Rakesh Kumar Saini v. Union Of India

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 7385/2014 Rakesh Kumar Saini S/o Late Shri Kanhaiya Lalji Saini, aged app.45 years, R/o Plot No.35, Manu Marg, Alwar ----Petitioner Versus 1. Union of India, through the Ministry of Finance, North Block,New Delhi-110 001, through the Commissioner of Income Tax,Alwar 2. The Commissioner of Income Tax Alwar, Moti Doongri Road,Alwar 3. The Income Tax Officer, Ward-2(3), Moti Doongri, Alwar ----Respondents For Petitioner(s) : Mr.Anant Kasliwal, Sr. Adv. withMs.Charu PareekMr.Diwakar Khaldwa &Mr.Raghav KrishnatriFor Respondent(s): Mr. Anuroop Singhi withMr. Aditya Khandelwal &Mr. N.S. Bhatti HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE UMA SHANKER VYAS ORDER -RESERVED ON:-PRONOUNCED ON: 08/11/2024 14/11/2024 -AVNEESH JHINGAN, (J): 1.This petition is filed seeking quashing of notice dated31.03.2014 issued under Section 148 of Income Tax Act, 1961 (forshort ‘the Act’) for Assessment Year (for short ‘AY’) 2009-10 andorder dated 05.06.2014 rejecting the objections. 2.The brief facts are that the petitioner filed Income Tax Returnfor AY 2009-10. The assessment under Section 143(3) of the Actwas finalized on 29.12.2011. Notice dated 31.03.2014 underSection 148 of Act was issued on the ground that deduction under Section 54B of the Act was wrongly claimed for the agriculturalland sold by the brothers of the petitioner. The objection filed bypetitioner were rejected on 05.06.2014. Hence, the presentpetition. 3.Learned Senior counsel for the petitioner submits that aspecific query was raised by the Assessing Officer (for brevity‘AO’) with regard to deduction claimed under Section 54-B of theAct. The proceedings under Section 148 of the Act are initiated onchange of the opinion. Reliance is placed upon the judgment ofSupreme Court in case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited reported in (2010) 320 ITR561 and Full Bench decision of the Delhi High Court in the case ofCommissioner of Income Tax-VI, New Delhi Vs. UshaInternational Limited reported in (2012) 348 ITR 485. 4.As per contra the AO had not dealt with the issue ofdeduction claimed under Section 54-B of the Act. The contention isthat land was sold by brothers of petitioner and the deductionunder Section 54B of the Act could not have been claimed bypetitioner. 5.The assessment of the petitioner for AY 2009-10 undersection 143(3) of the Act was finalized on 29.12.2011. Duringthe assessment proceedings, notice dated 14.12.2011 wasissued for furnishing information called for therein. The content of notice dated 14.12.2011 is reproduced:- Sub:- Assessment proceedings for the A.Y.2009-10/- PAN AENPSI1066H In order to complete the above assessmentproceedings, you are required to furnish thefollowing information /explanation:-1. You have shown income by way of sale ofland. Perusal of sale deeds reveals that theland sold in several plots was in the name ofSh. Suresh Kumar and Sh. Dinesh Kumar.When the land sold was not in your name,how the income from the same can betreated in your hands eligible to claimdeduction u/s 54B of the IT Act, 1961.2 However, you have claimed to inheritagricultural land through a will along-withyour 4 brothers. Though the land was earlierbeing used for agricultural purpose, but itwas in the purview of urban land. Now theland has been sold out after dividing into anumber of plots of different measurementwith a view to earning the profit by the act ofplotting the land vide 18 registered deedsexecuted. This act of yourself clear-cut suggest that theplotting is an act for earning income and thetransaction cannot be covered under theincome from Long term capital gain asclaimed by you. This act of yourself clear-cut suggest that theplotting is an act for earning income and thetransaction cannot be covered under theincome from Long term capital gain asclaimed by you. In such circumstances, you are requested toshow cause as to why the plotting of landand sale thereof should not be treated asyour business incorne as the same involvedadventure in the nature of trade, and whythe receipts of Rs.9,58,000/- should not betaxes in your hand accordingly.Your case is fixed for hearing on 19-12-2011. The petitioner filed reply dated 20.12.2011. Whilepassing the assessment order the AO gave up two issuesraised in the notice and made an addition of Rupees FiftyThousand for unexplained investment in purchase of land. Anaddition of bank interest receipts shown short to the tune ofRs.3,960/- was also made. 6.The notice dated 31.03.2014 under section 148 of the Act was issued. The reasons for reopening were: The Long term capital gain shown before claimdeduction u/s 54B of Rs. 9,97,577/- perusal ofrelevant sole deed of the Land (Plots) in thecase of brother of the assessee, Shri DineshSaini. It reveal that the sler of said pieces ofLand are Shri Dinesh Saini & Suresh Saini. Thus, the assesse is not the owner of of Land.The Land sold, hence deduction u/s 548 is notallowable his hand and accordingly the receipt inhis hand is assessable under the head of Incomefrom undisclosed sources of income. Thus, inview of the above I have reason to believe thatincome to the extent of LTCG Rs. 9,97,577/- hasescaped assessment within the meaning ofsection 147 of the I.T. Act, 1961 for which noticeu/s 148 of the IT Act, 1961 is required to beissued. 