Income Tax Appellate Tribunal - Panji
Income Tax Officer-Ward-30(3), ... vs Ishwar Chinta Haran Shiv Thakur, ... on 8 September, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH : KOLKATA
[Before Hon'ble Shri Aby. T. Varkey, JM & Shri M.Balaganesh, AM ]
I.T.A No. 2841/Kol/2013
Assessment Year : 2004-05
ITO, Ward-30(3), Kolkata -vs- Ishwar Chinta Haran Shiv Thakur
[PAN: AAAJS 0560R]
(Appellant) (Respondent)
For the Appellant : Shri Amitava Bhattacharya, Addl. CIT Sr. DR
For the Respondent : Shri J.P. Khaitan, Sr. Advocate.
Date of Hearing : 31.08.2017
Date of Pronouncement : 08 .09.2017
ORDER
Per M.Balaganesh, AM
1. This appeal by the Revenue arises out of the order of the Commissioner of Income Tax-XIV, Kolkata [in short the Ld. CIT(A)] in appeal No. 292/CIT(A)-XIV/Kol/09-10 dated 11.09.2013 against the order passed by the ITO, Ward-30(3), Kolkata [in short the Ld. AO] u/s 143(3)/147 of the Income Tax Act, 1961 [hereinafter referred to as the 'Act'] dated 24.12.2004 for the assessment year 2004-05.
2. The first issue to be decided in this appeal of the revenue is as to whether the ld CITA was justified in annulling the re-assessment on the incorrect assumption of jurisdiction u/s 147 of the Act by the ld AO, in the facts and circumstances of the case.
2.1. The brief facts of this issue is that the assessee is an Artificial Juridical Person (AJP) under the name & style of M/s SHRI SHRI ISWAR CHINTAHARAN SHIVTHAKUR. The managing committee of AJP consists of 5 persons. They are sebaits of the deity at the temple premises of the AJP. The return of income for the Asst Year 2004-05 was filed on 26.10.2004 declaring NIL income. The principal source of 2 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 income is from rent, donations, sale of flats and interest from investments. The ld AO observed that the assessee applied for exemption u/s 11(1) and 11(1A) of the Act seeking exemption of capital gains thereon, which is available to charitable and religious trusts. Since the assessee has not been granted the requisite registration u/s 12A of the Act which is mandatory for claiming exemption u/s 11 of the Act, the ld AO denied the same to the assessee. This was brought to the notice of the assessee by the ld AO which was accepted by the assessee. Explanation in regard to taxability of sale proceeds of the flats was asked from the assessee and assessability of capital gains thereon was examined. The assessee agreed for the assessment of taxation of capital gains from sale of two flats, for which it gave two options for taking the value of cost of acquisition. The first method is as per the value of consideration received from the Appropriate Authority of the Income Tax Department which was given u/s 269UL(3) of the Act on 4.8.1995 based on the development agreement made on 16.6.1995. As per this valuation, the apparent consideration was Rs 4,56,64,225/- and the indexed cost of acquisition would be Rs 7,52,40,342/- ( 45664225 * 463 / 281). So the Long Term Capital Loss would be Rs 6,83,30,842/- ( 75240342 - 6909500). The second option was market valuation given by a registered valuer Sri D K Datta based on advertisement published by the department in The Statesman on 28.7.1996 for auction of immovable property situated at 6, Sunny Park, Ballygunge for which the reserve price was fixed at Rs 27,00,000/- for an apartment of 1530 sq.ft. By this method, the cost of acquisition of each flat would be Rs 35,00,000/- and indexed cost of acquisition would be Rs 1,15,33,805/- ( 3500000 * 463/281*2). So the Long Term Capital Loss would be Rs 46,24,305/- ( 11533805 - 6909500).
2.2. The ld AO observed that both the methods were judged carefully and the second option was adopted by him , since the valuer had taken valuation rate fixed by the department for a property of nearby vicinity under the same pin code and Ballygunge area which is more acceptable considering the circumstances of the locality and civic 2 3 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 amenities available. Accordingly, he adopted the Long Term Capital Loss of Rs 46,24,305/- while completing the assessment. The original assessment in this case was completed u/s 143(3) of the Act on 31.10.2006 computing the total income at Rs NIL. In the said assessment order, the ld AO stated that the authorized representatives of the assessee appeared from time to time and produced the relevant documents and papers and bank statements, copy of original Aparnama, copy of agreement between developer and assessee, copy of order passed by Hon'ble Appropriate Authority and the submissions of the assessee which have been checked and examined by him.
