Rampal Samdani v. Additional Commissioner Of Income Tax, Range-1,Department Of Income Tax, Chittorgarh.department Of Income Tax, Chittorgarh

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. CIVIL WRIT PETITION No.9022/2021 Rampal Samdani S/o Mangilal Samdani Aged about 67, Residentof Behind Public Park, Nandwana Colony, Kapasan, Chittorgarh312202 Rajasthan. ----Petitioner Versus 1. Union of India, Ministry of Finance through Additional/ Joint/Deputy/ Assistant Commissioner of Income Tax, National e-Assessment Centre, Delhi 401, 2nd Floor, E-Ramp, JawaharlalNehru Stadium, Delhi-110003.Deputy/ Assistant Commissioner of Income Tax, National e-Assessment Centre, Delhi 401, 2nd Floor, E-Ramp, JawaharlalNehru Stadium, Delhi-110003. 2. Additional Commissioner of Income Tax, Range-1,Department of Income Tax, Chittorgarh.Department of Income Tax, Chittorgarh. 3. Principal Commissioner of Income Tax, Udaipur. 4. Income Tax Officer, Ward-1 Chittorgarh. ----Respondents For Appellant(s) : Mr. Vikas Balia, Sr. Advocate with Mr. Priyansh Arora. For Respondent(s): Mr. K.K. Bissa. HON'BLE MR. JUSTICE SANDEEP MEHTA HON'BLE MR. JUSTICE KULDEEP MATHUR J U D G M E N T Judgment pronounced on:::12/01/2023Judgment reserved on:::13/12/2022 BY THE COURT : (PER HON’BLE MEHTA, J.) 1.The instant writ petition has been preferred by the petitionerRampal Samdani under Article 226 of the Constitution of India forassailing the reassessment notice (Annexure-5) dated 30.03.2021issued under Section 148 of the Income Tax Act, 1961 for theAssessment Year 2013-14 and the notice (Annexure-7) dated 17.06.2021 issued under Section 143(2) read with Section 147 ofthe Income Tax Act for the same assessment year. 2.Brief facts relevant and essential for disposal of the writpetition are noted herein below: The petitioner did not furnish his return of income for theAssessment Year 2013-14 for the reason that he was havingincome lower than the basic exemption limit prescribed under theIncome Tax Act and Rules. A notice dated 08.04.2016 issued bythe ITO Ward No.3, Chittorgarh was received by the petitionerproposing to initiate assessment proceedings under Section 147 ofthe Income Tax Act. While complying with the said notice, thepetitioner filed return of the income in the prescribed format on09.05.2016 and declared his income for the said assessment yeari.e. 2013-14 as Rs.45,000/-. While declaring his income in thereturn, the petitioner claiming loss of Rs.2,21,429/- on the sale ofa residential property located at Ambe Vihar Colony, Chittorgarh.On receiving this return of the petitioner, a notice dated24.05.2016 under Section 143(2) of the Income Tax Act wasserved to him seeking further information with regard to certainpoints in connection with return of income submitted on09.05.2016. The petitioner was also required to appear before theITO, Chittorgarh and to furnish information regarding theregistered sale deed; all connected bank accounts details anddocuments pertaining to the claim of expenses and losses inreturn of income. The case of the petitioner was taken up forscrutiny assessment and notice dated 07.02.2017 under Section142(1) of the Income Tax Act was served upon him In response,the petitioner appeared before the ITO, filed written submissions and furnished all requisite details alongwith supportingdocuments. The Long Term Capital gain tax and total income ofthe petitioner for the Assessment Year 2013-14 was computed asRs.1,04,591/- and an order under Section 156 of the Income TaxAct was issued on 26.04.2017 indicating that the petitioner wasrequired to pay ‘NIL’ amount towards income tax. The assessmentorder dated 26.04.2017 and the notice under Section 156 of theIncome Tax Act have been annexed with the writ petition asAnnexure-4. and furnished all requisite details alongwith supportingdocuments. The Long Term Capital gain tax and total income ofthe petitioner for the Assessment Year 2013-14 was computed asRs.1,04,591/- and an order under Section 156 of the Income TaxAct was issued on 26.04.2017 indicating that the petitioner wasrequired to pay ‘NIL’ amount towards income tax. The assessmentorder dated 26.04.2017 and the notice under Section 156 of theIncome Tax Act have been annexed with the writ petition asAnnexure-4. In the year 2021, the petitioner was served with a noticedated 30.03.2021 issued under Section 148 of the Income Tax Actwhereby, the assessment of the petitioner for the Assessment Year2013-14 was sought to be reopened. It was stated in the noticethat income chargeable to tax for the Assessment Year 2013-14had escaped assessment within the meaning of Section 147 of theIncome Tax Act. The petitioner filed reply to the said notice andrequested