7.The explanation sought by the A.O during the assessment proceedings on issue no. 1 and reasons forinitiation of reassessment proceedings are identical. Thepetitioner raised objection that issuance of notice undersection 148 is a result of change of opinion. The objectionwas brushed aside vide order dated 05.06.2014. 8.It is a settled law that inspite of amendment made in theyear 1998 under section 147 of the Act, the reassessmentproceedings cannot be initiated on change of opinion. 9.The Supreme Court in Commissioner of Income Tax,Delhi Vs. Kelvinator of India Limitedreported in(2010)2SCC723 observed: 6. On going through the changes, quotedabove, made to Section 147 of the Act, we 7.The explanation sought by the A.O during the assessment proceedings on issue no. 1 and reasons forinitiation of reassessment proceedings are identical. Thepetitioner raised objection that issuance of notice undersection 148 is a result of change of opinion. The objectionwas brushed aside vide order dated 05.06.2014. 8.It is a settled law that inspite of amendment made in theyear 1998 under section 147 of the Act, the reassessmentproceedings cannot be initiated on change of opinion. 9.The Supreme Court in Commissioner of Income Tax,Delhi Vs. Kelvinator of India Limitedreported in(2010)2SCC723 observed: 6. On going through the changes, quotedabove, made to Section 147 of the Act, we find that, prior to Direct Tax Laws(Amendment) Act, 1987, re-opening couldbe done under above two conditions andfulfillment of the said conditions aloneconferred jurisdiction on the AssessingOfficer to make a back assessment, but inSection 147 of the Act [with effect from 1stApril, 1989], they are given a go-by andonly one condition has remained, viz., thatwhere the Assessing Officer has reason tobelieve that income has escapedassessment, confers jurisdiction to re-openthe assessment. Therefore, post-1st April,1989, power to re-open is much wider.However, one needs to give a schematicinterpretation to the words "reason tobelieve" failing which, we are afraid, Section147 would give arbitrary powers to theAssessing Officer to re-open assessments onthe basis of "mere change of opinion", whichcannot be per se reason to re-open. Wemust also keep in mind the conceptualdifference between power to review andpower to re-assess. The Assessing Officerhas no power to review; he has the power tore-assess. But re-assessment has to bebased on fulfillment of certain pre-conditionand if the concept of "change of opinion" isremoved, as contended on behalf of theDepartment, then, in the garb of re-openingthe assessment, review would stake place.One must treat the concept of "change ofopinion" as an in-built test to check abuse ofpower by the Assessing Officer. Hence, after1st April, 1989, Assessing Officer has powerto re-open, provided there is "tangiblematerial" to come to the conclusion thatthere is escapement of income fromassessment. Reasons must have a live linkwith the formation of the belief. Our viewgets support from the changes made toSection 147 of the Act, as quotedhereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament notonly deleted the words "reason to believe"but also inserted the word "opinion" inSection 147 of the Act. However, on receiptof representations from the Companiesagainst omission of the words "reason to believe", Parliament re-introduced the saidexpression and deleted the word "opinion"on the ground that it would vest arbitrarypowers in the Assessing Officer. 10.The opinion expressed by the A.O on the issue involved may be express or by necessary implications. In the case inhand, explanation on two issues was sought by the A.O. Oneof the issues being of deduction claimed under Section 54-Bof the Act. In view of the reply filed and material produced by the petitioner, the A.O dropped both the issues andassessment was finalized by making addition under other twoheads. The inference being that the A.O had opined on theissue of claiming deduction by the petitioner under section54-B. 11.The Supreme Court in Income Tax Officer Ward No.16(2) Vs. TechSpan India Private Ltd. and Ors. reported in(2018) 6SCC 685 held as under: 12. Before interfering with the proposed re-opening of the assessment on the groundthat the same is based only on a change inopinion, the court ought to verify whetherthe assessment earlier made has eitherexpressly or by necessary implicationexpressed an opinion on a matter which isthe basis of the alleged escapement ofincome that was taxable. the petitioner, the A.O dropped both the issues andassessment was finalized by making addition under other twoheads. The inference being that the A.O had opined on theissue of claiming deduction by the petitioner under section54-B. 11.The Supreme Court in Income Tax Officer Ward No.16(2) Vs. TechSpan India Private Ltd. and Ors. reported in(2018) 6SCC 685 held as under: 12. Before interfering with the proposed re-opening of the assessment on the groundthat the same is based only on a change inopinion, the court ought to verify whetherthe assessment earlier made has eitherexpressly or by necessary implicationexpressed an opinion on a matter which isthe basis of the alleged escapement ofincome that was taxable. For concluding that AO had applied mind to an issue not only assessment order is relevant but it can also be determinedfrom record. It is for AO to determine how to frame an order.The issue accepted may not be even discussed in the order and assessee is not responsible for this. Non recording ofreasons by the AO in assessment order for accepting theexplanation on an issue shall not make a foundation forreassessment on same issue as AO had already dealt with itand formed an opinion. 