2.3. The income was determined by the ld AO in the said assessment as under:-
Income from Other Sources Excess of Income over Expenditure (as per I&E A/c) 64,84,989 Less: Considered separately :
Sale of flats 69,09,500
Rent 1,61,920
-------------
70,71,420
----------------
(5,86,431)
Add: Disallowance of expenses 1,08,468
--------------- (4,77,963)
Income from House Property
6 Ramnarayan Lane
Annual Value 1,920
Less: Standard deduction 576
---------- 1,344
8 Ekdalia Road
Rent Receivable 1,60,000
Less: Unrealised 1,60,000
------------- 0
--------------- 1,344
3
4
ITA No.2841/Kol/2013
Ishwar Chinta Haran Shiv Thakur
A.Yr.2004-05
Capital Gain / (Loss)
Long Term Capital Loss (as discussed) (carried forward) ( 46,24,305)
Total Income NIL
3. Subsequently the ld AO issued notice u/s 148 of the Act on 5.3.2009 and reopened the assessment. The reasons recorded for reopening the assessment are as under :-
Shri Ishwar Chintaharan Shivthakur (AJP) (A.Y. 2004-05) Reason for Issuing Notice U/s 148 The assessee submitted return on 26.10.2004, declaring 'NIL' income on the ground that income earned from various sources was exempt u/s 11(1) and 11(1A). But since requisite registration was not granted. It was denied exemption in the assessment completed u/s 143(3) on 31.10.2006.
During the year under consideration, assessee acquired 18 out of 26 flats by virtue of an agreement with developers, out of which 2 flats were admeasuring 3907 sq.ft. were sold out:
Sl. No. Name of Purchaser Date of Possession FVC recd. On transfer
1. Angsuman Guha 11.03.2004 33,50,000/-
2. Satish Kr. Bhasim 25.03.2004 35,59,500/-
TOTAL 69,09,500/-
Since, above 2 flats were held by assessee for a period of less than 36 months, FVC was chargeable to tax under the head STCG, however, in assessment, computation was made under the head LTCG as under:
Full Value of Consideration (FVC) ......... 69,09,500/-
Less:- Indexed cost of Acquisition for 2 flats
35,00,000 * 463/281 *2 ............ 1,15,33,808/-
Long Term Capital Loss .......... 46,24,308/-
Above noted computation resulted in order assessment of income on two counts:- firstly, through asset in question was Short Term, it was treated as Long Term and benefit of indexation was wrongly allowed. Secondly, the Cost of Acquisition (35,00,000/-) was 4 5 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 based on an advertisement, published in the Statesman dated 28.07.2006 for auction of Immovable Property by Deptt. at 6, Sunny Park, Kolkata-700019, for which reserve price was fixed at 2,70,00,000/- . This was erroneous in so far as apartment consist of 26 flats ( + Proposed car parking space) measuring approx. 61607.625 sq. ft. was fixed by the Appropriate Authority at Rs. 4,56,64,225/- u/s 269 UL (3). Therefore, Cost of Acquisition of 3907 sq. ft. sold during the year would be Rs. 28,95,910/- [4,56,64,225 * 3907/61607.625].
And Short Term Capital Gain would come to :-
Full Value of Consideration ............... 69,09,500/- Less:- Cost of Acquisition ................ 28,95,910/- Short Term Capital Gain ............... 40,13,590/-
In this way, there was escapement of STCG to the tune of Rs. 40,13,590/-.
Further, the assessee exchanged 33 Cottah 10 chittacks of land for 20 flats, plus proportionate car parking space. This amounted to transfer of Capital assets u/s 2(47). LTCG chargeable on such transfer was not assessed in the order made u/s 143(3) dated 31.10.2006, and income of Rs. 2,33,18,266/- also escaped assessment.
In view of reasons mentioned in proceeding paragraphs, it is proposed to reopen the proceedings as per of Section 147."
