Wp/4370/2022 Of Vivek Jaisingh Asher v. Income-Tax Officer, Ward-19(3)(1) And 3 Ors

PURTI IN THE HIGH COURT OF JUDICATURE AT BOMBAYPRASADORDINARY ORIGINAL CIVIL JURISDICTIONPARABDigitally signed byPURTI PRASADPARABWRIT PETITION NO. 4370 OF 2022 Date: 2024.04.2218:32:24 +0530 Vivek Jaisingh Asher ….Petitioner V/s.Income Tax Officer, Ward 19(3)(1) and Ors. …Respondents ---- Mr. J.D. Mistri, Senior Advocate a/w Mr. B.V. Jhaveri and Ms. Bhargavi Ravalfor Petitioner.Mr. Akhileshwar Sharma for Respondents-Revenue. ---- CORAM : K.R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED : 16[th] APRIL 2024 P.C. : 1.Since the pleadings in the petition are completed, we havedecided to dispose the petition at the admission stage itself. 2.Rule. Rule made returnable forthwith. 3.Petitioner, an individual filed return of income for AssessmentYear (A.Y.) 2020-21 on 29[th] December 2020 declaring total income ofRs.3,11,410/-. The case was selected for scrutiny under CASS to examine“Capital Gains Deduction Claimed”. Therefore, Show Cause Notice dated23[rd] August 2022 was issued calling upon petitioner to show cause as to whycertain variations prejudicial to petitioner’s interest should not be made. 4.In reply assessee explained that on 11[th] August 2014development agreement was executed by and between the owner of thebuilding known as Vallabha Niwas and M/s. Arkade Paradigm (theDeveloper). The owners of the building agreed to grant development rightsin respect of the building and agreed to permit the developer to develop theproperty on terms and conditions mentioned therein. Under thedevelopment agreement, the developer was required to provide permanentalternate accommodation to the tenants/occupants and as mandated byMaharashtra Housing and Area Development Authority (MHADA), thedeveloper entered into permanent alternate accommodation agreement withthe tenants/occupants and registered the same with the Sub-Registrar ofAssurances. 5.An intimation of disapproval was issued by the BombayMunicipal Corporation on 9[th] December 2015 and the amended plans for thenew building were approved on 29[th] November 2017. 6.Petitioner along with his brother were tenant since 1[st] April2013 of a flat on the first floor of the building admeasuring 2270.24 sq. ft.carpet area and a garage of 259.50 sq. ft. in the said building. Petitionerand his brother were paying rent of Rs.5,000/- per month to the ownerssince 1[st] April 2013. The tenancy agreement was executed on 5[th] August2014 in respect of flat on the first floor of the building. Petitioner and his brother got permanent alternate accommodation and possession letter dated19[th] February 2020 in respect of flat on 15[th] Floor in the new building calledArkade Rise was issued. The stamp duty of the said flat wasRs.11,68,99,000/-. Petitioner thereafter received various notices underSection 142(1) of the Income Tax Act, 1961 (the Act) which were all repliedto. Finally petitioner received Show Cause Notice dated 23[rd] August 2022calling upon petitioner to show cause as to why the stamp duty value of thesaid flat being Rs.11,68,99,000/- should not be treated as deemed incomeof petitioner under Section 56(2)(x) of the Act and deduction under Section54F of the Act be denied. Petitioner replied vide his Chartered Accountant’sletter dated 1[st] September 2022 explaining that the tenancy in the hands ofpetitioner was at Nil cost and on surrender of this tenancy rights wasallotted a flat in the new building which was valued by the Stamp DutyAuthority at Rs.11,68,99,000/-. Petitioner fetched the consideration ofRs.11,68,99,000/- on surrender of its tenancy rights which has beeninvested in the flat on 15[th] Floor of the new building and hence entitle todeduction under Section 54F of the Act. Petitioner also filed copies of rentreceipt, application to Brihanmumbai Electric Supply and Undertaking(BEST) for fresh electric connection, electricity bills etc. 7.Respondent No.3 thereafter passed the impugned assessmentorder dated 29[th] September 2022. Before that petitioner had also filedadditional reply dated 12[th] September 2022 giving details of certain general precedents in support of petitioner’s case. The impugned order dated 29[th]September 2022 was passed in which Respondent No.3 proposed to treatthe entire stamp duty value of the said flat as unexplained investment underSection 69 of the Act and charged to tax under Section 115BBE of the Act. 