12.The full bench of Delhi High Court in Commissioner of Income Tax-VI v. Usha International Ltd. reported in(2012) 348 ITR 485 after considering the judgment of Co-ordinate Bench in Commissioner of Income TaxversusEicher Limited reported in (2007) 294 ITR 310 and thedecision of Punjab & Haryana High Court in Hari IronTrading Co. Vs. Commissioner of Income Tax reportedin (2003) 263 ITR 437 held as under: 12. It is, therefore, clear from theaforesaid position that: (1) Reassessment proceedings can bevalidly initiated in case return of incomeis processed under Section 143(1) andno scrutiny assessment is undertaken.In such cases there is no change ofopinion; (2) Reassessment proceedings will beinvalid in case the assessment orderitself records that the issue was raisedand is decided in favour of theassessee. Reassessment proceedings inthe said cases will be hit by principle of"change of opinion". (3) Reassessment proceedings will beinvalid in case an issue or query israised and answered by the assessee inoriginal assessment proceedings butthereafter the Assessing Officer doesnot make any addition in theassessment order. In such situations itshould be accepted that the issue was examined but the Assessing Officer didnot find any ground or reason to makeaddition or reject the stand of theassessee. He forms an opinion. Thereassessment will be invalid becausethe Assessing Officer had formed anopinion in the original assessment,though he had not recorded hisreasons. 13. In the second and third situation,the Revenue is not without remedy. Incase the assessment order is erroneousand prejudicial to the interest of theRevenue, they are entitled to and caninvoke power under Section 263 of theAct. 13.The Bombay High Court in Bedmutha Industries Ltd. v. Deputy Commissioner of Income Tax reported in 2012 SCC Online Bom 829held as under: 8. It was submitted that the issue regardingdepreciation on goodwill and set off ofunabsorbed depreciation was an issueconsidered by respondent No. 1 in orderdated 18-12-2006 and was not reviewed byhim. The only basis for the above submissionis that the order of assessment does notdiscuss the issues raised for the purposes ofreassessment. 13. In the second and third situation,the Revenue is not without remedy. Incase the assessment order is erroneousand prejudicial to the interest of theRevenue, they are entitled to and caninvoke power under Section 263 of theAct. 13.The Bombay High Court in Bedmutha Industries Ltd. v. Deputy Commissioner of Income Tax reported in 2012 SCC Online Bom 829held as under: 8. It was submitted that the issue regardingdepreciation on goodwill and set off ofunabsorbed depreciation was an issueconsidered by respondent No. 1 in orderdated 18-12-2006 and was not reviewed byhim. The only basis for the above submissionis that the order of assessment does notdiscuss the issues raised for the purposes ofreassessment. 9. This very issue as raised by the counsel forthe Revenue has been considered by thiscourt in the matter of Idea Cellular Ltd. v.Deputy Commissioner of Income Tax in(2008) 301 ITR 407 (Bom) wherein it hasbeenheldasfollows:It was also sought to be contended that sincethe assessing officer had not expressed anyopinion regarding this matter in his originalassessment order, it could not be said thatthere was any change of opinion in this case.In our view, once all the material was beforethe Assessing officer and he chose not to dealwith the several contentions raised by thePetitioner in his final assessment order, itcannot be said that he had not applied hismind when all the material was placed before him. To a similar effect is the decision of theFull Bench of Delhi High Court in the matterof Commissioner of Income Tax v. Kelvinatorof India Ltd. reported in (2002) 256 ITR 1(Del) and the division bench of Gujarat HighCourt in the matter of CIT v. Nirma ChemicalWorks reported in (2009) 309 ITR 67 (Guj).In view of the above, the submission of theRevenue that the reopening is not on accountof change of opinion as no opinion wasexpressed in the order of Assessment dated18-12-2006 must be negatived. (emphasis supplied) 14.At the cost of repetition, the issue of deduction underSection 54B was raised and discussed in the assessmentproceedings. The explanation of petitioner on the issue wasaccepted and deduction under Section 54-B of the Act wasallowed. It is inferred that AO formed an opinion albeit, notrecorded the reasons for it. 15.The notice issued under Section 148 for assessmentyear 2009-2010 and order dated 05.06.2014 rejecting theobjections are quashed. 16.The writ petition is allowed. (UMA SHANKER VYAS),J Riya/Danish/161 (AVNEESH JHINGAN),J Reportable:Yes