Ita/205/2015 Of The Commissioner Of Income Tax v. M/S Chaitanya Properties Pvt Ltd

IN THR HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THER 1 DAY OF FEBRUARY 2016 PRESENT THR HON’BLE MR.JUSTICE JAYANT PATEL AND THR HON’BLE MRS..JUSTICEHK S SUJAT ITA NO.205 OF 2015 BBRITWRE 1.The Commissioner of Income-tax,C.R.Building, Queens Road,C.R.Building, Queens Road, Bangalore| a2The Deputy Commissioner of Income-Tax, Circle-2(1),No.59, HMT Bhavan,@[th]Floor, Bellary Road,Ganganagar,Bangalore — 560032.No.59, HMT Bhavan,@[th]Floor, Bellary Road,Ganganagar,Bangalore — 560032. ... Appellan (By Sri.K.V.Aravind, Advocate) AN): M/s. Chaitanya Properties Pvt.Ltd., No.17, Sankey Road,Bangalore -560020 PAN: AAACC 5S900A. ...Respondent (By Sri.A.Shankar And Sri.M.Lava, Advocates) This ITA is filed Under Section 260-A of IncomeTax Act, 1961 arising out of Order dated 21.11.2014passed in ITA No.997/Bang/2014, for the AssessmentYear 2005-2006 praying to formulate the substantialquestions of law stated above and allow the appeal andset aside the orders passed by the Income-Tax AppellateTribunal, Bangalore in ITA No.9s9/7/Bang/2014 date21.11.2014 and confirm the order of the AppellateCommissioner confirming the order passed by theDeputy Commissioner of Income Tax, Circle-2(1),Bangalore. This Appeal coming on for Admission this day,JAYANT PATEL J., delivered the following: JUDGMENT The Revenue has preferred the present appeal by formulating the following substantial questions of law: 1.Whether the Tribunal was correct i1nholding that the reasons recorded by the.assessing officer did not spell out that.escapement of income was due to theholding that the reasons recorded by the.assessing officer did not spell out that.escapement of income was due to the assessee not fully and truly disclosing allmaterial facts necessary for completion ofassessment for the relevant assessment.year without considering the fact that theassessing officer recorded that the assessee_did not file any information regardingincidence of capital gains? a2Whether the Tribunal was correct i1nholding that the initiation of reassessment.has been merely on the basis of change ofOpinion and is not without appreciatingthat no opinion was formed in the originalassessment on the issue and hence changeof opinion does not arise?”holding that the initiation of reassessment.has been merely on the basis of change ofOpinion and is not without appreciatingthat no opinion was formed in the originalassessment on the issue and hence changeof opinion does not arise?” 2. We have heard Mr.K.V.Aravind, learned Counsel for the appellants-Revenue and Mr.A.Shankar, learned Counsel for the respondent-assessee. 3. We may record that the Tribunal in its order dated 21.11.2014 (Annexure ‘C’?) while dealing with the said aspects has observed from paragraph 12 toparagraph 26 as under: “12. It could be seen trom the tacts narrated|as above that the proceeding u/s. 147 of the|Act were sought to be initiated after a period otfour years from the end of the _ relevanassessment year. It is also clear from the facts|narrated as above that in the case of assessee|for the A.Y. 2005-06, an order of assessment|u/s. 143(3) of the Act had already been made.Therefore, proviso to section 147 of the Act will|apply. 13. It can also be seen from the reasons|recorded by the AO for initiating proceedings|u/s.147 of the Act, that the narration in para 1to 9 of the reasons recorded are facts which|were well within the knowledge of the AO whilecompleting the original assessment proceedingsu/s.143(3) of the Act. The joint development|agreement between the Assessee and PEPL wastaken note by the AO in the order passed|u/s.143(3) of the Act. The narration in para-10 13. It can also be seen from the reasons|recorded by the AO for initiating proceedings|u/s.147 of the Act, that the narration in para 1to 9 of the reasons recorded are facts which|were well within the knowledge of the AO whilecompleting the original assessment proceedingsu/s.143(3) of the Act. The joint development|agreement between the Assessee and PEPL wastaken note by the AO in the order passed|u/s.143(3) of the Act. The narration in para-10 in the reasons recorded by the AO relate to|application of the provisions of Sec.49(2) of the|Act. As we have already seen the Assessee held|the Whitefield property as investment and_convertedtheSammlaS|stock-in-tradeoT|business. This fact has also been recorded by|the AO in