3.1. During the course of re-assessment proceedings, the ld AO issued another show cause notice to the assessee as under:-
"I have examined your letter under reference thoroughly, but I do not find any reason to accept the plea as mentioned in your letter for the reason as mentioned under:-
Short Term Capital Gain It transpires from the documents submitted by you that you had taken possession of 18 flats during the financial year relevant to the assessment year 2004-05. Out of which you have sold one flat at Rs. 33,50,000/- on 11.03.2004 and another flat at Rs. 35,59,500/- on 25.03.2004. Since, date of acquisition of the above 18 flats will be the date from which the assessee had taken possession of the said flats. So, it is evident that the period of holding of the above two flats is less than three years. Section 49(1) of the I.T. Act provides where the capital asset became the property of the assessee the cost of acquisition of the assets shall be deemed to be the cost for which the previous owner of the property acquired. In the instant case the cost of acquisition was determined by the appropriate authority and that was taken as cost of acquisition of the 26 flats which was transferred to the assessee in lieu of 88 cottas 10 chattacks of land during the financial year relevant to the assessment year 2004-05. According to the spirit of Section 2(47)(v) of the I.T. Act the date of possession of the flat is the date of acquisition.5 6 ITA No.2841/Kol/2013
Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 Hence, your plea to consider LTCG from the sale of the above two flats is not acceptable .
In view of this Short Term Capital Gain is computed as under: Total sale consideration received against two flats Rs. 69,09,5000/-(A) Less: Cost of Acquisition of flats as determined by the ' Appropriate Authority Rs. 4,56,64,225/61607625*3907= Rs. 28,95,910/-
Indexed cost of acquisition Rs. 28,95,910/- * 463/282= Rs. 47,54,632/-(B) Short Term Capital Gain= (A-B) = Rs. 21,54,868/-
In view of the above, you are requested to show cause as to why Rs. 21,54,868/- will not be treated as Short Term Capital Gain.
LONG TERM CAPITAL GAIN The expression 'transfer' in sec. 45 of the I.T. Act, 1961 will have to be read in the light of its definition in section 2(47). A combined reading of section 45 with sec. 2(47) shows that any profits or gains arising from the transfer of capital asset, which expression includes same, exchange or relinquishment of the asset or the extinguishment of rights therein will be chargeable to tax as capital gains. The conditions precedent for the operation of sec. 45 are (i) there should be a transfer of a capital asset and (ii) as a result of such transfer, gains should have accrued or arisen to the transferor. As per agreement dated 16.06.1995 for developing and promoting its land at 8, Ekdalia Road, Ballygunge, Kolkata you have agreed to exchange 88 cottas 10 chattacks of land in lieu of 26 lakhs and proportionate car parking space. By virtue of this agreement you have acquired possession of the 18 flats during the financial year relevant to the assessment year 2004-05. Hence, provision of Section 2(47) is clearly attracted. So, capital gain on exchange of land for allotted 18 flats shall be taxable as Long Term Capital Gain. On perusal of the documents the Long Term Capital Gain is computed as under :-
Cost of 18 flats acquired during the financial year 2003-04 18/26 x 61607.625 x 1768* = Rs. 7,54,07,733/- (A) *Valuation rate of sale per sq. ft. is determined on the basis of rate per sq. ft. of two flats sold Cost of acquisition of land equivalent to 26 flats comprising 61607.625 sq. ft. of built up area as fixed by appropriate authority Rs. 4,56,64,225/-
Cost of indexation of acquisition of 18 flats = 18/26 x 45664225 x 463/281 = Rs. 5,20,79,467/-(B) 6 7 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 Long Term Capital Gain = (A-B) = Rs. 2,33,18,266/-
In view of the above, you are requested to show cause as to why Rs. 2,33,18,266/- will not be treated as Long Term Capital Gain.
You are requested to submit your reply within 7 days from the date of receipt of this letter, failing which order will be passed on the basis of the material available on record without any further reference to you."