the respondent department to provide reasons forissuing the notice under Section 148 of the Act of 1961. Theacknowledgment of the return of income filed earlier was annexedwith the reply. In response, another notice dated 17.06.2021under Section 143(2) read with Section 147 of the Act of 1961(Annexure-7) was issued to the petitioner. But as per thepetitioner, the said notice does not disclose the reasons forreopening of assessment. The petitioner kept on pursuing thematter with the respondent department and again requested toprovide the reasons for reopening of assessment. Consequentthereto, the letter (Annexure-8) dated 19.06.2021 was servedupon the petitioner wherein, reasons have been assigned for theproposed reassessment. As per the petitioner, the reasons so indicated amount to “change of opinion” which is not permissibleunder law. Thus, the petitioner has approached this Court by wayof this writ petition for assailing the impugned notice/order andproposed reassessment proceedings for the Annual Year 2013-14. 3.The respondents have filed reply to the writ petition wherein,the submissions made by the petitioner have been controverted Ithas been asserted that the claim of loss towards Long TermCapital gains set out in the previous return of the petitioner wasfound to be incorrect and thus, the re-assessment notice wasrightly issued. A particular instance has been given that claim forexpenses on account of construction of boundary wall on the landin question is contradicted by the valuation made by the Sub-Registrar in the sale deed. 4.Shri Vikas Balia, learned Senior Counsel assisted by ShriPriyansh Arora, Advocate representing the petitioner, placedreliance on the Supreme Court Judgment in the case ofCommissioner of Income Tax vs. Kelvinator of IndiaLimited reported in (2010)2 SCC 723 and urged that reopeningof assessment cannot be undertaken on mere change of opinion.Shr Balia further submitted that the reasons for re-assessmentwhich have been assigned by the respondents in thecommunication dated 19.06.2021 are without any foundation. Inthis letter itself, at para No.4, it has been mentioned that “thetool of 360 degree maintained with ITBA portal/ITS wasused, however, no fruitful information was received. ShriBalia thus urged that the impugned action is without any foundation and has been taken purely on ‘change of opinion’ andis thus unsustainable in the eyes of law. It was also submitted that the impugned notice underSection 148 of the Income Tax Act is time barred as the reopeningis attempted for assessment year beyond the period of 4 yearswhich is impermissible in view of proviso to Section 147 of the Actwhich reads as below: foundation and has been taken purely on ‘change of opinion’ andis thus unsustainable in the eyes of law. It was also submitted that the impugned notice underSection 148 of the Income Tax Act is time barred as the reopeningis attempted for assessment year beyond the period of 4 yearswhich is impermissible in view of proviso to Section 147 of the Actwhich reads as below: “Provided that where an assessment under sub-section (3) ofsection 143 or this section has been made for the relevantassessment year, no action shall be taken under this sectionafter the expiry of four years from the end of relevantassessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason ofthe failure on the part of the assessee to make a returnunder section 139 or in response to a notice issued undersub- section (1) of section 142 or section 148 or to disclosefully and truly all material facts necessary for his”assessment for that assessment year. (Emphasis Supplied). He urged that the case set up by the respondents that thereopening beyond 4 years is permissible because the petitionerfailed to disclose fully and truly the material facts in the returnfiled for the assessment year 2013-14, is absolutely unjustifiedbecause even in the reopening notice and the letter of reasonsdated 19.06.2021, there is not a whisper about the material factsnot truly and fully disclosed by the petitioner in the return filedearlier. He thus urged that the impugned reassessmentproceedings are liable to be quashed as being bad in the eyes oflaw and so also as being time barred. 