Income Tax Appellate Tribunal - Bangalore
Smt. P.Hamsaveni, Bangalore vs Ito, Ward-4(2)(3), Bangalore on 25 January, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH ' B '
BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND
SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER
I.T. A. Nos.1801 to 1804/Bang/2016
(Assessment Year : 2007-08)
i. Smt. P. Hamsaveni, No. 25, Munnekolalu, Marathahalli,
Bangalore-560 037. PAN : ACVPH 1285M
ii. Smt. P. Divya, PAN : ANCPD 7817R
iii. Shri P. Ritesh Babu, PAN : ALPPR 4124a
iv. Smt. Parvathamma, PAN : ASLPP 1928R
No.25, Munnekolalu, Marathahalli, Bangalore.
..........Appellants.
Vs.
Income Tax Officer,
Ward 4(2)(3), Bangalore. ..... Respondent.
Appellant By : Shri B.P. Sachin Kumar, C.A.
Respondent By : Smt. Swapna Dass, JCIT (D.R)
Date of Hearing : 14.12.2016.
Date of Pronouncement : 25.01.2017.
O R D E R
Per Bench :
These four appeals by the four related assessees who are mother, son and two daughters are directed against the composite order of CIT (Appeals)-4, Bangalore Dt.31.8.2016 for the Assessment Year 2007-08.2
ITA Nos.1801 to 1804/Bang/2014
2. These four assessees were joint owner of the property measuring two acres of land in S.Nos.104/3 & 104/3A at Munnekolalu Village, Varthur Hobli, Bangalore North Taluk. There was a search under Section 132 of the Income Tax Act, 1961 (in short 'the Act') in the case of M/s. Ittina Properties Pvt. Ltd. and others on 28.2.2008. During the course of search, certain documents relating to the sale of the property by these assessees were found. Consequent to search the assessees filed their respective returns of income and the assessment for the Assessment Year 2007-08 were completed on 30.10.2009 under Section 143(3) r.w.s. 153C of the Act. Subsequently, the Assessing Officer proposed to reopen the assessment originally concluded under Section 143(3) r.w.s. 153C of the Act by issuing a Notice under Section 148 on 17.12.2012. In pursuant to the order of CIT (Appeals) dt.2.12.2012 for the Assessment Year 2008-
09. The Assessing Officer completed the reassessment under Section 143(3) r.w.s. 147 vide order dt.27.3.2014 whereby the Assessing Officer has made an addition on account of Long Term Capital Gains ('LTCG') arising from Sale Agreement dt.11.9.2006. The assessee challenged the action of the Assessing Officer before the CIT (Appeals) inter alia raised the issue of validity of reopening and reassessment proceedings under 3 ITA Nos.1801 to 1804/Bang/2014 Section 148 of the Act, however, the CIT (Appeals) rejected the grounds raised by the assessee.
3. Before us, common grounds have been raised by the assessee in these appeals as under :
4
ITA Nos.1801 to 1804/Bang/2014
4. Ground Nos.1 to 6 are regarding validity of reopening of assessment.
5. The learned Authorised Representative of the assessee has submitted that during the F.Y. 2003-04 relevant to the assessment year 2004-05 all the four assessees entered into a Joint Development Agreement with M/s. Ittina Properties Pvt. Ltd. on 8.1.2004. As per the said JDA the parties agreed that the properties would be developed and the super built up area would be shared between the land owners and the developer in the ratio of 30:70. He has referred to the JDA dt.8.1.2004 at page Nos.1 to 16 of the paper book. Since the developer could not complete the project as committed and the matter went into dispute therefore, the developer offered to buy the property. Accordingly, an agreement of sale dt.11.9.2016 was entered into between the parties for a consideration of Rs.18 Crores. The purchase consideration was 5 ITA Nos.1801 to 1804/Bang/2014 discharged by the developer by issuing post dated cheques as mentioned in the said agreement of the pages 17 to 24 of paper book. The assessees also undertook to register the sale of the property on or before 31.12.2006. The cheques were dishonoured when presented for encashment and thereby the sale documents could not registered before 31.12.2006. The learned Authorised Representative has referred to the correspondence from the bank regarding return of cheques at pages 115 to 134 of the paper book. Subsequently, a Memorandum of Agreement dt.2.6.2007 was entered into wherein it was again agreed that the purchaser would buy the property for the same amount of Rs.18 Crores. The purchaser made part payment of Rs.2 Crores and a reference in this regard was made in the said agreement and further agreed to pay balance of Rs.16 Crores in instalments. However a total consideration amounting to Rs.11.51 Crores was paid by the purchaser on various dates as per the details. Since the developer did not make the agreed payment towards the sale/purchase consideration therefore, there was a settlement agreement dt.21.8.2013 between the parties whereby it was agreed that the full and final consideration shall be Rs.11.51 Crores instead of Rs.18 Crores as agreed earlier. The assessment was 6 ITA Nos.1801 to 1804/Bang/2014 completed under Section 143(3) r.w.s. 153C wherein the Assessing Officer accepted the returned income filed under Section 153C of the Act. For the Assessment Year 2008-09, the assessees filed their returns of income and offered the capital gains from the sale of the property after claiming exemption under Section 54F of the Act. Thus the assessees discharged their tax due on the balance capital gains in the scrutiny assessment under Section 143(3) of the Act.
