Wa/1777/2021 Of S.ganesan v. The Asst Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HON'BLE MR. JUSTICE T.S.SIVAGNANAMAND THE HON'BLE MR.JUSTICE SATHI KUMAR SUKUMARA KURUP S.Ganesan ...Appellant/Petitioner The Asst. Commissioner of Income Tax,Non-Corporate Circle, 15(1)121, Nungambakkam High Road,Chennai – 600 034. ...Respondent/Respondent Prayer : Writ Appeal filed under Clause 15 of the Letters Patentto set aside the order dated 23.04.2021 made in W.P.No.34075 of2017. Prayer in W.P.No.34075 of 2017:- Writ Petition filed under Article 226 of the Constitutionof India, to issue a Writ of Certiorari, quash the impugnednoticeissuedu/s.148oftheActinPanNo.AAZPG3716G/ACIT/NCC/A.Y.2010-11dated31.3.2017andconsequentially quash the proceedings in Pan : /Replyto objections/NCC 15(1)/2017-18 dated 22.12.2017 as illegal andwithout jurisdiction. (Judgment was delivered by T.S. SIVAGNANAM, J.) This Writ Appeal filed by the writ petitioner is directedagainst the order, dated 23.04.2021, in W.P.No.34075 of 2017. 2.The writ petition was filed challenging the proceedings ofthe respondent/Assessing Officer, dated 31.03.2017, initiatedunder Section 148 of the Income Tax Act, 1961 (“the Act” for https://hcservices.ecourts.gov.in/hcservices/ brevity) and to quash the consequential proceedings, dated22.12.2017, as being without jurisdiction and illegal. 3.The assessee is an individual and for the Assessment Yearunder consideration, AY 2010-11, he had filed return of incomeon 30.07.2010 declaring a total income of Rs.4,46,870/-. Thereturn was processed under Section 143(1) of the Act on08.04.2011 and subsequently, the assessment was taken up forscrutiny and notice under Section 143(2) of the Act was issuedand the Assessing Officer called for details. The details werefurnished by the assessee and one of the details called for wasin respect of the property which was sold by the assessee duringthe Financial Year 2009-10 for a consideration ofRs.5,67,30,000/-. The Assessing Officer questioned the assesseeby stating that the capital gains was not offered to tax by theassessee in the returns for the AY 2010-11. The assesseeexplained by stating that the property was transferred andpossession was handed over to M/s.Vinayaga Land Developers, apartnership firm, for a sale consideration of Rs.1,07,18,000/-through a sale agreement dated 15.12.2003 and a registered Powerof Attorney executed in favour of the partner of the firm tosell the property. A copy of the sale agreement and the Powerof Attorney were placed before the Assessing Officer forconsideration. The Assessing Officer issued summons to thepartner of the partnership firm, in whose favour the registeredPower of Attorney was executed. The assessee was also summonedand after recording the statements given by all the parties, theAssessing Officer was satisfied and accordingly, completed theassessment under Section 143(3) of the Act, by order dated12.03.2013. 4.This assessment was sought to be reopened by issuance ofnotice dated 31.03.2017. The assessee sought for reason forreopening, which was furnished by the respondent along withletter dated 06.10.2017. On a perusal of the reasons, theassessee came to know that the only reason for reopening is thesale transaction that took place in the previous year, i.e.,2009-10 relating to Assessment Year 2010-11, when the PowerAgent has executed the sale deed. Therefore, the AssessingOfficer opined that he has reasons to believe that the incomechargeable to tax has escaped assessment. The assesseesubmitted his reply, dated 21.10.2017, pointing out as to howthe Assessing Officer has sought to reopen the assessment afterit was completed under Section 143(3) of the Act and also havingtaken note of the facts that the assessee had in his return ofincome filed for AY 2004-05 had disclosed the transaction andthe details of the long term capital gains were furnished andintimation was issued under Section 143(1) for AY 2004-05 videnotice dated 01.07.2005, in response to which, the assessee hadsubmitted the proof of having deposited the capital gains as envisaged under Sub-Section 2 of Section 54 of the Act in theIndian Bank and a letter given by the Bank dated 07.08.2005 wasalso produced and subsequently, rectification order was alsopassed on 18.08.2005. Further, in the return of income filedfor AY 2006-07 dated 31.10.2006, the assessee had disclosed thelong term capital gain and had also paid taxes and theassessment was accordingly completed under Section 143(3) of theAct by order dated 30.10.2008. Therefore, the assessee wouldsubmit that there was no fresh tangible material for reopeningthe assessment and it was a clear case of change of opinion.The objections raised by the assessee were disposed ofreiterating what had been stated in the reasons for reopening.It was the argument of the learned counsel for the assessee thatthe Assessing Officer did not form an opinion by himself that hehad reason to believe that income has escaped assessment to tax,rather he has verbatim copied the audit objections raised by theAudit Wing, which came to the knowledge of theappellant/assessee when he obtained information under the Rightto Information Act, which was furnished to the assessee muchthereafter. 