5.Per contra, Shri Bissa, learned counsel representing therespondents, vehemently and fervently urged that the petitionerwrongly claimed the Long Term Capital gain losses in the returnfiled for the assessment year 2013-14. Before issuing thereassessment notice, close scrutiny was made and it wasconcluded that losses claimed by the petitioner towards Long TermCapital Gain regarding the property transaction in question werefound unjustified and thus, it was considered necessary to reopenthe assessment proceedings. However, Shri Bissa was not in aposition to point out as to what precisely was the untrue orincomplete disclosure made by the petitioner in the return filed forthe Assessment Year 2016-17 which could justify reopening of theproceedings beyond four years by taking recourse to the provisounder Section 147 of the Income Tax Act. At this stage, we would like to mention that in the noticeissued to the petitioner under Section 148 of the Income Tax Act(Annexure-5) dated 30.03.2021, there is not a whisper that thepetitioner made non-disclosure or untrue disclosure of materialfacts in the return filed for the Assessment Year 2013-14. Therelevant extracts of the letter of reasons (Annexure-8) dated19.06.2021 are reproduced herein below for ready reference: “1. The assessee is an individual and filed his ITR on08.04.2016 u/s 148 for the A. Y.2013-14 at Total Income ofRs.45000/-. The assessment u/s 147 of the Act had beencompleted on 26.04.2017 at Total Income Of Rs. 1,04,591/- 2. On perusal of assessment records, during the year underconsideration, the assessee sold immovable property beingland to Shri Mohd. Sher Khan for total sale consideration ofRs.32,00,000/-. The assessee claimed index cost ofpurchase, index cost of conversion and index cost ofimprovement etc., on the said transaction as under:- Income from Capital Gain 32000003200000/- 3. The above issue has been examined along withassessment record, ITR filed by the assessee and otherrelevant documents. As per section 45 the IT Act, any profitor gains arising from the transfer of a capital asset effectedin previous year shall be chargeable to Income-tax underhead Capital gain and shall be deemed to be the income ofthe previous year in which the transfer took place. 2. On perusal of assessment records, during the year underconsideration, the assessee sold immovable property beingland to Shri Mohd. Sher Khan for total sale consideration ofRs.32,00,000/-. The assessee claimed index cost ofpurchase, index cost of conversion and index cost ofimprovement etc., on the said transaction as under:- Income from Capital Gain 32000003200000/- 3. The above issue has been examined along withassessment record, ITR filed by the assessee and otherrelevant documents. As per section 45 the IT Act, any profitor gains arising from the transfer of a capital asset effectedin previous year shall be chargeable to Income-tax underhead Capital gain and shall be deemed to be the income ofthe previous year in which the transfer took place. 4. The tool of 360 degree maintained with ITBA portal/ITSdetails was used, however, no fruitful information wasreceived. 5. On verification of records, it is notified that theassesseehasreceivedsaleconsiderationRs.32,00,000/- in regard of capital gain arising on saleof residential property. The assessee claimed additionor alterations expenses of Rs. 31,40,409/- on the saidland as described in para 2 above. But on the contrary,there were no any additions of alterations makingwork found on sold property, which was certified byvaluation information of authorized sale deed (Sub-Registrar, Registration and Stamp, Chittorgarh,Rajasthan). As, it is noticed that there was no anyaddition alteration found as per valuation informationof Sub-Registrar in the deed and expenditureamounting to Rs.28,70,823/- incurred on soldproperty is not allowable as per the Registered deed.[i.e. land filing Rs.1,23,837/, land conversion andboundary Rs.1599977/-, tube-well Rs. 182051/-, roadand other development expenses Rs.944335/- andconversion charges Rs.20,623/-]. 6. Accordingly, income the chargeable amounting toRs.28,70,823/- to tax in the case of the assessee hasescaped the assessment within the meaning ofprovision of section 147 of the IT Act, 1961 by reasonof the failure on the part of the assessee for theassessment year 2013-14. 7. In this case return of income was filed for the year underconsideration on 08.04.2016 and assessment u/s 143(3)/147was made on 26.04.2017. Since, four years from the end ofthe relevant year has expired in this case, the only requirements to initiate proceedings u/s 147 of the Act arereason to believe that income for the year underconsideration has escaped assessment because of failure onthe part of the assessee to disclose fully and truly allmaterial facts necessary for his assessment. It is pertinent tomention here that reasons to believe that income hasescaped assessment for the year under consideration havebeen recorded above in preceding Paras. I have carefully considered the assessmentrecords containing the submission made by theassessee in response to various notices issued duringthe assessment proceeding. It