3.2. The ld AO completed the re-assessment proceedings on 143(3) / 147 of the Act on 24.12.2009 determining Short Term Capital Gain [in short STCG] at Rs 21,54,860/- and Long Term Capital Gain [ in short LTCG] at Rs 2,33,18,266/-. It was submitted by the assessee that the reasons mentioned by the ld AO are nothing but mere change of opinion on same set of facts. It was objected that the reassessment based on change of opinion was not permitted under the provisions of the Act. It was stated that while passing the original assessment order u/s 143(3) of the Act, the ld AO had all the facts on record and the initiation of reopening proceedings for the Asst Year 2004-05 was based on mere change of opinion. The assessee placed reliance on the following decisions in support of its contentions:-
a) CIT vs Kelvinator of India Ltd reported in 320 ITR 561 (SC)
b) CIT vs Kelvinator of India Ltd reported in 256 ITR 1 (Delhi) (FB)
c) Andhra Bank vs CIT reported in 225 ITR 447 (SC)
d) Indian Oil Corporation vs ITO reported in 159 ITR 956 (SC)
e) ITO vs Lakhmani Mewal Das reported in 103 ITR 437 (SC)
f) Calcutta Discount Co. Ltd vs ITO reported in 41 ITR 191 (SC)
g) Sunrolling Mills P Ltd vs ITO reported in 160 ITR 412 (Cal)
h) Asian Paints Limited vs DCIT reported in 308 ITR 195 (Bom)
i) Asteroids Trading and Investments vs DCIT reported in 308 ITR 190 (Bom)
j) ICICI Prudential Life Insurance Co. Ltd vs ACIT & UOI reported in 325 ITR 471 (Bom)
k) D T and T D C ltd vs ACIT reported in 324 ITR 234 (Del) 3.3. It was also stated that the entire issue of assessment of capital gains on sale of flats were subject matter of proper examination by the ld AO in the original assessment proceedings for which a separate show cause notice was issued by the ld AO to the 7 8 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 assessee. The assessee had replied for the same vide its letter dated 13.9.2006 which was duly examined by the ld AO in the original assessment proceedings. The ld AO having been satisfied with the reply given by the assessee , had on its own adopted the second method of computation of capital gains and rejected the first method on the reasons stated in the assessment order issued u/s 143(3) of the Act . It was submitted that once the ld AO accepted the mode of computation of capital gains by giving reasons for accepting the same in the assessment order, he is not permitted to review the same computation in his reassessment order issued u/s 147 of the Act which would tantamount to change of opinion. Moreover, when all the material facts including the development agreement, valuation report etc were filed at the time of original assessment proceedings, the ld AO cannot reopen the assessment u/s 148 of the Act without any new material on record and as such it would tantamount to reopening assessment without any tangible material on record.
3.4. Further the ld AO in the letter issued to communicate the reasons for reopening the assessment had further alleged the following:-
"Further , the assessee exchanged 88 cottah 10 chittacks of land for 20 flats plus proportionate car parking space. This amounted to transfer of capital assets u/s 2(47) . LTCG chargeable on such transfer was not assessed in the order made u/s 143(3) dt. 31/10/2006, and income of Rs 2,33,18,266/- also escaped assessment".
In this connection, it was replied that all the documents and details were made available before the ld AO at the time of original assessment proceedings and after considering the same, the ld AO passed the assessment order u/s 143(3) of the Act on 31.10.2006. Reference was also invited to the second paragraph of the assessment order for the captioned assessment year wherein the ld AO had stated that relevant documents and papers and bank statements, copy of original Aparnama, copy of the agreement between the developer and the assessee, copy of the order passed by the Hon'ble Appropriate Authority etc were filed before him along with the relevant submission. After 8 9 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 verification of all these documents, the ld AO had come to the conclusion that the transfer of land to the developer by virtue of the development agreement dated 16.6.1995 would not be chargeable to tax in the previous year relevant to the Asst Year 2004-05. Further, the ld AO also relied on the order of the Hon'ble Appropriate Authority dated 7.8.1995 u/s 269UL(3) of the Act wherein it was clearly mentioned that as per the terms and conditions mentioned in the development agreement, the signing of the said agreement would constitute transfer and as such the date of transfer was taken by the Appropriate Authority as the date of signing of the agreement i.e 16.6.1995. Accordingly, it was submitted that the ld AO after review of the development agreement and the order issued by the Appropriate Authority accepted that the transfer of land was not chargeable to tax during the relevant asst year. Hence the ld AO is not permitted to review the year of chargeability of the transfer of land in his reassessment order issued u/s 147 of the Act which would in any event tantamount to change of opinion. The assessee placed reliance on the larger bench decision of the Hon'ble Delhi High Court in the case of CIT vs Usha International Limited reported in 348 ITR 485 (Del) in this regard. The assessee also placed reliance on the decision of the Hon'ble Supreme Court in the case of ACIT vs ICICI Securities Primary Dealership Ltd reported in 348 ITR 299 (SC).
