B.kasi Viswanathan v. Income Tax Officernon Corporate Ward 15 (2),121 Mg Road, Nungambakkam,Chennai 600 034

IN THE HIGH COURT OF JUDICATURE AT MADRAS Reserved On 22.01.2020Pronounced On 11.02.2020 CORAM THE HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.41441 of 2016andW.M.P.Nos.35418 & 35419 of 2016 B.Kasi Viswanathan ... Petitioner Vs. Income Tax OfficerNon Corporate Ward 15 (2),121 MG Road, Nungambakkam,Chennai 600 034. ...Respondent Writ Petition filed under Article 226 of the Constitution ofIndia praying to issue a Writ of Certiorarified Mandamus, tocall for the records of the respondent contained in itsproceedingsbearingITO/NCW15(2)/ADLPV3666R/16-17,dated10.11.2016 and to quash the order contained therein asarbitrary, unjust and illegal and to consequently restrain therespondent from passing any assessment order for the assessmentyear 2009-10 against the petitioner pursuant to the noticeissued under Section 148 of the Income Tax, 1961, dated30.03.2016. For Petitioner : Mr.Suhrith ParthasarathyFor Respondent : Mr.A.N.R.Jayaprathap Government Pleader (T) In the Writ Petition, the petitioner has challenged theimpugned communication dated 10.11.2016 bearing referenceITO/NCW15(2)/ADLPV3666R16-17. 2. By the impugned communication dated 10.11.2016, therespondent has overruled the objection of the petitioner against https://hcservices.ecourts.gov.in/hcservices/ invocation of machinery prescribed for reopening of theassessment under Section 148 read with Section 147 of the IncomeTax Act, 1961. 3. The impugned communication was issued to the petitionerin response to the objection of the petitioner videletters/communications dated 05.04.2016 and 26.09.2016 againstthe noticedated30.03.2016bearingreferenceNo.PAN: /ACIT/NCC-15/AY 09-10 issued under Section 148read with Section 147 of the Income Tax Act, 1961. 4. The petitioner had purchased a property in the year 2001in Mumbai for a sum of Rs.54,32,000/-. The petitioner registeredthe said property vide sale deed in the year 2008 and perfectedthe title. Later the petitioner sold the same for a totalconsideration of Rs.1.20 crores during Assessment Year 2008-09. 5. The petitioner filed income tax returns on 31.07.2009 forthe Assessment Year 2009-10, wherein, the petitioner declared atotal income of Rs.47,54,535/- and claimed deduction underSection 54 of the Income Tax Act, 1961. 6. The said return was processed under Section 143(1) of theIncome Tax Act, 1961 and was later selected for scrutiny and anotice was issued under Section 143(2) of the Income Tax Act,1961. Details were called for recording the same andexplanations were offered on behalf of the petitioner on03.10.2011 and on 20.10.2011. Thereafter, an assessment orderwas also passed by the then Asst. Commissioner of Income Tax on29.10.2011. 7. The last date for reopening the assessment under Section148 of the Income Tax Act, 1961 within a period of four yearsand six years would have expired on 31.03.2014 and 31.03.2016respectively for the purpose of Section 147 of the Income TaxAct, 1961. 8. The impugned notice was issued on 30.03.2016 underSection 148 of the Income Tax Act, 1961. Under thesecircumstances, the petitioner called upon the respondent tofurnish reasons for reopening the assessment as per the decisionof the Hon’ble Supreme Court in G.K.N.Driveshafts (India) Ltd.Vs. Income Tax Officer and Others, (2003) 1 SCC 72. By acommunication dated 08.08.2016 bearing reference No.ITO/NCW15(2)/ADLPV366R/16-17, the reasons were furnished to thepetitioner. 9. It is stated that the petitioner has wrongly claimedLong-Term Capital Gain of Rs.41,39,650/- on transfer of houseproperty for sale consideration of Rs.1.2 crores and had claimedan exemption under Section 54 by depositing a sum of Rs.50 lakhs https://hcservices.ecourts.gov.in/hcservices/ 9. It is stated that the petitioner has wrongly claimedLong-Term Capital Gain of Rs.41,39,650/- on transfer of houseproperty for sale consideration of Rs.1.2 crores and had claimedan exemption under Section 54 by depositing a sum of Rs.50 lakhs https://hcservices.ecourts.gov.in/hcservices/ under the Capital Gain Scheme the Corporation Bank on 13.07.2009and that from the recital of the Agreement of Sale dated18.03.2009, it was noticed that the petitioner had acquired thehouse property only on 30.01.2008 and transferred it withinfourteen months of its purchase and therefore wrongly claimedthe benefit of Long Term Capital Gains under Section 54 of theIncome Tax Act, 1961. 10. The respondent concluded that the capital assettransferred was only a short-term capital asset as it was heldfor a period less than thirty six months ie. only for a periodof fourteen months and therefore the petitioner was not entitledto Long-Term Capital Gain under Section 54 of the Income Tax Act, 11. The petitioner sent its objections to the above reasonsstating that the property was indeed purchased in the year 2001and sold only in the year 2008 on 30.01.2008 and that thepetitioner has been holding the property for more than a periodof thirty six months and therefore the petitioner was entitledto treat the asset is a Long-Term Capital is a claim exemptionunder Section 54 of the Income Tax Act, 1961. It was furtherstated that the petitioner has all along claimed deduction onthe interest paid on housing loan under Section 24 of the IncomeTax Act, 1961 from the Assessment Year 2001-2002, which wasaccepted by the Department. 