Ita/572/2013 Of The Commissioner Of Income-Tax v. M/S Amco Batteries Ltd

IN THE HIGH COURT OF KARNATAKA AT BENGALURUDATED THIS THE 18 DAY OF NOVEMBER 2070.PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD BETWEEN: LT.A. NCO.572 OF 2013 1.|THE COMMISSIONER OF INCOME-TA® C.R.BUILDING QUEENS ROAD BANGALORE. 2 |THE DY. COMMMISSIONER OF INCOME-TAX CIRCLE - 11 (1) RASHTROTHANA BHAVAN NRUPATHUNGA ROAD BANGALORE. (BY SRI.K.V.ARAVIND, ADV.,) .., APPELLANTS. AND" M/S AMCO BATTERIES LTD.3RD FLOORUNITY BUILDING|N.R.SQUAREBANGALORE. (BY SRI.S.PARTHASARATHI, ADV.)| .., RESPONDENT THIS ITA IS FILED UNDER SECTION 260-A OF I.T. ACT,|1961L ARISING OUT OF ORDER DATED 31.0/7.20L3 PASSED IN IT NO.94/BANG/2013FOR.THE.ASSESSMENTYEAR|2004-05,|PRAYING TO: (1) FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW.STATED ABOVE.(11) ALLOW THE APPEAL AND SET ASIDE THE ORDERS.PASSED BY THE ITAT, BANGALORE IN ITA NO.94/BANG/2013—DATED 31.0/7.20L3 AND CONFIRM THE ORDER OF THE APPELLATECOMMISSIONER CONFIRMING THE ORDER PASSED BY THE.DEPUTYCOMMISSIONEROF.INCOME|TAX,|CIRCLE11(1),BANGALORE. THIS ITA COMING ON FOR FINAL HEARING, THIS DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: | JUDGMENT This appeal under Section 260A of the Income TaxAct, 1961 (hereinafter referred to as the Act for short)has been preferred by the revenue. The subject matter|of the appeal pertains to the Assessment year 2004-05.The appeal was admitted by a bench of this Court videorder dated 16.12.2014 on the following substantial|questions of law:| (1)WhetherIn|thefact|andIn|circumstances and In law the tribunal wascorrect in holding that there is no failure on-the assessee to aisciose truly and fully allmaterial facts necessary for computing its|income due to which income has escaped tax, admittedly when|theaSSCSSCEChas.not disclosed the fact regarding handing over of|possession of the property to the deve/operpursuant to JVA and recorded a perverse.finding? (il)WhetherIn|thefact|andIn|circumstances and in law the tribunal wascorrect in holding that disclosure of JVA andadvancereceiptfromIVAamountsTo disclosure, when the crucial fact regarding|handing over of possession which would|amount to transfer under Section 2(47) of the Act liable for capital gains was not disclosed|by the assessee and recorded a perverse.finding? 2D Facts leading to filing of this appeal brieflystated are that the assessee is a company engaged inthe manufacture and sale of automotive batteries. The|assessee filed its return of Income for the Assessment|Year 2004-05. The Assessing Officer by an order dated.22.12.2006 completed the assessment under Section143(3) of the Act. The Assessing Officer noticed that theaSS@CSSC2hacentered|intoajoint development agreement and in consideration, the assessee was to.receive 28% of the saleable constructed area and theassessee had handed over the possession of the land inpursuance of joint venture agreement. It was furtherheld that handing over the possession of the land wouldamount to transfer under Section 2(47) of the Act. TheAssessing Officer therefore, reopened the assessment.and issued a notice under Section 148 of the Act. The|Assessing OfficerDY an orderdated|30.17.7011.completed the re-assessment and brought to tax the.transaction relating to transfer of land at Hebbal under.the Long Term Capital Gains.| 3.0Tne assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who-by an order dated 28.11.2012 held that re opening ofthe assessment is in accordance with law. The assessee|thereuponapproachedtneIncome.TaxAppellateTribunal (nereinafter referred to as the tribunal forsnort) by filing an appeal. Tne tridDunal by an order dated 3.0Tne assessee thereupon filed an appealbefore the Commissioner of Income Tax (Appeals) who-by an order dated 28.11.2012 held that re opening ofthe assessment is in accordance with law. The assessee|thereuponapproachedtneIncome.TaxAppellateTribunal (nereinafter referred to as the tribunal forsnort) by filing an appeal. Tne tridDunal by an order dated 30.07.7013 #=‘Intalia held that earlier order!Of|assessment was made under Section 143(3) of the Acton 22.12.2006 and the assessment has been reopenedafter expiry of four years and therefore, the proviso toSection 147 of the Act applies. It was also held that theAssessing Officer has not mentioned that the assessee—had failed to disclose truly and fully all material factsnecessary for computing its income, due to which theincome had escaped tax. Accordingly, the order of reassessment was set aside. In the aforesaid factual|background, this appeal has been filed. 4Learned counsel for tne revenue submittedthat tne assessee had not declared / disciosed the)factum of nanding over the possession througn jointdevelopment agreement, which would constitute failureto disclose fully and truly all material facts necessary forassessment of income and tne same its refiected in tnereasons recorded by the Assessing Officer. It is furthersubmitted tnat notes to return only reflects receipts of advance of Rs.180 Crores and not handing over the.possession / enjoyment of property in terms of Section.2(47)(V) and Section 2(47)(VI) of the Act and therefore,it is a case of non disclosure. 