the order of assessment passed|u/s.143(3) of the Act. Sec.45(2) of the Act|provides that the profits or gains arising from|the transfer by way of conversion by the owner|of a capital asset into, or its treatment by him|as stock-in-trade of a business carried on by|him shall be chargeable to income-tax as his|income of the previous year in which such|stock-in-trade is sold or otherwise transferred|by him. The taxable event for application ofsec.45(2) is conversion of capital asset into/stock-in-trade of business. The point of time at|which tax is levied is the year in which the|stock-in-trade is sold. When the_ originalassessment was completed u/s.143(3) of the|Act, the AO did not think it fit to invoke|provisions of Sec.49(2) of the Act either becausehe|overlookedtheapplicabilityoT|thoseprovisions or because he thought that the point| of time at which tax is to be levied u/s.45(2) of the Act, viz., sale of the stock-in-trade had not|occurred during the previous year. In the|reasons recorded by the AO, the AO makes a|reference to the provisions of Sec.49(2) of the|Act and claims that the said provisions are|applicable because the assessee had entered|intoagreementfor.developmentoT|theWhitefield property on 5.2.2005 with M/S.PEPL|and further executed a power of attorney on|01/03/2005 in favour of M/s. PEPL for transfer|of stock for development. According to the AO,the above act by the Assessee amounts to|transfer/relinquishment /sale of stock by the|Assessee to M/S.PEPL. According to the AO,|the consideration so received has to be brought|to tax as capital gains as per the provisions Ofthe income tax Act. In para 12 to 19 of the|reasons recorded the AO has narrated as to’how capital gain had to be computed. In para-16 of the reasons recorded the AO has referred|to judicial pronouncements wherein a view hasbeen expressed that whenever property is givenon Joint Development, the date of transfer|would be the date of the Joint Development| Agreement for the purpose of levy of capital|gains tax. In the remaining paragraphs, the AOhas computed capital gain that has to be|brought to tax which in his opinion has|escaped assessment. 14. On the facts as narrated above and on the'basis of provisions of section 147 as well as|proviso to section 147 of the Act, the ld.|counsel for the assessee contended as follows:-. a) Initiation of reassessment proceedings is bad in law because proviso tosec.147 will apply in the present caseandthereforethe initiationoT reassessment proceedings can be onlyif there was failure on the part of theassessee to fully and truly disclosematerialfactsNnecessa lforassessment of income tor AY 05-06. b) Initiation of reassessment proceedingsare merely on a change of opinion andtherefore bad in law. Agreement for the purpose of levy of capital|gains tax. In the remaining paragraphs, the AOhas computed capital gain that has to be|brought to tax which in his opinion has|escaped assessment. 14. On the facts as narrated above and on the'basis of provisions of section 147 as well as|proviso to section 147 of the Act, the ld.|counsel for the assessee contended as follows:-. a) Initiation of reassessment proceedings is bad in law because proviso tosec.147 will apply in the present caseandthereforethe initiationoT reassessment proceedings can be onlyif there was failure on the part of theassessee to fully and truly disclosematerialfactsNnecessa lforassessment of income tor AY 05-06. b) Initiation of reassessment proceedingsare merely on a change of opinion andtherefore bad in law. 14.1 On point (a) as above, the learned counsel|for the Assessee submitted that the fact that|assessee owned 100.02 acres’ of land inWhitefield and the fact that the aforesaid|property was treated as investment as on_31.3.2004 and shown as stock-in-trade as on|31.3.20095 are all facts within the knowledge oftheAO,whilecompletingtheoriginal assessment u/s. 143(3) of the Act. The fact that|the property was subject matter of the joint|development agreement (“JDA”) between the|assessee and PEPL under an agreement dated|o.2.2005 to develop the same as a residential|complex by name ‘Shantiniketan’ is also withinthe knowledge of the AO. All the relevant booksof account as well as agreements had been filedbefore the AO. The fact that the land which washeld as’ investment in A.Y. 2VOO4-05 waconvertedintostock-in-tradeduringtheprevious year relevant to A.Y. 2005-06 was alsowell within the knowledge of the AO. These|facts have been duly recorded by the AO in theorder of assessment passed u/s. 143(3) dated|31.12.2007. 