3.5. In the instant case, the ld AO had already formed an opinion in regard to the following issues in the order passed u/s 143(3) of the Act :-
(i) The gains arising from the sale of flats would be treated as long term capital gains.
(ii) The balance of 18 flats which was handed over to the assessee by the developer during the financial year relevant to the Asst Year 2004-05 would not be chargeable to tax as the development agreement was executed and possession of land was handed over to the developer as and when the development agreement was signed which was in Asst Year 1996-97.9 10 ITA No.2841/Kol/2013
Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 Later on since the ld AO had changed his opinion and taxed the gains arising from the sale of flats as short term capital gains and further in regard to 18 flats which were handed over to the assessee during the relevant year was treated as transfer and taxed accordingly in the order u/s 143(3) / 147 of the Act which would clearly be termed as 'change of opinion'. Accordingly, the assessee prayed for annulling the reassessment proceedings before the ld CITA.
3.6. On merits, it was contended that the development agreement was entered into between the assessee and Park Chambers Ltd on 16.6.1995. Under the terms of the agreement, the construction was to take place on the land of the assessee, which would be divided between the developer and the assessee in the ratio of 50:50. As a result of the aforesaid, the developer would construct the building superstructure on the entire land (including assessee's share of land) for which the consideration would be 50% of the total land in possession of the assessee. To that extent, on facts, it may be stated here that the possession and / or control over 50% of the land was parted to the developer and as such it may be stated that the assessee had fulfilled all the conditions through the agreement dated 16.6.1995 as envisaged u/s 53A of the Transfer of Property Act 1882. It was also stated that after entering into the development agreement, the assessee executed the Power of Attorney in favour of the developer and handed over the same to the developer. Reliance was placed on the decision of the Hon'ble Bombay High Court in the case of Chaturbhuj Dwarkadas Kapadia vs CIT reported in 260 ITR 491 (Bom) wherein it has been opined that where, in case of a development agreement, if it is indicated in the contract that the complete control over the property has been passed or transferred in favour of the developer, the date of contract would be relevant in deciding the year of chargeability of capital gains. In the instant case, the above agreement was challenged in the Hon'ble Calcutta High Court by way of injunction by one A.S.Overseas Pvt Ltd. The Hon'ble Calcutta High Court vide order dated 10 11 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 27.5.1997 gave necessary instruction vide order to change the ratio from 50:50 to 48.5 :
46.5 between the assessee and the developer and the remaining 5% share would go to A.S.Overseas Pvt Ltd. Accordingly it was pleaded that the development agreement was entered into on 16.6.1995 and power of attorney was executed on the same date in favour of the developer and possession of the land was handed over to the developer on 16.6.1995 itself relevant to Asst Year 1996-97 and hence the chargeability of the transfer to capital gains tax thereon would arise only in Asst Year 1996-97 and not thereafter in terms of section 2(47)(v) of the Act read with section 53A of the Transfer of Property Act 1882. The assessee further placed reliance on the decision of the Hon'ble Supreme Court in the case of DLF Universal Limited vs Appropriate Authority reported in 243 ITR 730 (SC) wherein the Hon'ble Court had held that the agreement for transfer which has been reduced into writing in Form 37I pertains to immovable property and amounts to transfer of immovable property within the meaning of clauses
(d) and (f) of section 269UA of the Act. Thus, in this connection, it may be stated that as the definition of transfer stated in section 2(47)(v) and section 269UA(f) of the Act are same and hence the date of the issuance of the certificate of No Objection issued by the Appropriate Authority would have to be considered as the date of the transfer u/s 2(47)(v) of the Act. Hence it was pleaded that the transfer of the land had not taken place in the Asst Year 2004-05 as it has taken place much before receipt of possession of the flats.
