Gujarat High Court
Kunal Kiran Sheth vs Asstt. Commn. Income Tax Circle 5(2)(1) on 29 August, 2023
Author: Bhargav D. Karia
Bench: Biren Vaishnav, Bhargav D. Karia
NEUTRAL CITATION
C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 22167 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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KUNAL KIRAN SHETH
Versus
ASSTT. COMMN. INCOME TAX CIRCLE 5(2)(1)
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Appearance:
MR SN DIVATIA(1378) for the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 29/08/2023
ORAL JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) Page 1 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined
1.Heard learned advocate Mr.S.N.Divatia for the petitioner and learned Senior Standing Counsel Mr.Varun K. Patel with learned advocate Mr.Dev Patel for the respondent no.1.
2.Issue Rule returnable forthwith. Learned Senior Standing Counsel Mr.Varun K. Patel waives service of notice of rule on behalf of respondent no.1. Having regard to the controversy in narrow compass, with the consent of learned advocates appearing for the respective parties, the matter is taken up for final hearing.
3.By this petition under Article 226 of the Constitution of India the petitioner has challenged notice dated 31.03.2019 issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short "the Act")for the assessment year 2012-13 proposing to reopen the assessment.
4.The brief facts of the case are that the petitioner is an individual deriving income from salary, dividend, interest income etc. Page 2 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined 4.1. The petitioner filed e-return on 28.08.2012 for the assessment year 2012-13 declaring total income of Rs.2,87,87,665/- which also included long term capital gain of Rs.2,64,90,151/- from sale of shares of The Ahmedabad Victoria Iron Works Co. Ltd as per the details described in the statement of income after availing the exemption under Section 54 EC of the Act amounting to Rs.1 Crore.
4.2. The return of income filed by the petitioner was selected for scrutiny and the regular assessment order under Section 143 (3) of the Act was passed on 02.03.2015 by the Assessing Officer after calling for and detailed scrutiny of the documents relating to the lump sum capital gain on sale of the shares.
4.3. The Assessing Officer after considering the material available on record had assessed the income of Rs.2,87,91,295/- for the assessment year which included the long term capital gains amounting to Rs.2,64,90,151/-.
4.4. It appears that the Principal CIT Ahmedabad-
4 initiated proceedings under Section 263 of the Act by issuing notice dated 20.02.2017 in Page 3 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined respect of the exemption claimed under Section 54EC of the Act and by order dated 24.03.2017 set aside the order of regular assessment passed under Section 143(3) of the Act.
4.5. The petitioner preferred an appeal before the Income Tax Tribunal Ahmedabad being ITA No.821/AHD/2017 which was disposed of by order dated 30.06.2017 quashing and setting aside the order passed by the Principal CIT under Section 263 of the Act.
4.6. The Revenue has preferred appeal under Section 260A of the Act before this Court being Tax Appeal No.1050 of 2017 which is pending.
4.7. It is the case of the petitioner that as the Assessing Officer commenced proceedings under Section 154 of the Act by notice dated 10.04.2018 proposing that there was an error of allowing exemption under Section 54EC of the Act amount exceeding Rs.50,00,000/- and by order dated 23.05.2018, the exemption to the extent of Rs.50,00,000/- under Section 54EC of the Act was denied.
Page 4 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined 4.8. The petitioner has thereafter preferred an appeal before the CIT Ahmedabad, who called for various details documents in course of the appellate proceedings including the issue relating to the applicability of the provision of Section 50B of the Act. However the CIT (Appeals) allowed the appeal on legal ground by order dated 29.03.2019 by quashing and setting aside the order under Section 154 of the Act.
4.9. It is the case of the petitioner that as the CIT Appeals called for the information relating to the applicability of Section 50B of the Act, the impugned notice under Section 148 of the Act was issued proposing to reassess the total income.
