Wp-1164-2022.Doc v. Deputy Commissioner Of Income-Tax-2(1

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.1164 OF 2022 LOKHANDWALA CONSTRUCTION INDUSTRIES PRIVATE LIMITEDPlot No.48, Indranarayan Road, SantacruzWest, Mumbai – 400054 PAN No.AAACP2037 V/s. 1 DY.COMMISSIONER OF INCOME TAX CIRCLE 4(3)(1), Mumbai, R.No.649, 6[th] FloorAayakar Bhavan, M.K.Road, Mumbai-400020 2UNION OF INDIA through the SecretaryDepartment of Revenue, Ministry of Finance,North Block, New Delhi – 110001 ))))...PETITIONER )))) )))...RESPONDENTS Mr.Rahul Hakani, Advocate for the Petitioner.Mr.Suresh Kumar, Advocate for the Respondent. CORAM DATE : K. R. SHRIRAM & N. R. BORKAR, JJ.: 29[th] MARCH 2022 ORAL JUDGMENT: (PER : K. R. SHRIRAM, J.) 1Petitioner is impugning the notice dated 30[th] March 2021issued under Section 148 of the Income Tax Act, 1961 (the saidAct) for A.Y. 2017-18 and the order dated 10[th] December 2021rejecting petitioner’s objections. The subsequent notices issuedhave also been included in the petition. AVK 1/7 2Admittedly, the re-opening has been proposed before theexpiry of four years from the end of relevant assessment year,and therefore, even proviso to Section 147 will not apply. At thesame time, it is settled that if an assessment has been completedunder Section 143(3), re-opening cannot be proposed on thebasis of change of opinion. In this case assessment under Section143(3) has been completed. Let us now examine whether thenotice is sustainable. 3We have considered the reasons recorded and we aresatisfied that the re-opening proposed is on the basis of change ofopinion. Two issues are raised in the reasons for reopening. Thefirst issue is, petitioner has, in the profit and loss account andbalance sheet, shown closing finished goods of Rs.54,68,37,517/-and out of this the value of unsold flats was shown atRs.54,64,17,000/- for two projects which has not been offered totax under the head ‘Income from house property’ as held by theDelhi High Court and ITAT Ahmedabad. The second issue is, that out of 12 flats sold by petitioner,AVK 2/7 for 9 flats market value is more than the agreement value andtherefore, provisions of Section 43CA(1) of the Act applies. 4As regards the first issue, identical reasons were recordedfor A.Y.2016-17 and this Court was pleased to pass the orderdated 27[th] January 2022 in Writ Petition No.102 of 2022.Paragraph 2 of the said order reads as under : “2. Paragraph No.1 of the order dated 10[th]January, 2022 reads as under :1. Dr. Shivram for petitioner states that the noticeunder Section 148 of the Income Tax Act, 1961("the Act") for Assessment Year 2016-2017 hasbeen issued purely on change of opinion, which isnot permissible in law. Dr. Shivram states that, forthe reasons, reliance has been placed in assessmentrecords and the Return filed by the petitioner alongwith the profit and loss account and balance sheetand secondly, an issue raised is regarding thefinished stocks of Rs.65,53,57,872/-, which was forunsold flats of two projects at Kandivali andBandra and according to respondents, petitioner'shas not offered tax under the head income fromhouse property. Dr. Shivram states that the sameissue was raised during the assessment proceedingsas could be seen from Item No.16 in the annexureto notice dated 8[th] October, 2018, issued underSection 142(1) of the Act and petitioner hasreplied to, the same vide petitioner's letter dated8[th] November, 2021. Dr. Shivram states that thisissue has not been discussed in the assessment AVK 3/7 AVK 3/7 order but still relying on Aaroni Commercials Ltd.vs. Deputy Commissioner of Income-tax-2(1)(2014) 44 taxmann.com 304 (Bombay) submittedthat once a query has been raised and it has beenreplied to, the Assessing Officer is deemed to haveapplied his mind and considered the same even ifthat issue has not been discussed in the assessmentorder.” 