TMI Blog2023 (12) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to us, was a fatal error. What has emerged is that although reassessment had been triggered, concededly, after the end of four (4) years from the date of the end of relevant AY and at the end of the cusp of the sixth (6) year, i.e., on 31.03.2018, the AO did not allege that SIPL had failed to disclose fully and truly all material facts which were necessary for carrying out the assessment. This, according to us, was a grave folly. The reason, perhaps, why the AO did not allude to this aspect was because queries were raised during the original assessment, which included questions concerning the sale of the subject land. More particularly, answers were furnished by SIPL, along with the relevant documents and material sought by the AO, thusit cannot be said that the subject transaction was not scrutinized by the AO. It is well-known that the AOs often issue questionnaires, seek answers to their queries and if satisfied, may decide to accept the explanation and consequently, the return. Therefore, in our view, it is correctly argued on behalf of SIPL by Mr Sinha that this was a case of change in opinion. Whether the PCIT applied his mind while granting approval? - The for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any had confessed that it was a dummy entity and had not advanced any loan to any person. This letter conveyed that the so-called lender company lends money to different companies to launder their unaccounted money. It is against this backdrop that the court sustained the action taken to reopen the reassessment proceedings. Given this backdrop, the Court observed that it was not a case where the AO sought to draw fresh inference, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information in that case, as observed by the Court, exposed the falsity of the statement made on behalf of the appellant/assessee when the original assessment order was framed. Thus, we are of the opinion that for the reasons given above, this is not a case in which the reassessment proceedings ought to have been triggered against SIPL. Assessee appeal allowed. - HON'BLE MR. JUSTICE RAJIV SHAKDHER AND HON'BLE MR. JUSTICE ANISH DAYAL For the Petitioner Through: Mr Ruchesh Sinha, Adv. For the Respondents Through: Mr Vipul Agrawal, Sr Standing Counsel, with Mr Gibran Naush ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any project for two to three years. Thus, as per SIPL, once the sale took place, it claimed as profit an amount calculated at the rate of Rs. 1,00,000/- per acre and remitted the balance to STPL. SIPL conveyed to the AO that the amount remitted to STPL was claimed as expenditure, and the resultant profit earned, i.e., Rs. 1,73,002/-, was offered for levy of tax. 5. This explanation, broadly, formed part of the replies submitted by SIPL on various dates, i.e., 21.10.2013, 11.11.2013, 18.11.2013, 09.12.2013, and 16.01.2014. 6. In the backdrop of the explanation furnished by the petitioner/assessee that the AO framed the assessment order dated 28.02.2014 under Section 143(3) of the Act, without making any addition concerning the sale of the subject land; which had fetched a price of Rs. 1,51,00,000/-. 6.1. Despite detailed scrutiny, the AO served a notice dated 28.03.2018 on the petitioner s Chartered Accountant (CA) concerning the AY in issue. 6.2. Once again, via this notice, the AO sought various documents, which included balance sheets for the Financial Year (FY) in issue as well as the immediately preceding FY; ROI for the AY in issue, i.e., AY 2011-12; statements of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate. In sum, as per the AO, since SIPL was not in the business of purchasing and selling land, its transactions with STPL were on capital account. In this context, it was also noticed that the funds received from STPL by SIPL were shown under the head Sundry Creditors and not as advances. 11.4. Fourthly, it was the AO s view that the money received by SIPL was a loan and, therefore, any payment made by SIPL to STPL should result in scaling down the loan liability. 11.5. Fifthly, the AO also noticed that SIPL had failed to substantiate its stand that it had used funds provided by STPL for purchasing the subject land. 11.6. Lastly, doubts were also raised concerning the MOU/agreement dated 02.03.2007 on the ground that it was executed on plain paper. In sum, the AO s view was that there was collusion between SIPL and STPL; therefore, the provisions of Section 50C were applicable. 12. Pivoted on the aforesaid rationale, the AO concluded that SIPL had earned income by way of capital gains amounting to Rs. 57,30,000/-. The AO arrived at this figure by adjusting the sale consideration, i.e., Rs. 1,51,00,000/-, against the value of the land arrived at based on the circle rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such example. The submission was that parties could well have entered into an oral agreement. 19. It was contended by SIPL that since reopening was triggered after four (4) years from the end of relevant AY, as per the first proviso appended to Section 147 of the Act, a case had to be made out that there was a failure on the part of SIPL to disclose fully and truly all material facts which were relevant for assessment. 20. This assertion was sought to be supported by referring to the following judgements: (i) Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Delhi). (ii) Wel Intertrade (P.) Ltd. v. ITO (2009) 308 ITR 22 (Delhi). (iii) CIT v. Suren International (P.) Ltd., (2013) 357 ITR 24 CIT (Delhi). 21. Since the issue that triggered reassessment was an aspect that was inquired into by the AO while framing the assessment order dated 28.02.2014 under Section 143(3) of the Act, SIPL averred that this was a case of change of opinion, both concerning the nature of the transaction, and the applicability of provisions under Section 50 of the Act. Furthermore, because a query was raised and answered, the AO had no jurisdiction to reopen the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al assessment order, from the perspective of it being a sham transaction. This aspect has been brought to the fore in the reasons recorded by the AO, once he received the report of the OCM Cell. In support of this plea, Mr Agrawal placed reliance on the judgment rendered by the Supreme Court in Phool Chand Bajranglal v. ITO (1993) 4 SCC 77. (iii) Both the Additional Commissioner of Income Tax [in short, ACIT ] and PCIT had applied their mind before approving the initiation of the reassessment proceeding against SIPL. The fact that PCIT clearly stated that the action was approved was sufficient for the purposes of Section 151 of the Act. [ See PCIT v. Meenakshi Overseas Ltd. passed on 11.01.2016 in ITA No. 651/2015 ] (iv) The submission made on behalf of SIPL that this was a case of change of opinion was untenable for the reason that the AO had neither expressly nor by necessary implication expressed an opinion on the matter, which was the basis for triggering the reassessment proceeding qua SIPL [ ITO v. Techspan India Private Ltd. (2018) 6 SCC 685 ]. Analysis and Reasons 28. We have heard learned counsel for the parties. The essential facts which have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e business. This fact emerges from a perusal of the assessment order dated 28.02.2014 as well, wherein the AO has observed the following: The assessee company is engaged in the business of real estate and land development. 