14.2 Our attention was drawn to the provisionsof section 147 of the Act and proviso to section147 which reads as under:- “147: Income escaping assessment. — Ii the Assessing Officer, has reason to believe|that any income chargeable to tax has escaped|assessment for any assessment year, he may,|subject to the provisions of sections 148 to 153,assess or reassess such income and also any|other income chargeable to tax which has|escaped assessment and which comes to his|notice subsequently in the course of the|proceedings under this section, or recompute|the loss or the depreciation allowance or any|other allowance, as the case may be, for the|assessment year concerned (hereafter in this|section and in sections 148 to 153 referred to|as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has|been made for the relevant assessment year, noaction shall be taken under this section after)the expiry of four years from the end of the| relevant assessment year, unless any income|chargeable to tax has escaped assessment for|such assessment year by reason of the failure|on the part of the assessee to make a return|under section 139 or in response to a notice|issued under sub-section (1) of section 142 or section 148 or to disclose|fully and truly all material facts necessary for|his assessment for that assessment year:” 14.3 As per the proviso to section 147 of the.Act, where an assessment u/s. 143(3) of the Acthas been made in any assessment year and if after expiry of four years from the end of the|relevant assessment year, action is sought to betaken u/s. 147 of the Act, such action can be|only in cases where income chargeable to tax|has escaped assessment for such assessment|year, by reason of failure on the part of the|assessee to disclose truly and fully all material|facts necessary for his assessment for that|assessment year. He drew our attention to the|reasons recorded by the AO u/s. 147 of the Act|before issue of notice u/s. 148 of the Act and|submitted that in the reasons so recorded by| 14.3 As per the proviso to section 147 of the.Act, where an assessment u/s. 143(3) of the Acthas been made in any assessment year and if after expiry of four years from the end of the|relevant assessment year, action is sought to betaken u/s. 147 of the Act, such action can be|only in cases where income chargeable to tax|has escaped assessment for such assessment|year, by reason of failure on the part of the|assessee to disclose truly and fully all material|facts necessary for his assessment for that|assessment year. He drew our attention to the|reasons recorded by the AO u/s. 147 of the Act|before issue of notice u/s. 148 of the Act and|submitted that in the reasons so recorded by| the AO, there has been no allegation that therewas escapement of income due to failure on thepart of the assessee to disclose fully and truly|all material facts necessary for assessment ofincome of the assessee for A.Y. 2002-03. 14.4 Our attention was also drawn to the'decision of the Hon’ble Karnataka High Court|in the case of CIT and ACIT v..HewelettPackard Digital Global Solutions Ltd., ITA No.406of 2007, judgment dated 19.09.2011,wherein|the Hon’ble Karnataka High Court after making|9 reference to the decision of the Hon’ble|Bombay High Court in the case ofHindustanLever Ltd. v. R.B. Wadkar (2004) 137 Taxmann479 (Bom)observed as follows:- “7. It is observed in the said judgment.that|the TE ASOTrecordedby the|Assessing Officer no where state that.there was failure on the part of the.assessee to disclose fully and truly allmaterialfactsnecessaryfor.theassessment of that assessment year. Itis for the Assessing Officer to disclose. and open his mind through reasons. He.has to speak through his reasons. It is|for the Assessing Officer to reach the.conclusion as to whether there was)failure on the part of the assessee to.disclose fully and truly all material facts necessary for his assessment for the-concerned assessment year. It is for the.Assessing Officer to form his opinion. It.is for him to put his opinion on record in|black and white. The reasons recorded|should be clear and unambiguous and.should not sutier from any vagueness.The reasons recorded must disclose, his|mind. The reasons are the manifestation|of the mind of the Assessing Officer. The,TECASOTIrecorded|shouldbe|$ /')explanatory and should not keep