Shriprakash Ramshringar Pandey( v. Income Tax Officer – 14(3)(4), Mumbai Having Office At

THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3535 OF 2019 Shriprakash Ramshringar Pandey(PAN : ), Residing at 101, Onyx Onyz HousingCo-operative Society, 36, Union Park, Chembur, Mumbai- 400 071 Versus 1. Income Tax Officer – 14(3)(4), Mumbai having office at 455, 4[th] Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400 020 having office at 455, 4[th] Floor, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400 020 …Petitioner 2. The Principal Commissioner of Income Tax – 14, Mumbai having office at 415, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400 020 Tax – 14, Mumbai having office at 415, Aayakar Bhavan, Maharishi Karve Road, Mumbai-400 020 3. The Union of Indian Through the Secretary, Ministry of Finance, Government of India, North Block, New Delhi – 110 001 …Respondents Through the Secretary, Ministry of Finance, Government of India, North Block, New Delhi – 110 001 …Respondents …. Mr. Devendra H. Jain, for Petitioner.Mr. Suresh Kumar, for Respondents.Mr. Suresh Kumar, for Respondents. …. CORAM:K. R. SHRIRAM &M.M. SATHAYE, JJ.DATED:12[th] JUNE, 2023 ORAL JUDGMENT (Per K.R. SHRIRAM, J.) 1. Rule. Rule made returnable forthwith. By consent of both counsel, Petition taken up for final hearing at the admission stage. 2.By this Petition, Petitioner challenges the Notice dated 26.03.2019 issued under section 148 of the Income Tax Act, 1961 (the said Act) andthe Order dated 20.11.2019 disposing Petitioner’s objections to thereopening of assessment. Petitioner was Managing Director of a Companyand earned income from salary, income from house property and incomefrom other sources. For the assessment year 2012-13, Petitioner has filedincome tax return on 27.07.2012 disclosing the total income ofRs.81,23,933. The assessment was completed under section 143(3) of thesaid Act. In the assessment order dated 31.12.2014, the income wasassessed at Rs.82,07,933/-. 3.Petitioner received impugned notice dated 26.03.2019 undersection 148 of the said Act informing Petitioner that there were reasons tobelieve Petitioner’s income chargeable to tax for the assessment year 2012-13 has escaped Assessment within the meaning of Section 147 of the saidAct. Petitioner was called upon to file return in the prescribed form whichPetitioner did. Petitioner was also provided with the reasons to believe forreopening of assessment along with notice dated 20.09.2019 undersection 142(1) of the said Act. Reasons to believe reads as under: “……..In this case assessee has claimed exemption fo capital gain ofRs.108,46,405/- U/s.54. However, it was noticed from the agreement forpurchase that flat was purchased on 28.05.10 whereas capital gain arose on05.09.11. Hence the flat was purchased more than one year before the dateof capital gain arose. This has resulted in incorrect claim of exemptionU/s.54B and underassessment of income of Rs.108,46,405/- andconsequential short levy of tax of Rs.22,29,859/-. As per the provision of S.54, if the capital gain arises from transfer oflong term capital asset and assessee has within a period of one year beforeor two years after the date on which the transfer took place purchased orwithin a period of three years after that date constructed residential house, then amount of capital gain shall not be charged to tax, if amount investedin new house is greater than capital gain. From the information as gathered from the assessment record it is clearthat the assessee has claimed exemption U/s.54 of the IT Act for long termcapital gain even as the assessee was not eligible for the same. The assessment records of the assessee were accessed and were used toenquire about the nature of the transaction in respect of both theproperties. As per the provision of S.54, if the capital gain arises from transfer oflong term capital asset and assessee has within a period of one year beforeor two years after the date on which the transfer took place purchased orwithin a period of three years after that date constructed residential house, then amount of capital gain shall not be charged to tax, if amount investedin new house is greater than capital gain. From the information as gathered from the assessment record it is clearthat the assessee has claimed exemption U/s.54 of the IT Act for long termcapital gain even as the assessee was not eligible for the same. The assessment records of the assessee were accessed and were used toenquire about the nature of the transaction in respect of both theproperties. From the assessment records it was seen that the assessee has claimeddeduction by stating that the property was under-construction hence thetime limit of buying the same not before one year of the date on whichcapital gains arose does not apply. However, the property mentioned to beunder construction was purchased on 28.05.2010. As the property waspurchased and not constructed therefore the time limit of not buying beforeone year of the date of capital gains. Therefore, I am of the firm opinionand have bona fide and valid reason to believe that the case is squarely fitto be reopened with reference to the provisions U/s.147/148 of the IT Act,1961 so as to bring to tax the claim of exemption from capital gain taxmade by the assessee of Rs.1,08,46,405/-………” 4.Mr. Jain correctly submitted that since notice has been received after expiry of four years from the end of the relevant assessment year, therequirement of law to initiate proceedings under section 147 of the saidAct would be only when there was failure on the part of the assessee todisclose fully and truly all material facts necessary for his assessment forthe assessment year under consideration. Mr. Jain submitted that reasonsto believe dose not disclose that there was any such failure on the part ofthe assessee because the reasons to believe proceed on the basis“……..From the assessment records it was seen that assessee has claimeddeduction by stating that the property was under-construction……..” Mr. Jain further states the reason to believe says “…...In this caseassessee claimed deduction of capital gain of Rs.108,46,405/- undersection 54 of the said Act. However, it was noticed from the agreement for purchase that flat was purchased on…….