6. After examination of all documents submitted before it the Assessing Officer passed the assessment order in all the assessees cases on 30.10.2009. The learned Authorised Representative has pointed out that the assessment order for the Assessment Year 2007-08 under Section 153C r.w.s 143(3) as well as for the Assessment Year 2008-09 were passed in parallel on 30.08.2009. Therefore the Assessing Officer had all the requisite documents on record before passing the order for the Assessment Year 2007-08. Since the Assessing Officer made certain additions for the Assessment Year 2008-09 therefore the assessee challenged the said order before the CIT (Appeals). The CIT (Appeals) was of the view that capital gains is not chargeable to tax for the assessment year 2008-09 but it is chargeable to tax for the assessment 7 ITA Nos.1801 to 1804/Bang/2014 year 2007-08. Therefore the Assessing Officer has reopened the assessment merely on account of change of opinion without any new material coming into light. The reopening is based on a different view by the succeeding officer than one decision/view taken by the predecessor on the same material available. Therefore the reopening is not sustainable in law as it is nothing but based on change of opinion. The learned Authorised Representative has contended that for the purpose of reassessment there has to be discovery of new material or fresh facts came to the knowledge of the Assessing Officer which were not available at the time of original assessment. In the absence of any new material or fresh facts came to the knowledge of the Assessing Officer it would not constitute a reason to believe that the income has escaped assessment within the meaning of the section of 147 of the I.T. Act. Thus the reassessment is bad in law and deserves to be quashed. In support of his contention, he has relied upon the following decisions :
i) Wel Intertrade Pvt. Ltd. and Another Vs. ITO 308 ITR 22 (Del)
ii) NYK Line India Ltd. Vs. DCIT 68 DTR 90 (Bom)
iii) Indian & Eastern Newspaper Society Vs. CIT 119 ITR 996 (SC) 8 ITA Nos.1801 to 1804/Bang/2014 Placing reliance on the above said judgments, the learned Authorised Representative has submitted that the Assessing Officer has nowhere pointed out or alleged that there has been a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Since the reopening of assessment is beyond the period of four years and therefore it is mandatory condition that the assessee has failed to disclose fully and truly all material facts for the assessment. In the absence of any such finding as it is evident from the reasons recorded by the Assessing Officer, the reopening is not sustainable in law.
7. Second leg of argument is that the assessee in reply to Notice under Section 148 requested the Assessing Officer to treat the earlier return filed as return filed in response to Notice under Section 148 and also requested to provide a copy of reasons recorded for reopening of the assessment for the year under consideration. The Assessing Officer failed to provide the reasons recorded for reopening to the assessee. Consequently the assessee never got an opportunity to raise objection against the reasons recorded which has resulted in violation of principle of natural justice. The learned Authorised Representative has submitted 9 ITA Nos.1801 to 1804/Bang/2014 that since the Assessing Officer has failed to furnish the reasons recorded for reopening before the reassessement was completed, the reassessment is not valid and liable to be quashed. In support of his contention, he has relied upon the decision of Hon'ble Bombay High Court in the case of CIT Vs. VSNL 340 ITR 66 (Bom) as well as decision dt.10.11.2016 of co-ordinate bench of this Tribunal in the case of Shri V. Ramaiah Vs. ITO in ITA Nos.1282/Bang/2013.