theaSSCSSEEouessingfor.theTe€eaSONnReasonsprovidethelinkbetweenconclusion and evidence. The order!passed by the Assessing Authority did)not state anywhere that there was a.failure on the part of the assessee to.disclose fully and truly all material facts necessary for the assessment of that.year. All that has been stated in the.order is that the assessee has appended.the note and at no point of time, the.assessee has disclosed as to the nexus|between the amount of Rs. 10,06,617/-|and the 10OA unit. The disclosure has tobe full and true. Both the criteria have|to be met. In the assessee’s case, by.failing to bring out the nexus between.the 1OA unit and the interest income,|the assessee has not discharged its.responsibilityoT|furnishingfulldisclosure of facts. As set out above, thenote clearly sets out the interest income.earned by the STP unit and the claim oftheAaASsSSE€forexemptionundersection 10A. It is not the requirement of.law that further the assessee should|show the nexus between the amount!claimed and l10OA unit. When he hacategorically stated that the interest,which is earned from STP unit, is eligible for exemption under Section 10A, even.that nexus is manifest. The Assessing. Authority has not properly applied his.mind towards the statutory provisions|and has not taken into consideration|that the original assessment passed.under Section 143(3) which was also.reopened once and adjustment was.made. It is for the second time, he was|raisingalltheseobjections.When.admittedly the second reopening of the.assessment is beyond four years, under)law, it is barred by time and the findings recorded by the Tribunal is legal and.valid and does not sulier from any legalinfirmity. In that view of the matter, no.substantial question of law arises for.consideration1ntheseappeals.|Accordingly, the appeals are dismissed.” 14.5 Our attention was drawn to the decision otfthe Hon’ble Gujarat High Court in the case of|General Motors India Pvt. Ltd. Vs. DCIT, 360|ITR 527 (Guj) wherein the Hon'ble Gujarat HighCourt held: “ It is required to be noted that in the present|case notice u/s 148 of the Act had been issued|on 27/4/2011 in relation to the Assessment|Year 2005-06. Hence, admittedly the same had|been issued after expiry of a period of four|years from the end of the relevant assessment|year. Under the circumstances, in light of the|proviso to section 147 of the Act, in case, whereassessment has been framed under section|143(3) of the Act, no action can be taken under|section 147, unless income chargeable to tax|has escaped assessment by reason of the|failure on the part of the assessee to disclose|fully and truly all material facts necessary for|his assessment, for the assessment year. There|was not even a whisper to the effect that|income has escaped assessment on account ofany failure on the part of the assessee to|disclose fully and truly all material facts|necessary for its assessment. Even while|consideringtheobjections|raisedby theassessee and replying to the assessee, there|was no such case pleaded on behalf of the|revenue even in the Affidavit-in-reply filed,|there was no allegation of any such failure on| the part of the assessee. The AO was not in a|position to satisfy the Court with respect to|compliance / satisfaction of the requirement ofthe proviso to section 147 of the Act. Under thecircumstances,1T WaS apparentthat|the.requirement of the proviso to section 147 was|not satisfied. Secondly, in absence of anysatisfaction having been recorded by theAssessing Officer that the income hasescaped by reason of the failure on the part|of the assessee to disclose fully and truly allmater ital facts necessary for its assessmenfortheAssessmentYear|under.consideration, assumption of jurisdiction|u/s 147 of the Act was failure and therefore,the impugned notice u/s 147 of the Act,|cannot be sustained.Identical question came|to be considered by the Division Bench of this|Court in the case of Kanak Fabrics Vs. Income|Tax Officer in Special Civil Application No. 330of 2001 and in absence of any such satisfactionby the Assessing Officer, the Division Bench of this Court has quashed and set aside the noticeof reassessment u/s 148. In view of the above| and for the reasons stated above notice of reassessment u/s 148 quashed and set aside.” (emphasis supplied) 14.6 It was thus submitted by the Id. counsel|forthe.ASSECSSEEthat|reopeningoT the.assessment should be held to be bad in law, asthe