TMI Blog2023 (12) TMI 217X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of such finding would vitiate the reassessment proceeding. As relying on this court case M/S. Seshasayee Paper And Board Limited Rep. By Its Director (Finance) Secretary Sri V. Pichai [ 2023 (3) TMI 1111 - MADRAS HIGH COURT ] the impugned notice and consequential proceedings invoking the extended period of limitation beyond 4 years for making a reassessment under Section 147 read with Section 148 of the Act in the absence of any finding as to the existence of the condition precedent viz., that income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to fully and truly disclose the material particulars vitiates the entire proceedings and thus liable to be set aside. Assessee appeal allowed. - Honourable Mr. Justice Mohammed Shaffiq For the Petitioner : M/s Vandana Vyas For the Respondents : Mr.V.Mahalingam ORDER MOHAMMED SHAFFIQ, J. The present writ petition is filed challenging the notice dated 24.03.2020 and the consequential proceeding dated 27.02.2021 rejecting the objections inter alia on the premise that the assumption of jurisdiction in the absence of a finding that the income chargeable to tax h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 14A of the Act. During the pendency of the appeal, the Appellate Authority issued an enhancement notice under Section 250(2) of the Act, dated 19.01.2017 wherein a sum of Rs. 9,36,04,656/- was noticed as being shown as loss under the head long term capital gains . It was further stated that the sale consideration for the sale of the said land was shown at Rs. 21 Crores and as having been received on 27.06.2012 against which brokerage paid was reduced and indexed cost amounting to Rs. 30.36 Crores. The notice proceeds to state that perusal of Form 3CA and 3CD would reveal the nature of business is mentioned under the head Sector as Builders and Sub Sector as Property Developers and Code Number 0403 was also given. The petitioner was called upon to explain as to why the consideration received on sale of land should not be treated as business income in view of the company's nature of business and tax enhanced correspondingly. The petitioner submitted its written submission dated 30.01.2017 in respect of the above notice inter alia highlighting the fact that the appellant sold the subject land held as fixed asset. In this regard, the relevant portion of the written subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Platex Ltd. based at Mauritius. It cannot be ruled out that the cash generated from real estate transactions may have been routed through Mauritius company and the same is brough back. There is a possibility of round tripping in this case. Based on the materia on record, it is essential to investigate the sale of land during the relevant A.Y. Therefore, I have reasons to believe that the income chargeable to tax have escaped assessment exceeding Rs. 1 Lakh. In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 07.03.2016. Since, 4 years from the end of the relevant year has expired in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above. 2.5. The Petitioner submitted its reply vide letter dated 22.02.2021 inter alia highlighting the following: a) The impugned notice invoking the extended period under Section 147 from the end of relevant assessment year is without jurisdiction inasmuch as income chargeable to tax had escaped assessment by reason of failure on the part of the assessee / petitioner to disclose fully and truly all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nasmuch as it is a mere change of opinion without any fresh / tangible material. In this regard reliance was placed on the fact that the petitioner vide its reply dated 15.02.2016 had submitted that he was not claiming the long term capital loss of Rs. 9,36,04,656/- on account of sale of land. Thus, the transaction of sale of land was within the knowledge of the assessing officer while making the assessment. In any event, the Appellate Authority has exercised the power of enhancement by treating the transaction as representing business income and thus any proceedings by the assessing officer invoking section 143 of the Act would be hit by the 3rd proviso to the said section. 4. To the contrary, it was submitted by the learned counsel for the Respondent that the reasons set forth for exercising the power of reassessment are made on the basis of new material as would be evident from the fact that the reassessment looks to the fact that the petitioner had received investment from Platex Limited which is based in Mauritius a fact which was never discussed during the course of the original assessment. 