5It is also argued that the reasons recorded bythe Assessing Officer prima facie establish a statement|of tax and at the stage of recording reasons, the.Assessing Officer is not required to establish a statement|of tax with evidence and the finding of the tribunal|regarding the reasons which has been recorded by the|Assessing Officer is contrary to the factual position.existing on the record. It is further submitted that theissue with regard to applicability of Section 2(47)(VI) ofthe Act needs to be examined. Learned counsel for the|revenue has also invited our attention to Clauses 3, 4, 5, 6.4, 7.1, 7.4, 7.5, 7.7, 10.2 and 16 has submitted thatrisk and rewards in the property have already been.transferred in favour of the developer and in fact, thetitleNasalso|peentransferrecd.Tnerefore,the transaction is liable for capital gains under Section 45 of the Act. It is also argued that since the assessee failedto disclose the transaction, the same has escapedassessment. It is also urged that the order of re openingof assessment be upheld and the matter be remitted to.tribunal for adjudication on merits. In Support of aforesaid submissions, reliance has been placed on adecisionoftheSupremeCourtIn3ASSISTANTCOMMISSIONER OF INCOME TAX VS. RAJESH JHAVERTSTOCK BROKERS (P) LTD., 291 ITR 500 (SC). | 6.On the other hand, learned counsel for the|assessee submitted tnat an agreement nas to be acontract in order to attract the applicability of Section2(45) of the Act. While inviting the attention to clauses.3.1, 3.2 as well as other clauses of the agreement, it is.contended that there is no delivery of possession underSection 53A of the Transfer of Property Act, 1881 andtnedevelopmentAgreement.ISnotadregistereddocument. It is also submitted that the assessee gave. Power of Attorney to the developer on 07.03.2006 i.e.,beyond the accounting period and the possession wasnot handed over. It is also urged that there is nomaterial on record to show that the possession of theproperty in question was handed over and the reOpening of the assessment is beyond four years, which is.notpermissibleIn|law.In|SUPDPOTTOf aforesaidsubmissions, reliance has been placed on decision of theSupreme Court in‘COMMISSIONER OF INCOME TAXVS. BALBIR SINGH MAINI’, 398 ITR 531 (SC)and|decision of this court In."VENKATESH POWER WORKS|VS. COMMISSIONER OF INCOME TAX’, 278 ITR436. Power of Attorney to the developer on 07.03.2006 i.e.,beyond the accounting period and the possession wasnot handed over. It is also urged that there is nomaterial on record to show that the possession of theproperty in question was handed over and the reOpening of the assessment is beyond four years, which is.notpermissibleIn|law.In|SUPDPOTTOf aforesaidsubmissions, reliance has been placed on decision of theSupreme Court in‘COMMISSIONER OF INCOME TAXVS. BALBIR SINGH MAINI’, 398 ITR 531 (SC)and|decision of this court In."VENKATESH POWER WORKS|VS. COMMISSIONER OF INCOME TAX’, 278 ITR436. JWe have considered the submissions made bylearned counsel for the parties and have perused therecord. From perusal of the reasons recorded by theAssessing Officer while re opening the assessment, it is”evident that Assessing Officer has recorded a findingthat due to non disclosure of transaction of joint development agreement entered into by the assessee—with M/s Godrej Properties Ltd. on 22.01.2004, towardstransfer of land, the income has escaped assessment.The relevant extract of the order reads as under: It is noticed that the company M/s AmcoBatteries Ltd had entered into a Development|Agreement with M/s Godrej Properties andInvestments Ltd. (subsequently name change|to M/s Godrej Properties Ltd.) for developmentof 20 acres of land near Hebbal flyover.belonging to the company on 22.01.2004. ThisJoint Venture Development entered into on.27.01.04 enables the assessee to claim 78% of|the saleable constructed area. The balance72% of saleable constructed area belongs tothe developer. The possession of the land vestswith the developer on account of Joint Venture’Agreement and on account of constructioncarried on as per JVA as such there is a.transfer of property of 72% of the 20 acres ofland from the assessee company to M/s.Goarej Properties and Investments Ltd. to the|extent of value of the land transferred, the assessee /S liable to capital gains tax for the)year in which the joint venture agreement is.entered into and possession of land is handed|over for construction |.e., for the assessment.year 2004-05. As the assessee company failedto disclose fully the contents of the JVA.entered into with M/s Godrej Properties Ltd.which took place on 22.01.2004 relevant to theAssessment Year 2004-05, capital gain income,which exceeds more than One Lakh Rupees,arising on account of consideration receivedtowardstransferOF|land,has escapedassessment within the meaning of Section 147of the [.T.Act. In view of the above, I am satisfied that itis a fit case for issue of notice under Section148 of the Act for the Assessment Year 7O004O5. 8.Thus, from perusal of the above relevant.extract, it is evident that the Assessing Officer hasrecorded reasons for arriving at the conclusion thatincome has escaped assessment. Once the Assessing. Officer records the reasons that he has reason to believe| that income has escaped assessment, it confersjurisdiction to re open the assessment. However, thetribunal in a cryptic and cavalier manner withoutadverting to the reasons assigned by the Assessing_Officer has held in para 8, the relevant extract of it readsas follows: As seen from the reasons recoded and reopening of the assessment, the AO has not.mentioned therein anywhere that tne assesseehas failed to disclose truly and fully all materialfacts necessary for computing its income due ©to which the income has escaped tax. 9,Tnus, from tne perusal of the order passed by|the tribunal, it is evident that the order passed by thetribunal suffers from the vice of non application of mindand the finding recorded by it referred to supra is.perverse. | In view of preceding analysis, the substantial.questions of law framed by a bDencn of this court are answered in favour of the revenue and against theassessee. In the result, the order passed by the tribunalis therefore, quashed and the matter is remitted to thetribunal for decision afresh in accordance with law. Accordingly, the appeal is allowed. Sd/-— JUDGE. SS| Sd/- JUDGE.