AO in the present case has not recorded|specifically that escapement of income was dueto the failure on the part of the assessee to|disclose fully and truly all material facts|necessary for his assessment for the A.Y. 2000-O06. It was also submitted that factually therewas no failure on the part of the Assessee to|disclose fully and truly all material facts|necessary of his assessment for AY Oo-O6. In|this regard our attention was drawn to the fact|that all facts relating to the Joint Development|Agreement between the Assessee and PEPL hadbe duly disclosed and even considered by the|AO while concluding the original assessment|proceedings. It was emphasized that no new|material whatsoever has been referred to in the|reasons recorded. 15. The Id. DR, on the other hand submitted|that there was a failure on the part of the|Assessee to fully and truly disclose material|facts and in this regard drew our attention to|para-19 of the reasons recorded wherein the AOhas recorded the fact that the Assessee has not|filed any information to the etifect that therewas incidence of capital gain u/s. 45(2) of the|Act, as per the return of income. Further|reference was also made to Expln.1 to Sec.147|of the Act which lays down that merely filing ofdocuments.beforeAQ|fromwhich>factsregarding escapement of income could be|gathered, will not necessarily amount to|disclosure of all facts by an Assessee. Further reterence was made to the fact that§whilecompletingtheoriginalassessmentgu/s.143(3) of the Act there was no discussion|regarding applicability of Sec.45(2) of the Act.|Reliance was placed on page-10 and 11 of the|CIT(A)’s order wherein the CIT(A) has upheld|the action of the AO in initiating proceedings|u/s.147 of the Act. 16. The ld. counsel for the assessee, in|rejoinder, pointed out to Explanation 1 to|section 147 of the Act, which reads as under:- “Explanation 1.— Production beforethe Assessing Officer of account|books or other evidence from which.material evidence could with due!diligence have been discovered by the|Assessing Officer will not necessarily|amount to disclosure within the'meaning of the foregoing proviso.” 17. According to him, Explanation 1 to section|147 will not be applicable in the present case.because Explanation only lays down that'production before the AO of account books or other evidence from which material evidence|could with due diligence have been discovered|by the AO “will not necessarily” amount to|disclosure within the meaning of the foregoing|proviso. The expression)will not necessarily *found in Expln.-1 as above, will onlymean that one has to look into the tacts and circumstances of the given case to come to a|conclusion, whether there was failure on the| part of the assessee to fully and truly disclose|all necessary facts for his assessment for that|assessment year. The fact that the Assessee|filed all documents and accounts and other!evidence from which material evidence could|with diligence have been discovered by the AO,will not be conclusive in the matter. According|to him, elaborate discussion in the order of AOwhile completing the original assessment will|clearly show that there was a_complete|disclosure by the assessee of all material facts.According to him, there is nothing brought on|record to show that there was failure on thepart of assessee as contemplated by the provisoto section 14/7. Primary facts have _ bedisclosed by the Assessee and the legal|inferences to be drawn from such primary factslies in the domain of the AQ. The Assessee|cannot therefore be said to have failed todisclose fully and truly material facts. In this|regard, it was submitted by him that reasons|recorded only mention the fact that assessee|has not filed any information regarding capital|gains u/s. 49(2) of the Act in the return of|income filed. According to him, this allegation| cannot tantamount to an allegation by the AO|that assessee has failed to fully and truly|disclose all material tacts. cannot tantamount to an allegation by the AO|that assessee has failed to fully and truly|disclose all material tacts. 