8. On the other hand, the learned Departmental Representative has submitted that reopening is based on the order of the CIT (Appeals) for the Assessment Year 2008-09 and therefore when it was found that the capital gains arising from the sale of property in question is assessable to tax for the Assessment Year 2007-08 and not for the Assessment Year 2008-09 then the reopening is not based on change of opinion but based on the order of the CIT (Appeals) which constitutes a tangible material. The learned Departmental Representative has further contended that the finding of the CIT (Appeals) that the capital gains is chargeable to tax for the Assessment Year 2007-08 is based on sale agreement dt.11.09.2006 which are not in dispute and therefore the finding of CIT (Appeals) is supported by the decision of Hon'ble jurisdictional High 10 ITA Nos.1801 to 1804/Bang/2014 Court in the case of CIT Vs. Dr. T. K. Dayalu 202 Taxmann 531. The learned Departmental Representative has thus submitted that the reopening based on the subsequent assessment proceedings and order is valid in law. He has relied upon the impugned order of the CIT (Appeals).
9. We have considered the rival submissions as well as the relevant material on record. We have given our deep thought to evaluate the relevant facts emerged from the record on the issue of validity of reopening. The assessees are family members and co-owners of the land in question. They entered into a Joint Development Agreement ('JDA') on 8.1.2004 with M/s. Ittina Properties Pvt. Ltd. As per the said JDA, the assessees were to receive 30% of super built up area whereas 70% was the share of the builder. Since the builder did not show interest in completing the project therefore subsequently the sale agreement dt.11.9.2006 was entered into between the parties to sale the land in question measuring 2 acres for a consideration of Rs.18 Crores. The assessees received an amount of Rs.2 Crores in pursuant to the sale agreement. Though subsequently there were changes in the terms of the agreement as well as in the final sale consideration which was reduced to Rs.11.5 Crores. However for the purpose of deciding the question of 11 ITA Nos.1801 to 1804/Bang/2014 validity of reopening for the assessment year under consideration those developments are not relevant. The assessee did not offer any capital gains arising either from JDA or from the sale agreement dt.11.9.2006. However there was a search under Section 132 on 28.2.2008 in the case of M/s. Ittina Properties Pvt. Ltd., the developer. During the search these documents relating to the sale of property in question by these assessees were found and consequently, the Assessing Officer initiated the proceedings under Section 153C. In response to that the assessees filed their returns of income on 30.3.2009. The assessment for the year under consideration was completed on 30.10.2009 under Section 143(3) r.w.s. 153C in all the cases of the assessees. It is also undisputed fact that the assessment for the Assessment Year 2008-09 in the case of assessees were also completed under Section 143(3) on 30.10.2009. Since the Assessing Officer accepted the income declared by the assessee in the return of income filed in response to Notice under Section 153C of the Act while completing the assessment therefore, there was no further litigation against the orders passed under Section 143(3) r.w.s. 153C for the Assessment Year 2007-08. The assessee offered capital gains arising from sale agreement for the assessment year 2008-09 and also claimed 12 ITA Nos.1801 to 1804/Bang/2014 deduction under Section 54F. The Assessing Officer disallowed the claim under Section 54 and consequently the assessee challenged the order of the Assessing Officer before the CIT (Appeals) who held that the capital gain is chargeable to tax for the assessment year 2007-08 instead of 2008-09. Pursuant to the said order of the CIT (Appeals), the Assessing Officer reopened the assessment already completed under Section 143(3) r.w.s. 153C dt.30.10.2009 by issuing a Notice under Section 148 on 19.12.2012 by recording the reasons for reopening as under : 13
ITA Nos.1801 to 1804/Bang/2014
10. Undoubtedly the reopening of the assessment in the case of assessees before us is after the expiry of four years from the end of the assessment year under consideration and therefore as per the first proviso to Section 147 it is mandatory condition that when the assessment is completed under Section 143(3), no action shall be taken under this section after expiry of four years from the end of the relevant assessment year until and unless the income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee 14 ITA Nos.1801 to 1804/Bang/2014 to disclose fully and truly all material facts necessary for assessment. It is apparent from the reasons recorded by the Assessing Officer that there is no allegation by the Assessing Officer that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for these assessments and the income chargeable to tax for the assessment year under consideration has escaped assessment because of the failure on the part of the assessee. Even otherwise it is not the case of the Assessing Officer that any new material or fact was discovered or came to the knowledge of the Assessing Officer after completing the assessment under Section 