4. The ld CITA went through the certified copies of the order sheet entries recorded by the ld AO in the original assessment and later in the reassessment proceedings which are as under:-
Sl. No. Documents requisitioned Date of requisition Date of requisition as per as per order sheet order sheet during during assessment reassessment proceedings. proceedings.
1 Copy of the trust deed 19th June, 2006 2 Bank Statement 19th June, 2006 4th December, 2009 11 12 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 3 Development agreement 19th June, 2006 4th December, 2009 4 Details of capital gain 19th June, 2006 including the property acquired and property sold and valuation of property 5 Copy of the valuation 24th July, 2006 report 6 Explanation for short term 7th September, 2009.
capital gains Based on the aforesaid table, the ld CITA agreed with the contentions of the assessee that no new material had come to the possession of the ld AO after completion of the assessment proceedings so as to justify the initiation of the reassessment proceedings. The ld CITA concluded that the documents reviewed at the time of original assessment proceedings and reassessment proceedings were the same. The ld CITA observed that the ld AO by reviewing the same documents had reached to a different conclusion from the one originally taken by him in the original assessment proceedings. The ld CITA further observed that the ld AO himself in the last paragraph of the remand report had stated that 'on a further review of the development agreement and other documents which were already provided at the time of original assessment proceedings', the fact that the possession of land was handed over by the assessee in lieu of 26 flats came to light. The ld CITA further observed that in paragraph 2 of page 2 of the remand report, the ld AO had stated that on the basis of the above information he has formed a belief that income has escaped assessment. Further in fifth paragraph of page 2 of the remand report, the ld AO had stated that when the reassessment is based on sufficient material on record, the allegation of change of opinion cannot be leveled against him. The ld CITA based on these statements of the ld AO in his remand report, concluded that all the above facts prove beyond doubt that the ld AO had started the reassessment proceedings based on the same material which were already available on record and were in the possession of the ld AO during the course of the assessment proceedings.
12 13 ITA No.2841/Kol/2013Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 Later by placing reliance on the decision of the Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd reported in 320 ITR 561 (SC) wherein it was held that although the AO has no power to review it has power to reassess. However, such power to reassess cannot be based on 'change of opinion'. Hence, after 1.4.1989, AO has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. The ld CITA further placed reliance on the following decisions :-
a) ITO vs Lakhmani Mewai Das reported in 103 ITR 437 (SC) wherein the Hon'ble Court had stated :
"The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once, he has done that his duty ends. It is for the ITO to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the ITO with regard to the inference which he should draw from the primary facts. If an ITO draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment."
b) Sunrolling Mills P Ltd vs ITO reported in 160 ITR 412 (Cal) wherein the Hon'ble Jurisdictional High Court had held as under:-
"It is now well settled that the ITO can invoke jurisdiction under section 147(b) if he has information in his possession to form the belief that income has escaped assessment. Section 147 postulates that information must have come to the possession of the ITO after he had passed the original assessment order and it is only on such information the ITO is entitled to act. If the information was already with him and he did not act on the basis of such information before the assessment was completed, then section 147(b) would not permit him to apply his mind to the same assessment with a view to correct his own mistake. The ITO cannot act on the basis of the change of opinion. The ITO must have knowledge of any fact or law coming to his possession subsequent to the completion of the original assessment."
c) Asian Paints Limited vs DCIT reported in 308 ITR 195 (Bom) , wherein it was held as under:-
"It is further to be seen that the Legislature has not conferred power on the Assessing officer to review its own order. Therefore, the power under section 147 cannot be used to review the order. In the present case, though the Assessing officer has used the phrase "reason to believe", admittedly between the date of the order of assessment 13 14 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 sought to be reopened and the date of formation of opinion by the Assessing Officer, nothing new has happened, therefore, no new material has come on record, no new information has been received, it is merely a fresh application of mind by the same Assessing Officer to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator [2002] 256 ITR 1 referred to above, has taken a clear view that reopening of assessment under section 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent no. 1 to issue notice under section 148."