….This has resulted in incorrectexemption under section 54B and underassessment of income……..” Therefore, there was no failure to disclose. 5.Mr. Jain also submitted that in any event during the assessmentproceedings a query was raised regarding the capital gain on sale ofresidential flat No.601 at Solitaire, Chembur which is the subject matter ofthe reopening and Petitioner had, by letter dated 31.10.2014, respondedto the query and also provided the working note on computation of longterm capital gain on sale of flat and exemption claimed under section 54of the said Act along with copy of agreement of sale of flat. Copy of thereply along with working note has been annexed to the Petition.Consequently, an assessment order dated 31.12.2014 was passed. Ofcourse, assessment order does not disclose anything about the said flat butthe law on that is quite clear. 6.In the affidavit in reply, Revenue basically reiterated what is statedin the reasons to believe and denied that it was a case of change ofopinion. Revenue stated that in the return of income various informationwas disclosed, but the requisite material facts were embedded in such amanner that material evidence could not be discovered by the AssessingOfficer and could not have been discovered with due diligence. Mr. SureshKumar added there is no discussion in the assessment order about sale offlat. 6.In the affidavit in reply, Revenue basically reiterated what is statedin the reasons to believe and denied that it was a case of change ofopinion. Revenue stated that in the return of income various informationwas disclosed, but the requisite material facts were embedded in such amanner that material evidence could not be discovered by the AssessingOfficer and could not have been discovered with due diligence. Mr. SureshKumar added there is no discussion in the assessment order about sale offlat. 7.In our view, the notice impugned as well as the order of disposingobjections have to be quashed and set aside. We are in agreement with thesubmissions made by Mr. Jain. Admittedly, assessment was completedunder section 143(3) of the said Act and assessment order dated31.12.2014 came to be passed assessing Petitioner’s income atRs.82,07,933/- against disclosed income at Rs.81,23,993/-. 8.For the reasons to believe, the Assessing Officer has proceeded onthe basis of records available with him and after considering the records asfiled by Petitioner, the reasons to believe says “……...in this case assesseehas claimed exemption of capital gain…….. However, it was noticed fromthe agreement for purchase…….. From the information gathered from theassessment record, it is clear that the assessee has claimedexemption…….. The assessment records of assessee were accessed andwere used to enquire about the nature of the transaction…….. From theassessment record it was seen that the assessee has claimeddeduction……..” Therefore, the entire basis for reason to believe is accessed fromPetitioner’s record and there is nothing to indicate that there was anyfailure on the part of Petitioner to disclose fully and truly all material factsnecessary for his assessment. Assessing Officer has made bald allegationsthat even though the assessee has produced books of account, profit andloss account balance sheet and other evidence, no requisite material facts, as noted in the reasons for reopening, were embedded in such a mannerthat material evidence could not be discovered. In our view, this has beenmade only to get over the fetters as held in Calcutta Discount Co. Ltd. V.Income-Tax Officer[1] 9.Moreover undisputedly query was raised during the assessmentproceedings and Petitioner has provided the details vide letter dated31.10.2014 on capital gain of the sale of property. Just because the same isnot referred to in the assessment order, it does not mean that the queryraised was not the subject matter of consideration while completing theassessment. As held by the Division Bench of this Court in AroniCommercials Ltd. V. Deputy Commissioner of Income-Tax-2(1)[2], it is notnecessary that an assessment order should contain reference and/ordiscussion to disclose its satisfaction in respect of query raised. 10.This is a clear case where the reopening of the assessment is merelyon the basis of change of opinion of the Assessing Officer from that heldearlier during the course of assessment proceeding. This change of opiniondoes not constitute justification and/or reasons to believe that incomechargeable to tax has escaped assessment. 11.In the circumstances, Rule made absolute in terms of prayer clause (a) which read as under: “(a) that this Hon’ble Court may be pleased to issue a Writ of 1[1961] 41 ITR 191 (SC) 2[2014] 44 taxmann.com 304 (Bombay) Certiorari or a Writ in the nature of Certiorari or any other appropriateWrit, Order or direction, calling for the records of the Petitioner’s caseand after going into the legality and propriety thereof, to quash and setaside the notice u/s. 148 dated 26.03.2019 (“Exhibit E”) and thesubsequent Order dated 20.11.2019 (“Exhibit J”) disposing of Petitioner’sobjections on the issue of impugned notice.” 12.Petition disposed. [ M. M. SATHAYE, J. ] [ K. R. SHRIRAM, J. ]