is evident from theabove facts that the assessee had not truly and fullydisclosed material facts necessary from hisassessment for the year under consideration therebynecessitating reopening u/s 147 of the Act. (Emphasis supplied) 8. In view of the above foregoing facts, I have reasons tobelieve that income of Rs.28,70,823/- has escaped fromassessment within the meaning of the provisions of section147 of the IT Act 1961. The provisions of clause (c) ofExplanation 2 to section 147 are applicable to facts of thiscase and the assessment year under consideration is deemedto be a case where income chargeable to tax has escapedassessment. In this case more than four years have lapsedfrom the end of assessment year under consideration. Hencenecessary sanction to issue notice u/s 148 has been obtainedseparately from Principal Commissioner of Income Tax as perthe provision of section 151(1) of the Act.” (Emphasis supplied) 8. In view of the above foregoing facts, I have reasons tobelieve that income of Rs.28,70,823/- has escaped fromassessment within the meaning of the provisions of section147 of the IT Act 1961. The provisions of clause (c) ofExplanation 2 to section 147 are applicable to facts of thiscase and the assessment year under consideration is deemedto be a case where income chargeable to tax has escapedassessment. In this case more than four years have lapsedfrom the end of assessment year under consideration. Hencenecessary sanction to issue notice u/s 148 has been obtainedseparately from Principal Commissioner of Income Tax as perthe provision of section 151(1) of the Act.” A bare perusal of this letter is sufficient to convince us thatthe phraseology used therein by the ITO that the income of theassessee for the Assessment Year 2013-14 escaped assessmentbecause of failure on the part of the assessee to disclose fully andtruly material facts necessary for assessment, is absolutelyunfounded and self contradictory. Para 4 of this very letter statesthat the tool of 360 degree maintained with ITBA portal/ ITSdetails was used, however no fruitful information was received.Observations made at paras No.2, 5 and 7 of the letter dated19.06.2021 when comparatively considered with the assessmentorder (Annexure-4) dated 26.04.2017, makes it clear that all these facts were unquestionably disclosed and under considerationof the ITO who passed the assessment order dated 17.06.2021.Hence, the reasoning assigned by the ITO for reopening theproceedings on the ground that the material facts were not fullyand truly disclosed by the petitioner and thus, his income escapedassessment, is absolutely unfounded. A clear perusal of theproviso to Section 147 of the Income Tax Act (supra) makes itclear that reassessment proceedings after expiry of four yearsfrom the end of the relevant assessment year can only be initiatedin case, there is tangible material with the A.O. to show that theassessee had failed to fully and truly disclose all material factsnecessary for his assessment for that assessment year. This Court,after analysis of material facts available on record, is of acategoric opinion that the assessee disclosed all material factstruly and fully while furnishing the return for the Assessment Year2013-14 and hence, there was no justification for invoking theproviso to Section 147 of the Income Tax Act so as to initiatereassessment proceedings after a period of 4 years. Thus, thereassessment notice is definitely time barred. In addition thereto,the reassessment notice has been issued only on account of‘change of opinion’, plain and simple, without any tangible freshmaterial being available to the ITO for reopening the assessmentproceedings. 6.Resultantly, the impugned notice (Annexure-5) dated30.03.2021 is declared to time barred and cannot be saved byproviso to Section 147 of the Income Tax Act reproduced supra. 7.In addition thereto, the reassessment is being resorted toonly on account of ‘change of opinion’ of the Assessment Officerwithout there being any fresh tangible evidence for reopening theassessment proceedings. Hence also, the impugned notice dated30.03.2021 under Section 148 of the Income Tax Act runs foul ofthe Supreme Court Judgment in the case of Commissioner of Income Tax vs. Kelvinator of India Limited(Supra) andthus, the same cannot be sustained and is liable to be struckdown. 8.Consequently, the impugned notice (Annexure-5) dated30.03.2021 issued by the Income Tax Officer, Ward-1 Chittorgarhand all proceedings sought to be undertaken in pursuance thereofdeserve to be and are hereby quashed and set aside. 9.The writ petition is allowed accordingly. 10.No order as to costs. (KULDEEP MATHUR),J (SANDEEP MEHTA),J Tikam Daiya/-