34.1. This conclusion is buttressed by the fact that the subject land was treated as stock-in-trade in the hands of SIPL as well as STPL. Thus, the AO, according to us, committed an error in taking recourse to Section 50C of the Act. 34.2. Because the AO took recourse to Section 50C of the Act, he proceeded to arrive at the escaped income by calculating the value of the land based on the then prevailing circle rate, after adjusting it against the sale consideration. 34.3. This, according to us, was a fatal error. 34.4. Apart from the above, what has emerged is that although reassessment had been triggered, concededly, after the end of four (4) years from the date of the end of relevant AY and at the end of the cusp of the sixth (6) year, i.e., on 31.03.2018, the AO did not allege that SIPL had failed to disclose fully and truly all material facts which were necessary for carrying out the assessment. This, according to us, was a grave folly. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the relevant sale deed as above for you kind perusal and ready reference. 2. The total cost of land sold as above was debited to the Profit and Loss account for the assessee company as follows: S.No Khasra No. Area Direct Purchase Cost Credit to NSIL Total Cost 1. 146 7001 Hectare = 1.73002 ACRES 1,02,33,462/- 46,93,536/- 1,49,26,998/- xxx xxx xxx 5. Loans and Advances: We are enclosing a list of loans and advances as on 31.3.2011. The confirmation from Nitishree Realtech Pvt. Ltd. is being enclosed. Other advances (Advances for land (agreement) are very old and a list of such advances is being enclosed 6. Creditors for land: As .already explained, the flagship company Shourya Towers Private Limited ( then known as Nitishree Infrastructure Limited) had provided funds to its various SPVs and land was purchased in these SPVs for projects to be developed by the flagship company. Likewise, in the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... control over how the assessment order is framed. In this context, we may quote the following apposite observations of the judgment rendered by the Supreme Court in Joint Commissioner of Income Tax and Anr v Cognizant Technology Solutions India Pvt Ltd (2023) SCC Online SC 465: The assessee has no role to play and is not the author of the assessment order and hence the manner and contents of the assessment order as framed is not determinative (of) whether or not it is a case of change of opinion . [Emphasis is ours] 38. It is well-known that the AOs often issue questionnaires, seek answers to their queries and if satisfied, may decide to accept the explanation and consequently, the return. 39. Therefore, in our view, it is correctly argued on behalf of SIPL by Mr Sinha that this was a case of change in opinion. 40. This brings us to, perhaps, the last aspect concerning the matter at hand, which is, whether the PCIT applied his mind while granting approval. 41. Mr Sinha, in this context, has drawn our attention to the relevant entries made in the form for recording reasons for initiating the reassessment proceeding and obtaining the approval of the PCIT. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information sought against Sr. No. 9 had to be filled in, i.e., the AO had to indicate, firstly, the income at which SIPL was assessed initially and, secondly, whether it was a case of under-assessment at too low a rate, assessment which has been made the subject of excess relief of allowing of excessive loss or depreciation . 42.1. In other words, Mr Sinha submitted that since the AO's assertion was that this was a case of under-assessment, in terms of clause (c) sub-clause (i) of Explanation 2 appended to Section 147 of the Act, it had, according to him, resulted in deemed escapement of income chargeable to tax. The relevant part of the said provision is extracted hereafter: 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btaining approval is what appears to have been placed before the ACIT and PCIT. The mandatory entries were not made. Therefore, the weight of the evidence seems to suggest that the ACIT cleared the path without delving into the aspect that this was, indeed, a case of under-assessment and, likewise, the PCIT rubberstamped the request made by the AO for initiating the reassessment proceeding qua SIPL without applying his mind to the requisite aspects. 50. According to us, the reopening of the concluded scrutiny assessment is a serious business. The Act provides for a layered approach precisely for this reason. Senior officers like ACIT and PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings. Several pitfalls that the Court's notice can be avoided if the concerned authorities were to look closely at the request made for re-opening. 51. In this context, it was brought to our attention by Mr Sinha that a similar request for initiating reassessment proceedings qua another group company, i.e., Shourya Builders was declined. 52. This is evident from the extract of the office note placed before us, whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and therefore, he wrote to the AO of the lender company. The AO of the lender company informed his counterpart that the director of the lender company had confessed that it was a dummy entity and had not advanced any loan to any person. This letter conveyed that the so-called lender company lends money to different companies to launder their unaccounted money. It is against this backdrop that the court sustained the action taken to reopen the reassessment proceedings. Given this backdrop, the Court observed that it was not a case where the AO sought to draw fresh inference, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information in that case, as observed by the Court, exposed the falsity of the statement made on behalf of the appellant/assessee when the original assessment order was framed. 57. As mentioned above, the facts that obtained in the Phool Chand Bajranglal case are quite different from those obtained in the instant case. Conclusion 58. Thus, we are of the opinion that for the reasons given above, this is not a case in which the reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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