143(3) r.w.s 143C/153C on 30.10.2009. The assessment proceedings under Section 153C were initiated pursuant to the search action under Section 132 in the case of M/s. Ittina Properties Pvt. Ltd. wherein the sale agreement dt.11.9.2006 was found and seized. Therefore the assessment was completed under Section 153C by considering all available material and evidence including sale agreement dt.11.9.2006. Similarly the assessment for the Assessment Year 2008-09 was completed under Section 143(3) by considering the same material including the sale agreement dt.11.9.2006. Therefore the Assessing Officer in the original assessment for the Assessment Year 2007-08 as 15 ITA Nos.1801 to 1804/Bang/2014 well as for the Assessment Year 2008-09 both completed on 30.10.2009 was of the view that the capital gains arising from the sale of the property in question is chargeable to tax for the Assessment Year 2008- 09 and not in the Assessment Year 2007-08. It is only on the basis of the order of the CIT (Appeals) dt.2.12.2012 for the Assessment Year 2008-09, the Assessing Officer has changed his opinion that the capital gains on sale of the land in question vide agreement dt.11.09.2006 arises for the Assessment Year 2007-08 instead of 2008-09. The view taken by the Assessing Officer in the original assessment passed under Section 143(3) r.w.s. 153C and at the time of reopening of the assessment by issuing a Notice under Section 148 on 19.12.2012 is based on the same material as well as fact. Since the reopening is after the expiry of four years from the assessment year under consideration and there is no allegation in the reasons recorded by the Assessing Officer for reopening of the assessment that there is a failure on the part of the assessee to disclose fully and truly all material necessary for assessment therefore, the reopening of the assessment is hit by the first proviso to Section 147 of the Act. Even otherwise it is manifest from the record that the original assessment as well as the reopening of assessment was completed based 16 ITA Nos.1801 to 1804/Bang/2014 on the same material as well as facts and therefore it is not the case of failure on the part of the assessee to disclose fully and truly all facts necessary for the assessment. At this stage we may point out that the reopening on the basis of the new facts discovered by the Assessing Officer in the subsequent assessment proceedings is valid provided that the same is not hit by the first proviso to Section 147 of the Act.
11. An identical situation and issue arose before the Hon'ble Bombay High Court in the case of Multiscreen Media Pvt. Ltd. Vs. Union of India and Another 328 ITR 48 as well as 328 ITR 54 for the Assessment Years 2002-03, 2003-04 and 2004-05. The reopening of assessment year 2002- 03 and 2003-04 in the said case were beyond the four years from the end of the assessment year whereas the reopening of assessment for the Assessment Year 2004-05 was within four years from the end of the assessment year and therefore the Hon'ble High Court after considering the various judgments and settled principle on the issue passed two separate judgments one for the Assessment Year 2002-03 and 2003-04 reported in 324 ITR 48 and another for Assessment Year 2004-05 reported in 324 ITR 54. The reopening for the Assessment Years 2002-03 and 2003-04 was held as invalid by the Hon'ble High Court as it was after 17 ITA Nos.1801 to 1804/Bang/2014 the expiry of four years from the end of assessment year and therefore the conditions precedent stipulated by the proviso to Section 147 was not satisfied in that case. The Hon'ble High Court has held in paras 12 & 13 as under :
" 12. The notice issued by the AO under s. 148 does not state that there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment for asst. yr. 2002-03. The assessment was sought to be reopened after the expiry of a period of four years from the end of the relevant assessment year. In such a case the jurisdictional condition precedent stipulated by the proviso to s. 147 is a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment for that assessment year consequent upon which income chargeable to tax has escaped assessment. That has not been fulfilled. The notice does not even purport to state so. The ground furnished in the notice for reassessment would at the highest indicate that according to the Asstt. CIT, allocation of expenses as between the petitioner and the foreign principal ought to have been originally considered by the AO when the order of assessment was passed under s. 143(3). That however would not give a valid reason to reopen the assessment beyond a period of four years, even assuming that the AO had erred in not doing so, unless there was a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. Absent the existence of the jurisdictional condition precedent, assessment cannot be reopened beyond a period of four years after the expiry of the relevant assessment year, as has been done in the present case. In the circumstances, the notice for reassessment is liable to be quashed and set aside solely on the ground that the Revenue has failed to establish the existence of the jurisdictional condition precedent to the exercise of the power to reopen an assessment beyond a period of four years of the expiry of the relevant assessment year.