12. The learned counsel for the petitioner submitted thatthe impugned notice dated 30.03.2016 and the impugnedcommunication dated 10.11.2016 are liable to be quashed in thelight of the decision of the Hon’ble Supreme Court inCommissioner of Income Tax Vs. Kelvinator of India Ltd., (2010)2SCC 723, wherein the Hon’ble Supreme Court held that there is aconceptual difference between the power to review and the powerto re-assess. An Assessing Officer has no power to review andre-assessment has to be based on fulfilment of certain pre-conditions and if concept of “change of opinion” was removed aswas contended on behalf of the Department the said case, then inthe garb of reopening of the assessment review would take place. 13. The learned counsel for the petitioner also submittedthat the view of Division Bench of this court in the JointCommissioner of Income Tax Vs. Kalanithi Maran, 2014 3 LW 846,was overruled by the Hon’ble Supreme Court. 14. The learned counsel for the petitioner also submittedthat the Hon’ble Supreme Court in Jeans Knit Private Limited Vs.Deputy Commissioner of Income Tax, (2018) 12 SCC 36, hasreiterated the principle laid down by the Hon’ble Supreme Courtin Calcutta Discount Private Limited Vs. CIT, (1961) 41 ITR 191.The reliance was also placed on a recent decision of the learnedSingle Judge in the M/s.Asianet Star Communication Private https://hcservices.ecourts.gov.in/hcservices/ Limited Vs. Asst Commissioner of Income Tax in W.P.Nos.25328,25331 and 25336 of 2018 pronounced on 16.04.2019. 15. Opposing this Writ Petition, the learned GovernmentPleader (T) for the respondent submits that this writ petitionis liable to be dismissed as the respondent is indeed empoweredto reopen the assessment as long as the notice issued underSection 148 meet the criteria under Sections 149 to 153 of theIncome Tax Act, 1961. It is submitted that the views expressedin the communication dated 10.11.2016 is only a prima facie viewand therefore the petitioner should be directed to participatein the adjudicatory mechanism prescribed the Act. https://hcservices.ecourts.gov.in/hcservices/ Limited Vs. Asst Commissioner of Income Tax in W.P.Nos.25328,25331 and 25336 of 2018 pronounced on 16.04.2019. 15. Opposing this Writ Petition, the learned GovernmentPleader (T) for the respondent submits that this writ petitionis liable to be dismissed as the respondent is indeed empoweredto reopen the assessment as long as the notice issued underSection 148 meet the criteria under Sections 149 to 153 of theIncome Tax Act, 1961. It is submitted that the views expressedin the communication dated 10.11.2016 is only a prima facie viewand therefore the petitioner should be directed to participatein the adjudicatory mechanism prescribed the Act. 16. The learned Government Pleader (T) for the respondenthas relied on the decision of a learned Single Judge inSeshasayee Paper Boards Ltd. Vs. Union of India in W.P.Nos.12603& 12604 of 2002 and W.P.No.33239 of 2002 dated 25.01.2019,wherein, in a somewhat identical case, the writ petitions weredismissed. 17. I have considered the arguments advanced on behalf ofthe petitioner and the learned Government Pleader (T) for therespondent. Vast powers have been vested with the officers underthe provisions of the Income Tax Act, 1961 to reopen theassessment under Section 148 for the purpose of Section 147. Thenotice to be issued under Section 148 of Income Tax Act, 1961,has to be within the period of limitation prescribed. 18. The Hon’ble Supreme Court has taken a view that if inabsence of any material to conclude that there was failure onthe part of assessee to either fully and/or truly disclosematerials required for assessment, the machinery under Section147 of the Income Tax Act cannot be invoked beyond the period offour years. The Hon’ble Supreme Court has also held that ifthere is a change of opinion, the Department cannot resort toSection 147 of the Income Tax Act, 1961. 19. From the facts of the case, it is evident thatpetitioner had claimed Long-Term Capital Gains under Section 54of the Income Tax Act, 1961, in his return filed for theAssessment Year 2009-10 on 30.07.2009. Before the assessment wascompleted, the petitioner was called upon to furnish evidence insupport of his claim for deduction under Section 54 of theIncome Tax Act, 1961 vide letter dated 09.09.2011. 20. By a reply dated 03.10.2011, the petitioner partlyfurnished certain informations followed by another letter dated20.10.2011. In the reply/representation dated 20.10.2011following documents were furnished:- i. A sheet containing the workings for capitalgains on sale of residential house is enclosed(Annexure 1). Kindly note that while computingthe capital gains the cost inflation index forthe financial year 2008-09 was inadvertentlytaken as 551 instead of 582. Hence the capitalgains was shown as Rs.41,39,650 as against anamount of Rs.37,24,891. ii.Copy of the deposit receipt evidencing depositof Rs.50 lakhs in Capital Gains Account Schemebefore the due date of filing of return isenclosed (Annexure 2).iii.Copy of the sale deed evidencing sale ofresidential house is enclosed as Annexure 3.iv.Copy of the sale agreement in connection withthe purchase of the residential flat along witha copy of the registered deed is enclosedevidencing the cost of acquisition of the flat(Annexure 4). 