18. On the reopening of assessment being|merely on a change of opinion, the learned|counsel for the Assessee submitted that while|completing the original assessment the AO wasfully aware of the fact that the land at'Whitefield was converted into stock in trade'during the previous year relevant to AY O95-O0and the fact that the said property was subject|matter of a Joint Development Agreement with|Prestige Estates and Properties Ltd. It was his|contention that the AO while completing the|assessment did not deem it proper to consider|the act of the Assessee entering into afDevelopment agreement in respect of the|property as resulting to a transfer giving raise|to charge of capital gain u/s.45(2) of the Act. It was pointed out by him that in the reasons|recorded the AO has not referred to any|material which had come into his possession|subsequent to the passing of the order|u/s.143(3) of the Act based on which he| entertained belief that Development Agreement|resulted in a Transfer and thereby provisions ofsec.45(2) of the Act became applicable. There|being no material which has come to the|possession of the AO since the conclusion of the original assessment proceedings, it was not|possible for the AO to change or form a differentopinion on the same set of facts and resort to reopeningoT aacompletedassessment.According to him, doing so will result in the AOreviewing his own order which is not legally|permissible. According to him even assuming|that there was a failure on the part of the AO inthis regard, the appropriate action can only be|under section 2VJ63 of the Act. It was hisubmission that the law is well settled that to|assume jurisdiction u/s. 147 of the Act, there|should be reason to believe that income§chargeable to tax has escaped assessment.|Such reason to believe cannot be on a mere!change of opinion. This position is well settled|by the decision of the Hon’ble Supreme Court|in the case otCIT v. Kelvinator of India Ltd., 320|ITR 561 (SC)| Attention was also drawn to aidecision of the Hon’ble Karnataka High Court| in the case ofCIT Vs. Hardware Trading Co.,248 ITR 673 (Karn)- laying down_ identicaproposition. — 19. The Id. DR submitted that in the original|order of assessment, the AO had not made any|discussion with regard to applicability of|section 45(2) of the Act and therefore it cannot|be said that there was any expression oOfopinion in the order originally passed u/s.|143(3). It was his submission that there cannot|be any change of opinion in the given|circumstances. 20. With regard to the contention of the Id. DR|regarding change of opinion, Id. counsel for theassessee brought to our notice the following|observations of the Hon’ble Supreme Court in|the case otKelvinator of India Ltd.7 “On going through the changes, quotedabove, made to s. 147 of the Act, we findthat,priorTO Direct|Tax.Laws(Amendment) Act, 1987, reopening couldbe done under above two conditions and fulfillment of the said conditions aloneconferred jurisdiction on the AO to make.a back assessment, but in s.147 of the’Act (w.e.f. lst April, 1989), they are givena go by and only one’ condition has—remained, viz., that where the AO hasreason to believe that income has escapedassessment, conifers jurisdiction to reopenthe assessment. Therefore, post lst April,1989, power to reopen is much wider.|However, one needs to give a schematic.interpretation to the words "reason to.believe" failing which, we are atiraid, s.147 would give arbitrary powers to the AO.to reopen assessments on the basis of."mere change of opinion", which cannot.be per se reason to reopen. We must also.keep in mind the conceptual differencebetween power to review and power to.reassess. The AO has no power to review;he has the power to reassess. But.reassessment.hasTObebasedOTlfulfillment of certain pre-condition and ifthe concept of "change of opinion" is—removed, as contended on behalf of the Department,then,1nthe.sarbot reopening the assessment, review would.take place. One must treat the concept of"Change of opinion" as an in-built test to.check abuse of power by the AO. Hence,alter lst April, 1989, AO has power to.reopen,providedthere1S"tangiblematerial" to come to the conclusion that.there is escapement of income from.assessment. Reasons must have a live.link with the tormation of the belief.” He laid emphasis on the fact that there was.absence of tangible material in possession of the AO to come to conclusion that there was|escapementoT|incomefromassessment.According to him, the present action of the AO|is clearly a case of resort to reassessment|proceedings merely on change of opinion. 21. We have given a very careful consideration|to the rival submissions. AS we have already|seen the Assessee held the Whitefield property|As investment and converted the same as)stock-in-trade of business during the previous| year relevant to AY 05-06. This fact has also|been recorded by the AO in the order of|assessment passed u/s.143(3) of the Act.