G.s.sandhawalia J v. Income Tax Officer,Panipat & Another,Pertaining To The Assessment Year 1996-97. —

IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARHCWPNo.5282 of 2014 |Reserved on26.03.2015Date of decision:10.04.2015Sudhir Kapoor_. PetitionerVersusIncome Tax Officer & another|......RespondentsCWP? No.5283 of 2014 |Sudhir Kapoor— PetitionerVersusIncome Tax Officer & another|......RespondentsCWP? No.5285 of 2014Sudhir Kapoor— PetitionerVersusIncome Tax Officer & another|......RespondentsCWP? No.5309 of 2014Sudhir Kapoor_. PetitionerVersusIncome Tax Officer & another|......RespondentsCWP? No.5311 of 2014Sudhir Kapoor_. PetitionerVersusIncome Tax Officer & another|......RespondentsCWP? No.5313 of 2014Sudhir Kapoor— PetitionerVersusIncome Tax Officer & another|......Respondents CORAM:HON'BLE MR.JUSTICE S.J.VAZIFDAR, ACTING CHIEF JUSTICEHON'BLE MR.JUSTICE G.S.SANDHAWALIA Present:Ms. Radhika Suri, Sr. Advocate with Ms. Rajni Paul, Advocate, for the petitioner. Mr. Yogesh Putney, Advocate, for the respondents.0000 G.S.Sandhawalia J. 1)This judgment shall dispose of a bunch of 6 writ petitions bearingCWP Nos.5282, 5283, 5285, 5309, 5311 & 5313 of 2014, involving commonquestions of law and facts. However, to dictate orders, facts have been takenfrom CWP No 5282 of 2014 titledSudhir Kapoor Vs. Income Tax Officer,Panipat & another,pertaining to the assessment year 1996-97. — 2 Challenge in the present writ petition is to the order dated17.02.2006 (Annexure P8), vide which, the Commissioner of Income Tax, Karnal(for short, the 'CIT")-respondent No.2 rejected the objections raised in therevision petitions of the deceased assessee-Hira Lal Kapoor, predecessor-in-interest of the present petitioner. Challenge has also been raised to the orderdated 12.09.2013 (Annexure P12), passed by respondent No.2, under Section 154of the Income Tax Act, 1961 (for short, the ‘Act'), whereby it was held that theassessee could not point out any apparent mistake in the order passed underSection 264 of the Act, which could be rectified and therefore, the revisionpetitions filed were rejected. — onThe necessary facts for deciding the present bunch of writ petitionsis that the land of the HUF of the deceased assessee was acquired videnotification issued under Section 4 of the Land Acquisition Act, 1854. Theaward was passed on 21.02.1992 by the Land Acquisition Collector, Panchkula(for short, the LAC’) and as per the case of the petitioner, the land was situatedout of the limits of the notified area and the compensation amount received wasexempted from the Long Term Capital Gain (for short, the ‘LTCG’). -3-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document 4 A notice dated 11.03.2003, under Section 148 of the Act was issuedby recording reasons that 15 acres of land had been acquired and the amount hadbeen deposited in tour bank accounts of Panipat and income tax returns had beenfiled for the assessment years 1994-95 and 1995-96 but no return for income hadbeen filed tor the year 1996-97. As per the reasons, the quantum of incomewhich had escaped assessment was|L2,04,659/- for the period from 01.04.1995 to31.03.1996, relevant to assessment year 1996-97. On account of the reason tobelieve that due to the failure on the part of the assessee to file his income taxreturns for the said years and for the said amounts, permission was sought by theIncome Tax Officer, Panipat (for short the '[TO')-respondent No.1, to assess theescaped income. The deceased-assessee, vide objections dated 26.02.2004,through the present petitioner, filed objections wherein reliance was placed uponthe judgment of the Apex Court inK.M.Sharma Vs. Income Tax Officer, Ward 13(7), New Delhi AIR 2002 SC 1715on the ground that Section 149 of the Actprescribes a maximum period of 4 years for initiating reassessment proceedingsand the quantum of tax had to be of more than=1 lac for that year. Theassessment proceedings for the year 1996-97 to 1999-2000, was accordingly,sought to be dropped wherein the objection was taken that the assessmentproceedings for the year 1996-97 and 1998-99 were time-barred. Similarobjections were also sent on 27.02.2004. However, assessment order was passedon 19.03.2004 (Annexure P6). 5 A perusal of the letter dated 08.03.2004 (Annexure P5) from the ITOwould also show that the said officer had called tor information under Section133 of the Act from the LAC wherein the details of the award were provided tohim and the amount of compensation which had been paid to the assessee. Theassessment was framed on 19.03.2004 wherein it was noticed that the presentpetitioner had attended the proceedings and the necessary objections had been -4.SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document filed on 26.02.2004 and the assessee had been asked to file returns by 09.01.2004but no return had been filed. The reply of the assessee was held to beunwarranted, untenable, without any force and the ITO came to the conclusionthat the assessee was not cooperative and made theex parteassessment on thebasis of the best judgment and material on the ground that there was a receipt ofinterest on the deposit ofL2,94,659/-. The assessee having received additionalcompensation of 41,56,270/- by cheque dated 04.09.1995, was assessed underLTCG under Section 45(5)(b) Explanation (1) of the Act and accordingly, penaltynotices were also issued for concealment of income and for non-compliance ofthe noticed issued under Section 142(1) of the Act, apart from charging ofinterest etc. 6 The revision petitions, filed under Section 264 of the