4.1. Secondly, the assessee had sold 36.24 acres of land at Pattipulam for a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent to invoke the extended period beyond four years under section 147 of the Act. Absence of such finding would vitiate the reassessment proceeding. The above issue namely whether the absence of finding that income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to fully and truly disclose the material facts necessary for assessment would render the assumption of jurisdiction under Section 147 of the Act bad and illegal stands resolved by a Division Bench of this Court in W.A.No.2759 of 2022 wherein it was held as under : 8. We find that there is no illegality or infirmity in the order of the learned Single Judge warranting interference for the following reasons: a) That the impugned proceeding is admittedly initiated invoking the extended period under Section 147 of the Act. The relevant portion of the said Section is extracted below: 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 ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings under clause (c). To invoke the extended period of six years for reassessment, the reasons furnished for reassessment ought to contain a finding that the appellant herein had failed to disclose fully and truly all material facts necessary for assessment. We say this, since it appears to us that the whole idea of furnishing reasons before embarking on a full fledged exercise of reassessment was to ensure that the powers of reassessment are exercised only in circumstances which the statute permit. The above limitation/restriction on the power of reassessment was intended to ensure transparency in the proceeding and to avoid abuse of power. It is trite law that power of reassessment must be exercised with a degree of caution and an element of circumspection and must be strictly in compliance with the procedure and only in circumstances which warrants exercise of that power. In the present case, though admittedly the power to reassess has been exercised by invoking the extended period of limitation in terms of the proviso to Section 147 of the Act, there is no recording of the existence of the circumstances, viz., failure to disclose fully and truly all material particulars w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authority on a question of fact. The relevant Act enabled the local authority to acquire land compulsorily for housing of working classes. But it was expressly provided that no land could be acquired which at the date of compulsory purchase formed part of park, garden or pleasure ground. An order of compulsory purchase was made which was challenged by the owner contending that the land was a part of park. The Minister directed public inquiry and on the basis of the report submitted, confirmed the order. 81. Interfering with the finding of the Minister and setting aside the order, the Court of Appeal stated; The first and the most important matter to bear in mind is that the jurisdiction to make the order is dependent on a finding of fact; for, unless the land can be held not to be part of a park or not to be required for amenity or convenience, there is no jurisdiction in the borough council to make, or in the Minister to confirm, the order. (emphasis supplied) 11. While on the question of existence or otherwise of jurisdictional fact which would enable the authority to invoke the extended period of limitation of six years for reassessment, it may also be rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoke the extended period, the Assessing Officer ought to show/ demonstrate the existence of any of the three circumstances set out in the proviso to Section 147 of the Act. In this case, failure on the part of the assessee to fully and truly disclose all material particulars in our view would constitute the jurisdictional fact for invoking extended period of limitation and failure to record the existence of the above jurisditional fact while invoking the extended period under the proviso to Section 147 of the Act, would vitiate the entire proceedings. In this regard, it may be relevant to refer the following judgments, wherein it was held that failure to render a finding as to the existence of the above circumstance warranting invocation of the extended period in terms of the proviso to Section 147 of the Act would vitiate the entire proceedings. In this regard, it may be relevant to refer to the following judgements: a) Duli Chand Singhania vs ACIT (269 ITR 192): ...that the reasons recorded for issue of notice showed that the satisfaction recorded therein wes merely about the escapement of income. There was not even a whisper of an allegation that such escapement h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Foramer France, [2003] 264 ITR 566 (SC), it was held that if there is no failure to file return or to disclose fully and truly all material facts, issuance of notice beyond the period of four years is barred by limitation. In the case of CIT v. Annamalai Finance Ltd., [2005] 275 ITR 451 (Mad) it was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. It is incumbent on the Assessing Officer to prove that there was a failure to disclose material facts necessary for the assessment for the issuance of notice beyond the period of four years. e) Caprihans India Ltd. v. Tarun Seem, Deputy Commissioner of Income Tax, (2004) 266 ITR 566 : 8. The Assessing Officer seeks to reopen the assessment after a period of four years from the end of the assessment year and in view of the judgment of this court in the case of IPCA Laboratories Ltd. v. Gajanand Meena, Deputy CIT (No. 2)[2001] 251 ITR 416, the Assessing Officer cannot act in the matter of reopening of assessment beyond four years, unless he has reason to believe that income has escaped assessment by reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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