|sec.45(2) of the Act provides that the profits or gains arising from the transfer by way of|conversion by the owner of a capital asset into,or its treatment by him as stock-in-trade of a|business carried on by him shall be chargeableto income-tax as his income of the previous|year in which such stock-in-trade is sold or|otherwise transierred by him. The taxable event|for application of Sec.45(2) of the Act is|conversion of capital asset into stock-in-trade|of business. The point of time at which tax is|levied is the year in which the stock-in-trade issold.When.theoriginal assessmentgWaScompleted u/s.143(3) of the Act, the AO did notthink it fit to invoke provisions of Sec.49(2) ofthe Act either because he overlooked thesapplicability of those provisions or because he|thought that the point of time at which tax is tobe levied u/s.49(2) of the Act, viz., sale of the|stock-in-trade had not occurred during the|previous year. It is clear from a perusal of the|order u/s. 143(3) of the Act dated 31.12.2007| that AO was fully aware of the fact that|property at Whitefield which was held as|investment got converted into stock-in-trade|during the previous year relevant to A.Y. 2009-O6. It is also clear from the order u/s. 143(3) of|the Act that AO was fully conscious of the fact|that property at Whitefield having been given|under joint development agreement to PEPL on5.2.2005. In the said assessment order, the AOdespite knowing the fact that property at|Whitefield was stock-in-trade of the business ot|the assessee and that it was subject matter of|jointdevelopmentagreement,bywhichproperty was to be developed as a residential|complex, did not consider the JDA dated|0.2.2005 as giving rise to a transfer within the|meaning of section 45(2) of the Act. In the|reasons recorded by the AO before issue of|notice u/s. 148 of the Act, the AO has come to the conclusion that by virtue of JDA dated|o.2.2005, there was a transfer of the capital|asset giving rise to capital gains u/s. 45(2) of|the Act. In this regard, the AO has relied on twoimportant factors viz., (1) assessee has executed|POA in favour of developer and the fact that| aSSCSSEEreceivedrefundableandnonrefundable deposits under the JDA, and (iI)the fact that several courts have held that¥capital gains is liable to tax on account of JDA|entered into by the land owners with the|builder on handing over of the possession of theproperty for joint development. In coming to theaforesaid conclusion, the AO has placed|reliance on the decision of the Hon’ble Bombay|High|Court1ntheCaSE€oT|ChaturbhujDwarkadas Kapadia v. CIT, 260 ITR 491 (Bom)rendered on 13.2.2007, which was much beforewhen the AO concluded the original assessmentproceedings|u/s.|143(3)ot the.ActOTL31.12.2007. The other decision referred to by|the AO in the reasons recorded is—CIT v. TK.Dayalu, 202 Taxman 531_ This decision was)rendered on 20.60.2011, after the conclusion otthe originalassessment.proceedings.|Thedecision rendered subsequent to the original|assessment proceedings will not mean that|assessee did not fully and truly disclose|material facts. If reassessment proceedings are|initiated on the basis of a subsequent judicial|decision, then that would also be a case of| change of opinion, as was held by the Hon'ble|Bombay High Court in the case ofSesq GoqLtd. v. JCIT, 294 ITR 101 (Bom)on whichreliance was placed by ld. counsel for the|aSSECSSFEC 22. In the present case, the facts on record and|reasons recorded clearly show that all facts|WeETEavailablebetorethe|AQwhenhe.completed the original assessment proceedings|u/s. 143(3) of the Act. There is no tangible|material which has come to the possession Ofthe AO justifying initiation of reassessment|proceedings. On the facts and circumstances ofthe present case, we are of the view that'initiation of reassessment proceedings has|been merely on the basis of change of opinion|and in view of the law laid down by the Hon'bleSupreme Court in the case ofKelvinator of India|Ltd.