Act were thenfiled before respondent No.2 by taking the plea that the objections had not beendisposed of regarding the initiating of proceedings under Section 148 of the Actand the compensation originally charged was not liable to capital gain tax whichhad been wrongly charged on the enhanced compensation and was liable to beexempted apart from raising other objections, T Respondent No.2 only dealt with the issue of LTCG and held that theassessee had been asked to produce the copy of the original notification issued bythe State Government and therefore, it was not possible to verify the genuinenessof the contention of the assessee and the same was rejected. However, on theissue of limitation, for the assessment years 1996-97 and 1998-99, no referencewas made whether the proceedings were time-barred, as had been raised beforerespondent No.1. § In the meantime, the assessee expired. Resultantly, the rectificationapplication, under Section 154 of the Act, was filed on 28.02.2013 wherein copyof the objections dated 26.02.2004 were also attached and written submissions -5-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document dated 05.04.2013, were also submitted, taking the plea that the land which hadbeen acquired was not situated within the notified area and the notification wasonly issued on 06.01.1994 for Panipat and the enhanced amount of compensationwas exempted from LTCG. Reliance was placed upon the judgment of the ApexCourt inCommissioner of Income Tax, Faridabad Vs. Ghanshyam_ (HUF[2009] 315 ITR 1 (SC) § In the meantime, the assessee expired. Resultantly, the rectificationapplication, under Section 154 of the Act, was filed on 28.02.2013 wherein copyof the objections dated 26.02.2004 were also attached and written submissions -5-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document dated 05.04.2013, were also submitted, taking the plea that the land which hadbeen acquired was not situated within the notified area and the notification wasonly issued on 06.01.1994 for Panipat and the enhanced amount of compensationwas exempted from LTCG. Reliance was placed upon the judgment of the ApexCourt inCommissioner of Income Tax, Faridabad Vs. Ghanshyam_ (HUF[2009] 315 ITR 1 (SC) QOThe issue of the amount of tax adjudged was only=71,990/- and thequantum being less than =1 lac, as per Section 148 of the Act, the objection wasraised to the jurisdiction for opening the assessment. Respondent No.2 again fellinto the same error regarding the non-disposal of the so called objections byholding that it would not render the assessment order illegal. The reasoninggiven to justify the action was that the demand raised in both the assessmentorders for the years 1996-97 and 1997-98, on conclusion of reassessmentproceedings was more than41 lac and the contention was not maintainable. Thecompletion of assessment without passing a Separate order on the said objectionswere held to be justified. The fact that the land was located beyond the municipallimits was held not to be especially established by the assessee at the assessmentStage or under the proceedings under Section 264. Accordingly, the decisionunder Section 264 was upheld, while being weighed down by the ground that thepetition was filed 2 days before the limitation expired and therefore, the orderunder Section 264 was not liable to be interfered with. 10)Learned Senior Counsel for the petitioner has, thus, contended thatonce specific objections had been raised on the issue of jurisdiction for twoassessment years and there was sufficient material before the Assessing Officerregarding the details of the land and when the award was passed, he was notjustified in framing the assessment and imposing LTCG. Reference was,accordingly, made to the notification dated 06.01.1994 which had been attached -6-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document in the written submissions before the respondent No.2, to contend that once theland was beyond the notified area and was agricultural land and not falling withinthe jurisdiction of Municipality, as provided under Section 2(14) of the Act, theauthorities below were in error in not dealing with all the contentions. ll.Counsel for the revenue, on the other hand, defended the impugnedorders on the ground that the petitioner had not been cooperative and did notprovide the requisite information and therefore, the impugned orders werepassed. It would, thus, be necessary to refer to Section 149(1)(b), which reads as under: “section 149. (1) No notice under section 148 shall be issued forthe relevant assessment year,— (a)if four years have elapsed from the end of the relevantassessment year, unless the case falls under clause (b) [or clause(C)]; (f) if four years, but not more than six years, have elapsed from theend of the relevant assessment year unless the income chargeableto tax whicn nas escaped assessment amounts to or Is likely toamount to one lakh rupees or more for that year.| ll.Counsel for the revenue, on the other hand, defended the impugnedorders on the ground that the petitioner had not been cooperative and did notprovide the requisite information and therefore, the impugned orders werepassed. It would, thus, be necessary to refer to Section 149(1)(b), which reads as under: “section 149. (1) No notice under section 148 shall be issued forthe relevant assessment year,— (a)if four years have elapsed from the end of the relevantassessment year, unless the case falls under clause (b) [or clause(C)]; (f) if four years, but not more than six years, have elapsed from theend of the relevant assessment year unless the income chargeableto tax whicn nas escaped assessment amounts to or Is likely toamount to one lakh rupees or more for that year.