner has justifiably contended that it is a case of change of an opinion based upon the proceedings in respect of co-owners. In fact, it appears that the petitioner pursuant to previous notice for scrutiny has already furnished the information and accepted the claim of the petitioner. [11] Now at this stage, if we may peruse the return of income as verification form, reflecting on page 171, with respect to Assessment Year 2016 - 2017, the annexures attached to the same are clearly indicating that in exempted income column at bottom on page 172 the petitioner has indicated the figure in titled named as land (taxfree, Government Acquisition) and on page 177 the very first query relates to the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpensation received for compulsory acquisition of agricultural land and non-agricultural land in the matter of providing exemption from income-tax under the RFCTLARR Act, the exemption provided under section 96 of the RFCTLARR Act is wider in scope than the tax exemption provided under the existing provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Board and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961 Circular No. 36 2016, dated 25-10-2016 [13] In addition to this, a reference also deserves to be made to a similar CBDT Circular dated 25.10.2016 reflecting on page 181 in which the subject of taxability of compensation received is clarified and observed that in view of uncertainty which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xisting provisions of Income-tax Act, 1961. This has created uncertainty in the matter of taxability of compensation received on compulsory acquisition of land, especially those relating to acquisition of non-agricultural land. The matter has been examined by the Baard and it is hereby clarified that compensation received in respect of award or agreement which has been exempted from levy of income-tax vide section 96 of the RFCTLARR Act shall also not be taxable under the provisions of income-tax Act, 1961 even if there is no specific provision of exemption for such compensation in the Income-tax Act, 1961. 4. The above may be brought to the notice of all concerned. 5. Hindi version of the order shall follow. (F.No. 225/S8/2016-ITA.Il) Rohit Garg Deputy Secretary to the Govt. of India [14] It appears that based upon aforesaid provisions as well as circular it might be possible that Assessing Officer at the time of passing assessment order must have formulated an opinion that claim made by the petitioner deserves to be accepted and as such it was not turn-down and hence, the presumption which has been drawn by the authority that income has been escaped from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open for the authority to take appropriate corrective measure if permissible in law since authorities are sufficiently couched with the power. [16] There is one another circumstance, which also cannot be sideline is that in case of Ms. Poonamben Modi one of the coowner in the proceedings have been dropped with respect to this very property on 22.06.2021 and similar to present petitioner the assessment was undertaken and found no addition. The said aspect has not been controverted so specifically by the learned advocate appearing for the revenue. [17] In the background of these circumstances, if we peruse the contentions raised by the petitioner and to justify the decisions have been brought to the notice of this Court, we may deal with the same before concluding the issue with respect to present petitioner. [18] Here is the case where during scrutiny process a specific query was raised relating to exempt income and to satisfy the query necessary particulars by the petitioner has already been furnished and it is only thereafter the assessment order has been passed without any addition or dis-allowance and as such the action which is sought to be initiated is based upon a me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h issue without any additional material would be a mere change of opinion. As held by this Court in the case of Gujarat Power Corporation v. Asst. CIT, 350 ITR 166 (Guj.), even when the Assessing Officer in an order of assessment had accepted the assessee s stand and granted the claim as put forth, reopening on the same issue would not be permissible on the basis of selfsame material on record. Similar view is also taken by the Delhi High Court in the case of CIT v. Usha International Ltd, 348 ITR 485 (Delhi). In the present case, the Assessing Officer had raised a pointed query with respect to the amount accumulated or set apart for utilization in subsequent years. He called upon the petitioner to give details and to produce computation of income and statutory form for accumulation of amount under section 11(2) of the Act. It was in response to such query, the petitioner pointed out that an amount of Rs.93.20 lacs was accumulated or set apart for the assessment year 2007-09 and in the year under consideration, i.e., 2008-09, a further sum of Rs.1.30 crores was set apart under section 11(2) of the Act. In the return filed itself, the petitioner had produced Form 10 as well as the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 6-4-2016 amounts to change of opinion beyond any pale of doubt. [20] As such when this issue has been in substance reiterated over the period of time, we are of the opinion that since very issue about exemption has been dealt with during the assessment proceedings, now after about almost two years, reopening is impermissible by resorting to Section 147 of the Act simply because in respect of other co-owners the claim has not been allowed but then the said issue is very much