Mumbai – 400 036 v. Commissioner Of Income-Tax – 5

agkIN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.738 OF 2012 M/s.Rock Castle Property Private Limited 3[rd] Floor, Sunama House,140 August Kranti Marg, Opposite Shalimar Hotel, Kemps Corner, Mumbai – 400 036..Petitioner. Versus 1)Commissioner of Income-tax – 5, Room No.559, Aayakar Bhavan,M.K. Road, Mumbai – 400 020 2)Income Tax Officer 5(3)(1), Room No.525, Aayakar Bhavan,M.K. Road, Mumbai – 400 020..Respondents. Ms.Natasha Mangat with Mr.S.C. Tiwari for the petitioner.Mr.Abhay Ahuja for the respondents. CORAM : J.P. Devadhar &M.S. Sanklecha, JJ. DATE : 22[nd] October 2012 ORAL JUDGMENT : (Per J.P. Devadhar, J.) 1.Heard. Rule. Rule is made returnable forthwith. Taken up for hearing and final disposal by consent of both the parties. 2.This writ petition is filed to challenge the notice issued under Section 148 of the Income Tax Act, 1961 on 19[th] January 2012. 3.The assessment year involved herein is AY 2005-2006. The impugned notice for re-opening of the assessment is issued beyond four years from the end of the relevant assessment year. 4.The reasons recorded for re-opening the assessment, reads thus : “Return of income filed on 29/10/2005 while declaring total income of Rs.88,900/- assessment was completed u/s.143(3) on 27/8/2007 at Rs.158750. On perusal of assessment record, I have found that during the course of assessment proceeding, AO has called the copy of sales agreement, market value determined for the payments of stamp duty. The assessee has claimed before the AOI that provisions of section 50-C is not applicable to its case, being confirming party. The learned AO has not verified the working of short-term capital gain correctly. Further record shows that the AO has not called the copy of return filed by the Metal Box India Limited to verify the market value taken for working out capital gain. In this case, assessee company has claimed as confirming party of the land deal between Metal Box India and M/s.S.K. Raheja Property Private Limited. On perusal f the record, which shows that assessee has shown the agreement value, reduced the cost of acquisition, and claimed other incidental expenditure while computing the short term capital gain in its return of income and hence assessee company becomes the owner and its claim as a confirming party title does not survive in this transaction. The provision of section 50-C has clearly attracted to this case as under :- Market value of land Rs.5,43,09,500Less : value shown by the companyRs.4,05,00,000---------------------Difference short term capital gainRs.1,38,09,500======== In view of said facts, I have reason to believe that short term capital gain on sale of land Rs.1,48,09,500/- have escaped assessment. I am also satisfied that assessee committed default in claiming as confirming to defraud the revenue in not showing true short term capital gain for taxations. Thus, this fit case to initiate proceeding under Section 147 Explanation 2(c) of the IT Act. The approval of CIT – 5 has obtained before issuance of notice under Section 148 of the Income Tax Act.” 5.From the aforesaid reasons recorded by the assessing officer, it is seen that failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment was not the ground for re-opening the assessment which is a precondition for re-opening the assessment beyond four years from the end of the relevant assessment year. Thus, this fit case to initiate proceeding under Section 147 Explanation 2(c) of the IT Act. The approval of CIT – 5 has obtained before issuance of notice under Section 148 of the Income Tax Act.” 5.From the aforesaid reasons recorded by the assessing officer, it is seen that failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment was not the ground for re-opening the assessment which is a precondition for re-opening the assessment beyond four years from the end of the relevant assessment year. 6.Counsel for the Revenue, however, contended that by the Article of Assignment dated 28[th] February 2002, the property in question was in fact assigned by Metal Box India Limited to the assessee for Rs.11.11 crores and the assessee had become owner of the said property. Counsel for the Revenue further submitted that though by a first supplementary agreement dated 30[th] November 2002, the area of the plot claimed to be assigned was reduced with the consequential reduction in consideration from Rs.11.11 crores to Rs.3.71 crores and by a second supplementary agreement dated 31[st ]August 2004 the consideration was enhanced from Rs.3.71 crores to Rs.3.81 crores, the assessee had paid the said amount and thus became owner of the wp738-12 property in question. 7.Counsel for the Revenue further submitted that though in the Deed of Assignment dated 22[nd] December 2004 executed by Metal Box India Limited, it is shown that the property is assigned to K Raheja Private Limited with the assessee as confirming party for Rs.4.05 crores, the fact that the assessee had already become the owner of the property was not disclosed by the assessee and, therefore, the re-opening of the assessment beyond four years from the end of the relevant assessment year by invoking the provisions of Section 50-C of the Income Tax Act was justified. 8.We see no merit in the above contention. If the Articles of Assignment dated 28[th] February 2002 was indeed a Deed of Assignment, then by the supplementary agreements dated 30[th] November 2002 and 31[st] August 2004, the area of the plot to be assigned could not be reduced and the consideration in respect thereof could not be altered. Moreover, if the contention of the Revenue is accepted, it would mean that Metal Box India Limited had actually assigned the property to the assessee on 28[th] February 2002. In that event, the Metal Box India Limited executing a Deed of Assignment on 22[nd] December 2004 with the assessee as a confirming party would not arise at all. Therefore, the fact that the Metal Box India Limited has actually executed the Deed of Assignment on 22[nd] December 2004, supports the contention of the assessee that on 28[th] February 2002 the parties wp738-12 had agreed to assign the property and the Deed of Assignment was executed on 22[nd] December 2004 with the assessee as the confirming party and thus the property was never transferred to the assessee. In any event, the aforesaid documents were produced before the assessing officer at the time of assessment. It was open to the assessing officer on the basis of the above documents to draw an inference that the property has been transferred to the assessee and accordingly assess by invoking Section 50C of the Act. Failure to do so cannot be a ground to hold that there was failure on the part of the assessee to disclose fully and truly all material facts so as to re-open the assessment beyond four years from the end of the relevant assessment year. 9.In this view of the matter, since the precondition for re-opening of an assessment beyond four years from the end of relevant assessment year that is, failure on the part of the assessee to disclose fully and truly all material facts is not satisfied, the impugned notice issued beyond four years from the end of the relevant assessment year cannot be sustained. 9.In this view of the matter, since the precondition for re-opening of an assessment beyond four years from the end of relevant assessment year that is, failure on the part of the assessee to disclose fully and truly all material facts is not satisfied, the impugned notice issued beyond four years from the end of the relevant assessment year cannot be sustained. 10.Accordingly, the impugned notice dated 19[th] January 2012 issued under Section 148 of the Income Tax Act, 1961 is quashed and set aside. Rule is made absolute accordingly with no order as to costs. (M.S. Sanklecha, J.) (J.P. Devadhar, J.)