| 12.After hearing counsel for the parties, we are of the view that theassessee has raised a legal objection in his communications dated 26.02.2004 and27.02.2004 before respondent No.1, pertaining to the assessment years 1996-97and 1997-98 wherein he has raised the objection of jurisdiction under Section149(1)(b) and specified that the income chargeable would be the income thatescaped tax, which is the relevant factor. Thus, the quantum of tax which hasexcaped assessment was to be kept in mind. Admittedly, the interest income wasonly=2,94,659/- which had, supposedly, escaped income and the return had notbeen filed. The income chargeable to tax on the said amount was, thus, relevantfactor which was sought to be agitated but never dealt with by respondent No.1,solely on the ground that the return had not been filed. The objections having not -/-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document been dealt with solely on the ground that return had not been filed inspite ofbeing asked to, would, thus, violate the mandate of the Apex Court laid down inGKN Drweshafts (India) Ltd. Vs. Income Tax Officer & others [2003] (259)ITR 19 (SC)wherein it has been held that the Assessing Officer is bound todispose of the objections by passing a speaking order. Relevant portion reads as under: “We see no justifiable reason to interfere with the order underchallenge. However, we clarify that when a notice under section148 of the Income Tax Act is issued, the proper course of action forthe noticee Is to file a return and if he so desires, to seek reasonsfor issuing notices. The Assessing Officer is bound to furnishreasons within a reasonable time. On receipt of reasons, thenoticee is entitled to file objections to issuance of notice and theAssessing Officer is bound to dispose of the same by passing aspeaking order. In the Instant case, as tne reasons nave beendisclosed in these proceedings, the Assessing Officer has todispose of the objections, if filed, by passing a speaking order,before proceeding with the assessment in respect of the abovesaidfive assessment years.”challenge. However, we clarify that when a notice under section148 of the Income Tax Act is issued, the proper course of action forthe noticee Is to file a return and if he so desires, to seek reasonsfor issuing notices. The Assessing Officer is bound to furnishreasons within a reasonable time. On receipt of reasons, thenoticee is entitled to file objections to issuance of notice and theAssessing Officer is bound to dispose of the same by passing aspeaking order. In the Instant case, as tne reasons nave beendisclosed in these proceedings, the Assessing Officer has todispose of the objections, if filed, by passing a speaking order,before proceeding with the assessment in respect of the abovesaidfive assessment years.” 13)The same error was made by respondent No.2 wherein also, thepetitioner had filed the revision petitions under Section 264 of the act andthereatter, the rectification application was filed under Section 154 of the Act,Admittedly, the rectification application was also within limitation and solely onaccount of the fact that it was filed just before the limitation coming to an end,would not be a ground for respondent No.2 to deny the relief. Merely on theeround that the amount of demand on conclusion of the reassessment proceedingswas more thanL1 lac, on the income which is chargeable and which had escapedassessment would have to be seen at the time of issuing notice under Section 149of the Act and not at the time of the conclusion of assessment proceedings andtherefore, the reasoning arrived at by respondent No.2 is also without anyjustification. We are also of the view that there was sufficient material before -§-SAILESH RANJAN2015.04.10 17:27I attest to the accuracy andintegrity of this document respondent No.l regarding the amount of compensation received by thedeceased-assessee which had been supplied by the LAC vide letter dated08.03.2004 and therefore, the respondent No.1 was not justified in coming to theconclusion that the deceased-assessee had not supplied the material facts. It wasalso the bounden duty of respondent No.1 to take into consideration the fact thatthe land fell within the notified area of the Panipat Municipality or not. 14,In CWP Nos.5285, 5309, 5311 & 5313 of 2014, the assessee hadfiled his returns but the interest received by the assessee was assessed to taxwithout taking into consideration the tax deducted at source and without referringto the interest certificates issued by the banks, on the same grounds that theassessee was not cooperating. 15)Accordingly, we are of the view that the matter is liable to beremanded to respondent No.1 for fresh decision and to take into consideration thereturns filed for each assessment years, separately, and also take intoconsideration the TDS certificates issued by the banks regarding the interestelement. The issue ofjurisdiction for the 2 years pertaining to the years 1996-97and 1997-98, as arising under Section 149(1)(b) also be specifically dealt with. Resultantly, the present writ petitions are allowed and the impugnedorders dated 17.02.2006 (Annexure P8) and 12.09.2013 (Annexure P12) arequashed along with the assessment made for the years 1996-2000 and matter isremanded to respondent No.1, for fresh decision, on merits, (S.J.Vazifdar)(G.S.Sandhawalia)Judge Acting Chief Justice 10.04.2015sailesh