4.1. The ld CITA annulled the reassessment by observing as under:-
"Thus, the common thread running through all the above decisions rendered by the Hon'ble Supreme Court, Calcutta High Court and the Hon'ble Bombay High Court it is seen that section 147 of the Act postulates that information must have come to the possession of the AO after he had passed the original assessment order and it is only on such information the AO is entitled to act. If the information was already with him and he did not act on the basis of such information before the assessment was completed, then Section 147 of the Act would not permit him. The AO cannot act on the basis of the change of opinion. The AO must have completion of the original assessment. Hence, following the principles enunciated reassessment was based on 'change of opinion' as the AO came to a different conclusion by reviewing the same documents which were there with him during the course of assessment proceedings.
In view of my above findings, facts of the case and case laws cited in Para Nos. 6.5, 6.6, 6.7 and 6.8 (Supra), I am inclined to agree with the contentions & arguments of the learned AR of the appellant. I, therefore, treated the reassessment proceedings and the impugned order of assessment passed u/s 143(3)/147 of the I.T. Act, 1961 by the AO is bad in law and hence void. In the result, I annul the said impugned order of assessment and allow additional ground no. 1 of the instant appeal."
4.2. Apart from this, the ld CITA also proceeded to adjudicate the issue on merits held that the transfer of land had taken place in terms of section 2(47)(v) of the Act pursuant to the development agreement entered into on 16.6.1995 relevant to Asst Year 1996-97 and possession of the land was also handed over to the developer in the Asst Year 1996- 97 by executing a valid power of attorney. Hence there cannot be any capital gains on transfer of land in Asst Year 2004-05 i.e at the time of handing over the flats to the assessee by the developer. He accordingly held as under on merits :-
14 15 ITA No.2841/Kol/2013Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 "7.1 In the grounds of appeal before me I found that the appellant has claimed the gains arising from the sale of flats as a long term capital gains. The submission of the appellant and the contention of the AO are carefully considered and the facts of the case perused. It is seen that when the flats were sold during the year under consideration two different assets namely the building superstructure and the undivided share in the land on which the superstructure were sold separately and not the building only. Since, the sale took place soon after obtaining possession of flats, the building superstructure would be treated as short term capital assets and any gains from such sale would be treated as short term capital gains. Further, the gains arising from the same of undivided portion of land included in the superstructure would be a long term capital asset and the gains if any would be treated as long term capital gains.
7.2 Now the moot question is that how to find out the sale value of land and building superstructure separately when the bifurcation is not specified in the sale deed. In this connection my attention was drawn to the decisions of the Hon'ble Kolkata Tribunal in the case of Statesman Ltd. vs. ACIT and ITC Ltd. vs. DCIT wherein the principles set out by the decision of the Hon'ble Tribunal, I am of the considered opinion that the bifurcation of the sale price should be done by calling for a valuation report of any registered valuer on the date of sale to estimate the allocation of sale price between the building superstructure and the undivided portion of the land and thereafter deducting the value of the land as on 1st April, 1981 (after indexation) which may also found out by taking a valuation report from any registered valuer from the sale price of land as stated above to arrive at the long term capital gains. The short term capital gains from the sale of building superstructure would however be computed without deducting any cost as the appellant would not be incurring any cost for the same. In the light of the above facts and law. I am neither inclined to accept the contention of the appellant nor with the contention of the AO that the gains arising from the sale of flats would only constitute long term or only short term as the case may be."
5. Aggrieved, the revenue is in appeal before us on the following grounds:-
1. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as on facts in treating the reopening of the case ab initio void, by ignoring the facts of the case.
2. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as on facts in not considering the fact that the AO relied upon a document i.e. possession letter of flats, for reopening the case and it was not a mere change of opinion.
3. Whether on the facts and circumstances of the case, the Ld. CIT(A) was right in law as well as on facts in not considering the fact that transfer of land in lieu of flats was a transfer of capital asset as per sec. 2(47) of the Act and assessee was liable for long term capital gain.15 16 ITA No.2841/Kol/2013
Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05
4. That the appellant craves leave to add, alter, modify, delete or include any of the grounds of appeal.
6. We have heard the rival submissions. The ld DR stated that the period of holding of flats by the assessee was never examined by the ld AO in the original assessment proceedings which would be crucial for determining the subject mentioned gains as short term capital gains. Hence it is a mistake of fact which had led to initiation of reassessment proceedings and accordingly the ld CITA ought not to have annulled the reassessment proceedings. He placed reliance on the decision of the Hon'ble Bombay High Court in the case of Export Credit Guarantee Corporation of India Ltd vs Additional CIT reported in 350 ITR 651 (Bom). In response to this, the ld AR argued that the entire documents and records were made available before the ld AO in the original assessment proceedings and he reiterated the findings of the ld CITA. He further placed reliance on the decision of the Hon'ble Supreme Court in the case of Indian and Eastern Newspaper Society vs CIT reported in 119 ITR 996 (SC). He further stated that this is a fit case for invoking revisionary jurisdiction u/s 263 of the Act by the ld CIT which had been missed by the department and reassessment u/s 147 of the Act is not the right recourse available to the department in the facts of the instant case.
6.1. We find that this case law relied upon by the ld AR squarely covers the case of the assessee wherein it was held that :-
14. Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so and, on that basis, to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 , where a Bench of learned Judges of this Court observed that a case where income had escaped assessment due to the "oversight, inadvertance or mistake" of the ITO must fall within the meaning of section 34(1)(b ) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels further than the statute warrants insofar 16 17 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 as it can be said to lay down that if on reappraising the material considered by him during the original assessment the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kamal Kumar Singh's case (supra) , A. Raman & Co.'s case (supra) and Bankipur Club Ltd. v. CIT [1971] 82ITR 831 and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji's case (supra) suggesting the contrary do not, we say with respect, lay down the correct law.
15. A further submission raised by the Revenue on section 147(b) of the Act may be considered at this stage. It is urged that the expression "information" in section 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment. It is said that when upon receipt of the audit note the ITO discovers or realises that a mistake has been committed in the original assessment, the discovery of the mistake would be "information" within the meaning of section 147(b ).
The submission appears to us inconsistent with the terms of section 147(b). Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words "reason to believe", and it follows from the "information" received by the ITO. The information is not the realisation, the information gives birth to the realisation.
6.2. Now coming to the decision of the Hon'ble Bombay High Court relied upon by the ld DR in 350 ITR 651 supra , we find that in that case, the assessee had failed to disclose material facts coupled with complete failure on the part of the AO to apply his mind during original assessment proceedings. Accordingly it was held that there was tangible material and reason to believe that income had escaped assessment. We hold that this decision is factually distinguishable to the facts of the assessee before us, as admittedly, there was absolutely no failure on the part of the assessee from furnishing the facts together with relevant documents before the ld AO in the original assessment proceedings. Infact the ld AO had conceded this fact in the remand report that he had only verified the very same documents that were already available in the file which made him to form a belief that income had escaped assessment. Hence it could be safely concluded that there was no tangible material available with the ld AO to form a belief that income of the assessee had escaped assessment. Hence the decision of the 17 18 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 Hon'ble Supreme Court in the case of CIT vs Kelvinator of India Ltd reported in 320 ITR 561 (SC) would clearly support the case of the assessee which has been rightly applied by the ld CITA while annulling the assessment. We hold that the ld AO had only tried to review his own order in the garb of reassessment by looking into the very same materials that were already available on record. Hence we do not find any infirmity in the order of the ld CITA on annulling the reassessment. Accordingly, the grounds raised by the revenue are dismissed. Since we have confirmed the order of the ld CITA in annulling the assessment, we refrain to give our opinion on the merits of the issue.
7. In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 08.09.2017
Sd/- Sd/-
[A.T. Varkey] [ M.Balaganesh ]
Judicial Member Accountant Member
Dated : 08.09.2017
SB, Sr. PS
Copy of the order forwarded to:
1. ITO, Ward-30(3), Kolkata, Aayakar Bhavan Daksin, 2, Gariahat Road South, 5th Floor, Kolkata-700068.
2. Ishwar Chinta Haran Shiv Thakur, 8, PC Sarkar Sarani, Kolkata-700019.
3. C.I.T(A)-XIV, Kolkata. 4. C.I.T.- Kolkata.
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By Order Senior Private Secretary Head of Office/D.D.O., ITAT, Kolkata Benches 18 19 ITA No.2841/Kol/2013 Ishwar Chinta Haran Shiv Thakur A.Yr.2004-05 19