(supra),|nitiationoT|reassessment.proceedings has to be held as not proper. "23. We are also of the view that initiation otreassessment proceedings will have to be held| as invalid for the reason that reasons recorded|by the AO do not spell out that escapement ofincome was due to the assessee not fully and|truly disclosing all material facts necessary for|completion of assessment for the _ relevanassessment year. In this regard, we are also ofthe view that allegations in para 19 of the|reasons recorded do not spell out the belief thatthere was a failure on the part of the assessee|to fully and truly disclose all material facts. In fact, the assessee had disclosed all facts in the|original assessment proceedings u/s. 143(3) of|the Act.. 24. With regard to reliance placed by the ld. DR on Explanation to section 147, we are of the|view that Explanation 1 only lays down that|facts and circumstances oft each case will haveto be looked into to ascertain as to whether|there was failure on the part of the assessee to fully and truly disclose material facts. As rightlycontended by the Id. counsel for the assessee,|theexpressionSollnot.necessarily~1NExplanation 1 will only mean that facts and_circumstances of each case will have to be seen as to whether production of books of account|and other evidence betore the AO will amount to full and true disclosure of material facts. In|the present case, aS we have already seen,|evidence was produced before the AO in the|course of the original assessment proceedings|u/s.143(3) of the Act and the same was/perused by the AO and he had not chosen to|draw any conclusion that there was a transfer|by the assessee to PEPL. The fact that assesseewas following completion method of accounting|for income from the JDA, has also been|acknowledged|by theAQ..Inthegivencircumstances,WE|are|oT the viewthat|Explanation 1 cannot be resorted to by the|revenue. Explanation-1 to Sec.14/7 cannot beread in a manner so as to override Proviso toSec.147 oft the Act. as to whether production of books of account|and other evidence betore the AO will amount to full and true disclosure of material facts. In|the present case, aS we have already seen,|evidence was produced before the AO in the|course of the original assessment proceedings|u/s.143(3) of the Act and the same was/perused by the AO and he had not chosen to|draw any conclusion that there was a transfer|by the assessee to PEPL. The fact that assesseewas following completion method of accounting|for income from the JDA, has also been|acknowledged|by theAQ..Inthegivencircumstances,WE|are|oT the viewthat|Explanation 1 cannot be resorted to by the|revenue. Explanation-1 to Sec.14/7 cannot beread in a manner so as to override Proviso toSec.147 oft the Act. 25. Before us, the ld. DR had placed reliance onthe order of the ClT(Appeals) on the issue of|validityot initiationot reassessment.proceedings. In our view, the Id. CIT(Appeals)|has merely proceeded on the basis that incomearises.OT]executingjointdevelopment agreementTOthe assessee..He|hasNOTaddressed the issue with regard to applicability|of proviso to section 147 of the Act or the|question whether reassessment proceedings|were initiated merely on change of opinion. 26. We are, therefore, of the view that in the|given facts and circumstances of the case,|initiation of reassessment proceedings u/s 147|of the Act is held to be illegal and consequently,order passed u/s. 147 of the Act is cancelled onthis ground.” 4. As such, whether it was a case of change ofopinion or the non-disclosure of true and correct facts,if considered in light of the report, one may say thatsuch may fall in the arena of question of fact which mayinclude the consideration of the earlier proceedings ofthe assessment. The Tribunal having found that therelevant material including that of transfer by theassessee to PKBHPL was on record and therefore it was no Q9 case where there was non-disclosure of true and correct facts. The aforesaid finding, in our view, couldbe said to be rather pertaining to the questions of fact tobe examined on the basis of the material on record|which would fall outside the judicial scrutiny in thepresent appeal. o. On the questions of law, the Tribunal has gone|by the decision of the Apex Court in case ofCommissioner of Income Tax Vs. Kelvinator ofIndia Ltd.,reported at(2010) 320 ITR 561in additionto other decisions of Karnataka High Court. In ourview, if the Tribunal has taken the view based on the.decision of the Apex Court and also of the jurisdictionalHigh Court 1.e., High Court of Karnataka, we do not findthat any substantial questions of law would arise forconsideration, as sought to be canvassed. ����%0 &�*� �(#&(."$*+%( $-�*� �+33 +/�#$� 0#$"#$$ 0�� ��>)� ��%0�12345���%0�12345