21. Therefore, on this issue, the respondent cannot proceedto pass an order under Section 147 of the Act by treating thesale of house property in Mumbai was a short-term capital gainsin the light of the decision of the Hon’ble Supreme Court in theKelvinator of India’s case referred to supra. 21. Therefore, on this issue, the respondent cannot proceedto pass an order under Section 147 of the Act by treating thesale of house property in Mumbai was a short-term capital gainsin the light of the decision of the Hon’ble Supreme Court in theKelvinator of India’s case referred to supra. 22. The respondent will have to therefore pass an orderdropping the proposal contained in the notice dated 13.03.2016on this issue as it cannot be said that income chargeable to taxhad escaped assessment by reason of the failure on the part ofthe petitioner to either make a return under Section 139 or inresponse to a notice issued under Section 142(1) or Section 148to disclose fully and truly all material facts necessary for hisassessment. 23. At the same time, while dropping the proposal containedin the notice invoking Section 148 of the Income Tax Act, 1961,the rights of the respondent to exercise the power in terms ofExplanation 3 to Section 147 of the Income Tax Act, 1961 cannotbe curtailed. 24. The issue of notice under Section 148 for the purpose ofpassing an order of re-assessment Section 147 has to merelysatisfy the requirement of Section 149 to 151 of the Income TaxAct, 1961. 25. At the same time, while passing orders under Section 147of the Income Tax Act, 1961, an Assessing Officer is required tokeep in mind the settled principles of law on the subject. Ifthere is a change of opinion which prompted the issue of the https://hcservices.ecourts.gov.in/hcservices/ notice under Section 148 of the Income Tax Act, 1961, theofficer while passing order under Section 147 can not proceedfurther. Proviso to Section 147 makes it clear that no actionshall be taken under it, unless any income chargeable to tax hasescaped assessment for such assessment year by reason of thefailure on the part of the assessee to make a return underSection 139 or in response to a notice issued under sub-section(1) of Section 142 or Section 148 or to disclose fully and trulyall material facts necessary for his assessment, for thatassessment year. 26. While conducting proceedings, an Assessing Officer isbound by the proviso to Section 147 of the Income Tax Act, 1961.Therefore, while exercising the powers vested with an officer atthe time of re-assessment under Section 147 of the Income TaxAct, 1961 pursuant to issue notice under Section 148 of theIncome Tax Act, 1961, the officer concerned has to not only keepin mind the express language of the proviso to Section 147 ofthe Income Tax Act, 1961 but also well settled principles of law. 27. In the light of the above discussion the writ petitionis disposed with the following directions / observations:- i. The respondent cannot have a re-look into theissue arising out of the claim of the petitionerfor Long-Term Capital Gains which was allowed inthe assessment order passed on 29.10.2011 as therewas true and full disclosure of all materialrequired for assessment by the petitioner forclaiming deduction; ii.Therefore, the proposal to re-determine thetaxable income and the tax payable by thepetitioner for the reasons stated in the impugnedcommunication is unsustainable.;iii.At the same time, while passing final order underSection 147 of the Income Tax Act, 1961, therespondent can examine any other aspect forescaped assessment of tax in the light ofExplanation 3 to Section 147 of the Income TaxAct, 1961.iv.While passing such order, the respondent shall notdisturb the deduction allowed under Section 54 ofthe Income Tax Act, 1961 in the assessment orderdated 29.10.2011. v. Since the dispute pertains to the assessment year2009-10, the respondent is hereby directed to passappropriate order within a period of thirty daysfrom date of receipt of a copy of this orderwithout disturbing the claim of the petitioner forLong-Term Capital Gains allowed under Section 54 of the Income Tax Act, 1961.vi.No cost.vii.Consequently, connected Miscellaneous Petitionsare closed. v. Since the dispute pertains to the assessment year2009-10, the respondent is hereby directed to passappropriate order within a period of thirty daysfrom date of receipt of a copy of this orderwithout disturbing the claim of the petitioner forLong-Term Capital Gains allowed under Section 54 of the Income Tax Act, 1961.vi.No cost.vii.Consequently, connected Miscellaneous Petitionsare closed. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar JenToThe Income Tax Officer,Non Corporate Ward 15 (2),121 MG Road, Nungambakkam,Chennai 600 034.+1cc to M/s Arun Karthik Mohan, Advocate S.R.No.10787+1cc to Mr.A.P.Srinivas, Advocate SR.No.10954.CO/SPDadl/29.05.2020 W.P.No.41441 of 2016