5.The learned Single Bench was of an opinion that the IncomeTax authorities are entitled to reopen the proceedings toexamine the genuineness and validity of the transactions andalso whether the transactions are legal transactions recognizedunder the provisions of the Act. Further, the learned SingleBench was of the view that, Power of Attorney alone was executedby the appellant/assessee in the year 2003 and admittedly, thePower Agent sold the property only during the Assessment Yearunder consideration and therefore, the assessee should raise allgrounds before the Assessing Officer and avail the remediesunder the provisions of the Act. 6.In our considered view, moot question which was requiredto be decided in the writ petition was whether the reopening ofthe assessment was valid and whether it is a case of change ofopinion. For such an exercise, the only issue to be consideredwas whether there was a transfer of the immovable propertyduring the previous year relevant to AY 2004-05 or did thetransfer take place at the behest of the appellant/assessee inthe Assessment Year 2010-11. 6.In our considered view, moot question which was requiredto be decided in the writ petition was whether the reopening ofthe assessment was valid and whether it is a case of change ofopinion. For such an exercise, the only issue to be consideredwas whether there was a transfer of the immovable propertyduring the previous year relevant to AY 2004-05 or did thetransfer take place at the behest of the appellant/assessee inthe Assessment Year 2010-11. 7.Therefore, to decide the said question, we are guided bythe definition of transfer as defined under Section 2(47) of theAct. If the assessee had executed the agreement of sale on15.12.2003 and executed the registered General Power of Attorneyon 19.12.2003 in favour of the partner of the partnership firm,which was the purchaser in the sale agreement irrevocablyempowering the Power Agent to sell the property in whole or inpieces, and also admitted having receiving the full saleconsideration and put the purchaser in possession of the property in question, then all elements of transfer as envisagedunder Section 2(47) of the Act stood complied with. Added tothat, the assessee has filed his return of income for theAssessment Year 2004-05 and has offered the sale considerationfor capital gains and deposits were made in the Bank Account.All these aspects were called for by the Assessing Officer byissuing intimation and after considering the documents producedby the assessee, summons were issued to the partner of the firm,who had purchased the property, their Books of Accounts wereperused and the Assessing Officer having been fully satisfiedthat the transfer has taken place in terms of Section 2(47) ofthe Act in the Assessment Year 2004-05, had passed the scrutinyAssessment Order under Section 143(3). Admittedly, theAssessing Officer did not have any new or tangible material toshow that the assessee failed to fully and truly disclose allparticulars and the assessment warrants reopening. In ourconsidered view, the assessee has been put to sheer harassmenton account of notice under Section 148 of the Act, dated31.03.2017. Had the Assessing Officer perused the letter of theAssessing Officer dated 26.07.2005, wherein, the details weresought for with regard to the deposit of capital gains, theinformation furnished by the assessee through his CharteredAccountant on 08.08.2005, the certificate issued by the IndianBank, North Usman Road Branch, Chennai, dated 07.08.2005, andthe order of assessment under Section 143(3) dated 30.10.2008,the present reopening would not have been made and could nothave been made. Therefore, we are convinced that the reopeningis a clear case of change of opinion and therefore, not valid inlaw. 8.For all the above reasons, the Writ Appeal is allowed andthe order passed in the Writ Petition is set aside andconsequently, the Writ Petition is allowed and the proceedingswhich are impugned in the Writ Petition are quashed. No costs.Consequently, connected miscellaneous petition is closed. Sd/- Assistant Registrar(CS III) //True Copy// mknTo The Assistant Commissioner of Income Tax, Non-Corporate Circle, 15(1) 121, Nungambakkam High Road, Chennai – 600 034. NMI[co]NSK 17/09/2021 https://hcservices.ecourts.gov.in/hcservices/