8.Admittedly, no notice has been issued to assessee/petitionercalling upon assessee to show cause whether the entire stamp duty value betreated as unexplained investment under Section 69 of the Act. In theaffidavit in reply, the answer given to this allegation of petitioner that nonotice was given to show cause under Section 69 of the Act is that theassessment was getting barred by limitation on 30[th] September 2022 andthere was no time for further show cause notice and hence the FacelessAssessing Officer (FAO) has passed the assessment order after consideringall the submissions and possible aspect of the case and agreement value ofthe new purchased property at Rs.11,68,99,000/- is treated as unexplainedinvestment under Section 69 of the Act and added to the total income ofassessee. In the assessment order though there is reference to Section 56(2)(x) of the Act and the reply/objections filed by petitioner in response to theshow cause notice, in the operative part there is no reference to Section56(2)(x) of the Act. 9.The courts have time and again held that issuance of showcause notice is not an empty formality. Its purpose is to give reasonable opportunity to the affected persons to effectively deal with the allegations inthe show cause notice. In our view, even the show cause notice dated 23[rd]August 2022 is defective in as much as even though it had reference toSection 56(2)(x) of the Act, it did not mention whether the AssessingOfficer proposed to treat the stamp duty value as deemed income ofassessee under clause (a) or clause (b) of Section 56(2)(x) of the Act. Thisis because both are separate provisions and under either of these twoclauses the stamp duty value could be treated as deemed income. By notspecifying whether Section 56(2)(x)(a) or Section 56(2)(x)(b) of the Actwas applicable, the A.O. first of all has not given reasonable opportunity ofshowing cause to the assessee. Assessee would be totally unaware of thegrounds which had prompted the A.O. to arrive at a prima facie conclusionand issue show cause notice. The power that the A.O. had was required tobe executed properly. Moreover in the assessment order dated 29[th]September 2022 that is impugned in the petition, the A.O. has chosen togive Section 56(2)(x), a go by and treat the stamp duty value of the flat atRs.11,68,99,000/- as from unexplained source under Section 69 of the Act.There is no reference to Section 56(2)(x) of the Act in the operative part ofthe order dated 29[th] September 2022. 10.In the circumstances, the impugned order dated 29[th] September2022 cannot be sustained. The allegations in the affidavit in reply thatassessee has claimed tenancy rights as colourable device in order to get an exemption under the provisions of the Act and evade the tax liability alsocannot be accepted because if the A.O. had evidence to that effect the same should have been stated in the show cause notice dated 23[rd] August 2022. 11.In the circumstances, Rule made absolute in terms of prayer clause – (a) which reads as under : 10.In the circumstances, the impugned order dated 29[th] September2022 cannot be sustained. The allegations in the affidavit in reply thatassessee has claimed tenancy rights as colourable device in order to get an exemption under the provisions of the Act and evade the tax liability alsocannot be accepted because if the A.O. had evidence to that effect the same should have been stated in the show cause notice dated 23[rd] August 2022. 11.In the circumstances, Rule made absolute in terms of prayer clause – (a) which reads as under : (a) that this Hon’ble Court may be pleased to issue a writ ofcertiorari or a writ in the nature of certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of the case leading tothe passing of the assessment order u/s. 143(3) read with Section144B of the Act dated 29[th] September, 2022 (Ex. ‘N’) and aftergoing through the same and examining the question of legalitythereof to quash, cancel and set aside the impugned assessmentorder passed u/s. 143(3) read with Section 144B of the Act dated29[th] September, 2022 (Ex. ‘N’). 12.Mr. Sharma states that respondent would issue supplementary show cause notice. We express no opinion because if the Revenue can, inaccordance with law, issue such notice, assessee may exercise his rights andraise contentions as advised in accordance with law. 13.Petition disposed. (DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)