13. The petition would accordingly have to be allowed. Rule is made absolute in terms of prayer cl. (a), by quashing and setting aside the notice dt. 25th March, 2009 and the order dt. 29th Sept., 2009."
12. For the Assessment Year 2004-05, since the reopening of assessment was within four years therefore, the Hon'ble High Court held that the reopening is valid. A similar view has been taken by the Hon'ble Bombay High Court in the case of Prashanth S Josh & Another Vs. ITO & 18 ITA Nos.1801 to 1804/Bang/2014 Another 324 ITR 154 wherein the Hon'ble High Court after recording relevant facts in para 12 and considering the various precedents on this point held in para 20 as under :
" 20. For all these reasons, it is evident that there was absolutely no basis for the first respondent to form a belief that any income chargeable to tax has escaped assessment within the meaning of the substantive provisions of s. 147. Explanation 2 to s. 147 creates a deeming fiction of cases where income chargeable to tax has escaped assessment. Clause (b) deals with a situation "where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return".
For the purpose of cl. (b) to Expln. 2, the AO must notice that the assessee has understated his income or has claimed excessive loss, deduction, allowance or relief in the return. The taking of such notice must be consistent with the provisions of the applicable law. The act of taking notice cannot be at the arbitrary whim or caprice of the AO and must be based on a reasonable foundation. The sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power. In the present case, having regard to the law laid down by the Supreme Court it was impossible for any prudent person to form a reasonable belief that the income had escaped assessment. The reasons which have been recorded could never have led a prudent person to form an opinion that income had escaped assessment within the meaning of s. 147. In these circumstances, the petition shall have to be allowed by setting aside the notice under s. 148."
13. In the case on hand, when no new fact or material was either detected or came to the knowledge of Assessing Officer during this assessment proceedings for the Assessment Year 2008-09 which was not available before the Assessing Officer for the assessment proceedings for the Assessment Year 2007-08 under Section 153C then the reopening is based on 'change of opinion' on the same facts and material as available at the time of passing the original assessment order under Section 153C of the Act. Accordingly, when the assessment was completed by the 19 ITA Nos.1801 to 1804/Bang/2014 Assessing Officer under Section 143(3) r.w.s. 153C of the Income Tax Act on 30.10.2009 after examination and consideration of all the relevant facts as well as material pertaining to the sale/transfer of the land in question then the Assessing Officer has no authority and jurisdiction to review or revise its original assessment on the reason that the income (capital gains) which was assessed for the Assessment Year 2008-09 is assessable to tax for the Assessment Year 2007-08. Accordingly, the reassessment based on change of opinion without any new material much less to the tangible material or fact came to the knowledge of the Assessing Officer after completion of the original assessment is bad in law. Hence the reassessments in these cases are quashed as not permissible under law.
14. The second contention of the learned Authorised Representative is that the Assessing Officer had not furnished the reasons for reopening and therefore the reassessment completed without giving reasons is invalid. We find that the CIT (Appeals) while dealing with this issue has observed that the reason were duly intimated to the assessee as the Assessing Officer has made specific reference to letter dt.3.12.2013 issued to the assessee wherein the reasons recorded are stated to be 20 ITA Nos.1801 to 1804/Bang/2014 communicated. The assessee has also filed an Affidavit in support of his stand that the Assessing Officer has not furnished the reasons recorded for reopening for the assessment. Since we have already quashed the reassessment on the first objection therefore we do not propose to go into this issue of validity of reassessment for not supplying the reasons recorded for reopening of the assessment.
15. Other grounds of the assessee becomes academic in nature when we have quashed reopening and consequential reassessment.
16. In the result, the appeals of the assessees are allowed.
Order pronounced in the open court on the 25th day of Jan., 2017.
Sd/- Sd/-
(INTURI RAMA RAO) (VIJAY PAL RAO)
Accountant Member Judicial Member
Bangalore,
Dt. 25.01.2017.
*Reddy gp
Copy to :
1. Appellant 2. Respondent 3. C.I.T. 4.CIT(A) 5. DR, ITAT,
Bangalore. 6.Guard File.
By Order
Asst. Registrar, ITAT, Bangalore