pending, has not attained finality and as such action initiated by respondent authority is impermissible. [21] Further it appears that there is no independent application of mind by respondent authority and a bare perusal of the reasons recorded would clearly indicate that the main and substantial ground is that in respect of other co-owners in proceedings under Section 263 of the Act a different view is taken but then the authority while examining the issue about exemption as prayed for ought to have gone into the specific provisions alongwith the CBDT circular and ought to have applied its mind to the effect that contours of Sections 147 and 263 of the Act are altogether different and as such with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment to fish out evidence which is impermissible and the pre-requisite for reopening being satisfaction of income to tax having escaped , the authority should have reason to believe that income of the assessee has escaped assessment; and, secondly, he must have reason to believe that such escapement is by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. If these twin conditions are not being fulfilled, notice issued by the authority would be one without jurisdiction. The belief which the authority entertains must not be arbitrary or irrational. It must be reasonable or having nexus to the escapement of income to tax. The adequacy of the reasons and its relevancy would form the foundation for reopening of the assessment. In the absence thereof, on borrowed opinion, reassessment proceedings cannot be commenced. [22] This very principle has also been further reiterated in yet another decision delivered by co-ordinate bench of this Court in the case of Kantibhai Dharamshibhai Narola (supra) which has also emphasis the efficacy of independent application of mind. The said relevant observation is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case is made out by the petitioner to call for any interference. [24] The background of facts as such has led to a situation where yet another decision which has been brought to our notice has some impact on the conclusion which we may arrived in the present case on hand. In case of NLC India Ltd. (supra) the Madras High Court has also touched the said issue and as such we deem it proper to quote hereunder the observations contained in paragraphs 54, 55, 56 and 58:- 54. Likewise, section 148 must be resorted to only in those cases where the reasons disclose prima facie satisfaction that there is escapement of turnover. In a case where orders of assessment have been passed under scrutiny, the specific issues set out in the reasons have been identified at the time of original assessment and information in that regard has been solicited and furnished by the assessee, the legal assumption is that these orders have taken note of the ROI and accompanying statutory forms and all the material available on that account. 55. All the more, in a case where the officer has been careful in his analysis of the issues that arise and has raised queries that relate to the issues in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the income was also assessed accordingly. However, thereafter on 30.05.2012, a notice was issued to the appellant under Section 148 of the Act whereby the Income Tax Department decided to re-open the assessment on the ground that income which was assessable to income tax escaped assessment during the year 2009-10. The stand which was taken by the Revenue in this notice was that the amount of compensation/consideration received by the appellant against the aforesaid land was not the result of compulsory acquisition and on the contrary it was the voluntary sale made by the appellant to the Techno Park and, therefore, the provisions of Section 10(37) of Act were not applicable. The appellant objected to the re-opening of the said assessment by filing his reply dated 30.11.2012. However, respondent no. 2 namely, the Joint Commissioner, Income Tax Range-I, Kawadiar, Thiruvananthapuram, took the view that the case did not come under compulsory acquisition and directed the Assessing Officer to compute the income accordingly. This direction dated 11.03.2013 of respondent no. 2 was challenged by the appellant by filing a Civil Writ Petition in the High Court of Kerala. The learned Single ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n acquired and he cannot reiterate the same. The appellant, therefore, only wanted to salvage the situation by receiving as much compensation as possible commensurate with the market value thereof and in the process avoid the litigation so that the appellant is able to receive the compensation well in time. If for this purpose the appellant entered into the negotiations, such negotiations would be confined to the quantum of compensation only and cannot change or alter the nature of acquisition which would remain compulsory. We, therefore, overrule the judgment of the Kerela High Court in Info Park Kerala vs. Assistant Commissioner of Income Tax (2008) 4 KLT 782. [26] Here also the land appears to be compulsory acquired and the income is rightly claimed as exempted and therefore, the conclusion of an authority that income has escaped assessment, appears to be erroneous. At this stage, learned advocate appearing for the petitioner has pointed out that co-owners Poonamben Modi whose assessment was also sought to be reopened under Section 148 of the Act for very same reasons and thereafter, an order was passed by revenue under Section 143(3) read with Section 147 order while acce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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