5This Court, in paragraph 4 of the said order dated 27[th]January 2022 in Writ Petition No.102 of 2022 has held as under :January 2022 in Writ Petition No.102 of 2022 has held as under : “ We have to note at the outset that the ITAT orderis not binding on this court. Secondly, thejudgment/order of the Delhi High Court reliedupon for the reasons for re-opening has beenreported in (2013) 213 Taxman 0143. Therefore, itis a judgment of 2013 or earlier. The assessmentorder in this case has been passed on 20[th]December, 2019 and the query on this issue hasbeen raised on 19[th] October, 2019 and replied bypetitioner vide its letter dated 14[th] November, 2019and 12[th] December 2019. Therefore, the AssessingOfficer had benefit of the judgment of the DelhiHigh Court relied upon by the Assessing Officerwanting to re-open the assessment but still did notfind anything wrong in the case made out bypetitioner and proceeded to pass the assessmentorder.” 6On the second issue of market value being more than the agreement value and applicability of Section 43CA(1) of the Act, AVK 4/7 that has been a subject matter of consideration during theassessment proceedings. Mr.Suresh Kumar submitted that in theassessment order dated 20[th] December 2019 the Assessing Officerhas not discussed this aspect. He does not have to because asheld by this Court in Aaroni Commercials Ltd. vs. DeputyCommissioner of Income-tax -2(1)1once a query is raised duringassessment proceedings and assessee has replied to it, it followsthat the query raised was a subject matter of consideration of theAssessing Officer while completing the assessment. It is notnecessary that an assessment order should contain referenceand/or discussion to disclose its satisfaction in respect of thequery raised. In this case, during the original assessmentproceedings, a notice dated 19[th] October 2019 was issued underSection 142(1) of the Act by which petitioner was called upon tofurnish copies of Index II(s) of three flats sold during the year.Petitioner responded by its letter dated 14[th] November 2019 andprovided copies of Index II of flats sold during the year.Therefore, it is abundantly clear that the second issue relating to 1(2014) 44 taxmann.com 304 (Bombay) AVK 5/7 nine flats out of the twelve flats mentioned in the reasons forreopening was a subject of consideration of the Assessing Officerwhile completing the assessment. There can be no doubt in thepresent facts that the subject matter of the market value of nineflats as against the agreement value was a subject matter ofconsideration by the Assessing Officer. It would, therefore, followthat the reopening of the assessment for this reason is merely onthe basis of change of opinion of the Assessing Officer. As held inAaroni Commercials Ltd. (supra) this change of opinion does notconstitute justification and/or reasons to believe that incomechargeable to tax has escaped assessment. 7In the circumstances, we allow the petition in terms ofPrayer Clause (a) which reads as under : “(a)That this Hon’ble Court may be pleased toissue a Writ of Certiorari or a Writ in the nature ofCertiorari or any other appropriate Writ, order ordirection, calling for the records of the Petitioner’scase and after going into the legality and proprietythereof, to quash and set aside the said (i)reopening Notice dated 30[th] March, 2021 u/s 148 7In the circumstances, we allow the petition in terms ofPrayer Clause (a) which reads as under : “(a)That this Hon’ble Court may be pleased toissue a Writ of Certiorari or a Writ in the nature ofCertiorari or any other appropriate Writ, order ordirection, calling for the records of the Petitioner’scase and after going into the legality and proprietythereof, to quash and set aside the said (i)reopening Notice dated 30[th] March, 2021 u/s 148 AVK 6/7 ARTIVILASKHATATEDigitally signed byARTI VILASKHATATEDate: 2022.04.0117:33:16 +0530 for A.Y. 2017-18 (Exh. A), (ii) the impugned orderdated 10/12/2021 being (Exh “B”) and (iii) Noticeu/s 143(2) dated 29/12/2021 being (Exh “C”).” 8Petition is disposed. (N. R. BORKAR, J.) (K. R. SHRIRAM, J.) AVK 7/7