4.10. The petitioner filed a return pursuant to the notice under Section 148 of the Act on 04.04.2019 declaring the same income and by letter dated 10.04.2019 sought for the copy of the reasons recorded from the respondent.
4.11. The respondent uploaded the copy of the reasons recorded for reopening by letter dated 09.04.2019. The petitioner on receipt Page 5 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined of the reasons filed objections vide letter dated 18.04.2019 followed by letter dated 14.10.2019 before the respondent.
4.12. The respondent rejected the objections filed by the petitioner vide order dated 07.12.2019. Being aggrieved the petitioner has preferred this petition.
5.Learned advocate Mr.S.N.Divatia for the petitioner submitted that the reasons recorded by the respondent are based on the material which is already on record, except it is stated in the reason that the information is received from the CIT Appeal-5 with regard to the difference in valuation of the shares sold by the petitioners during the previous year as well as the applicability of Section 50B of the Act relating to the slump sale to the transaction of sale of shares by the petitioner for which long term capital gain is already offered and scrutinized during the course of the regular assessment.
5.1. It was submitted that there is no fresh material available with the respondent nor there is any live link between the material Page 6 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined available on record and the reasons recorded so as to assume the jurisdiction to issue the notice under Section 148 of the Act.
5.2. In support of his submissions learned advocate Mr.Divatia referred to and relied upon the decision of the Hon'ble Apex Court in case of CIT Vs. Kelvinator of India Ltd. (320 ITR 561) (SC).
6. On the other hand learned Senior Standing Counsel Mr.Varun K.Patel for the respondent submitted that the reasons recorded discloses the fresh material available on record in form of the information received from file of CIT (Appeals) to the effect that the Assessing Officer did not consider the applicability of Section 50B of the Act. It was also submitted that the MOU entered into between the petitioner and Lilamani Builders and The Ahmedabad Victorial Iron Works Company Ltd. was not placed before the Assessing Officer. It was submitted that as per the MOU, the value at which the shares were to be sold by the petitioner was Rs.39,000/- whereas the valuation provided by the petitioner is Rs.32,866/- and therefore Page 7 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined the assessee did not disclose all the facts before the Assessing Officer resulting into reason to believe that income has escaped assessment and hence the impugned notice is issued beyond four years, the proviso to Section 147 would not apply.
6.1. Learned Senior Standing Counsel Mr.Patel further would submit that the petitioner would have an alternative remedy to challenge the assessment order which would be passed pursuant to the assessment proceedings which may be carried out pursuant to the impugned notice and therefore this petition may not be entertained as the Assessing Officer has rightly assumed the jurisdiction on the material available on record with regard to the reasons duly recorded and sanctioned under Section 151 of the Act.
7.Having heard learned advocates for the respective parties and having considered the material on record, it appears that the petitioner has disclosed fully and truly all relevant materials during the course of regular assessment in response to the notice Page 8 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023 NEUTRAL CITATION C/SCA/22167/2019 JUDGMENT DATED: 29/08/2023 undefined under Section 142(1) of the Act and based upon such information the Assessing Officer passed the assessment order under Section 143(3) of the Act. On perusal of the material available on record, it also reveals that the assessee has disclosed the sale consideration at Rs.39,000/- per share which is evident from the computation of the long term capital gains provided along with the return of the income. Thus the assessee has disclosed all facts truly and fully during the course of the regular assessment and therefore, there is a mere change of opinion on the part of the respondent to issue the impugned notice based upon the information received from the CIT Appeals.
8.We are therefore of the opinion that the respondent has issued the impugned notice on the borrowed satisfaction without application of mind contrary to the material and facts available on record and therefore such notice cannot be sustained in view of the dictum of the Hon'ble Apex Court in case of CIT Vs. Kelvinator of India Ltd. (Supra).
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9.In view of the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notice dated 31.03.2019 and the order rejecting the objection dated 07.12.2019 are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) URIL RANA Page 10 of 10 Downloaded on : Sun Sep 17 02:51:14 IST 2023