RAKESH KUMAR SAINI vs. U O I AND ORS

[2024:RJ-JP:46964-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 7385/2014 Rakesh Kumar Saini S/o Late Shri Kanhaiya Lalji Saini, aged app. 45 years, R/o Plot No.35, Manu Marg, Alwar ----Petitioner Versus 1. Union of India, through the Ministry of Finance, North Block, New Delhi-110 001, through the Commissioner of Income Tax, Alwar 2. The Commissioner of Income Tax Alwar, Moti Doongri Road, Alwar 3. The Income Tax Officer, Ward-2(3), Moti Doongri, Alwar ----Respondents For Petitioner(s) : Mr.Anant Kasliwal, Sr. Adv. with Ms.Charu Pareek Mr.Diwakar Khaldwa & Mr.Raghav Krishnatri For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Khandelwal & Mr. N.S. Bhatti HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE UMA SHANKER VYAS ORDER RESERVED ON:- 08/11/2024 PRONOUNCED ON:-

14/11/2024 AVNEESH JHINGAN, (J):- 1. This petition is filed seeking quashing of notice dated 31.03.2014 issued under Section 148 of Income Tax Act, 1961 (for short ‘the Act’) for Assessment Year (for short ‘AY’) 2009-10 and order dated 05.06.2014 rejecting the objections. 2. The brief facts are that the petitioner filed Income Tax Return for AY 2009-10. The assessment under Section 143(3) of the Act was finalized on 29.12.2011. Notice dated 31.03.2014 under Section 148 of Act was issued on the ground that deduction under

[2024:RJ-JP:46964-DB] (2 of 9) [CW-7385/2014] Section 54B of the Act was wrongly claimed for the agricultural land sold by the brothers of the petitioner. The objection filed by petitioner were rejected on 05.06.2014. Hence, the present petition. 3. Learned Senior counsel for the petitioner submits that a specific query was raised by the Assessing Officer (for brevity ‘AO’) with regard to deduction claimed under Section 54-B of the Act. The proceedings under Section 148 of the Act are initiated on change of the opinion. Reliance is placed upon the judgment of Supreme Court in case of Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited reported in (2010) 320 ITR 561 and Full Bench decision of the Delhi High Court in the case of Commissioner of Income Tax-VI, New Delhi Vs. Usha International Limited reported in (2012) 348 ITR 485. 4. As per contra the AO had not dealt with the issue of deduction claimed under Section 54-B of the Act. The contention is that land was sold by brothers of petitioner and the deduction under Section 54B of the Act could not have been claimed by petitioner. 5. The assessment of the petitioner for AY 2009-10 under section 143(3) of the Act was finalized on 29.12.2011. During the assessment proceedings, notice dated 14.12.2011 was issued for furnishing information called for therein.

The content of notice dated 14.12.2011 is reproduced:- Sub:- Assessment proceedings for the A.Y. 2009-10/- PAN AENPSI1066H

[2024:RJ-JP:46964-DB] (3 of 9) [CW-7385/2014] In order to complete the above assessment proceedings, you are required to furnish the following information /explanation:- 1. You have shown income by way of sale of land. Perusal of sale deeds reveals that the land sold in several plots was in the name of Sh. Suresh Kumar and Sh. Dinesh Kumar. When the land sold was not in your name, how the income from the same can be treated in your hands eligible to claim deduction u/s 54B of the IT Act, 1961. 2 However, you have claimed to inherit agricultural land through a will along-with your 4 brothers. Though the land was earlier being used for agricultural purpose, but it was in the purview of urban land. Now the land has been sold out after dividing into a number of plots of different measurement with a view to earning the profit by the act of plotting the land vide 18 registered deeds executed. This act of yourself clear-cut suggest that the plotting is an act for earning income and the transaction cannot be covered under the income from Long term capital gain as claimed by you. In such circumstances, you are requested to show cause as to why the plotting of land and sale thereof should not be treated as your business incorne as the same involved adventure in the nature of trade, and why the receipts of Rs.9,58,000/- should not be taxes in your hand accordingly. Your case is fixed for hearing on 19-12-2011. The petitioner filed reply dated 20.12.2011. While passing the assessment order the AO gave up two issues raised in the notice and made an addition of Rupees Fifty Thousand for unexplained investment in purchase of land. An addition of bank interest receipts shown short to the tune of Rs.3,960/- was also made.

[2024:RJ-JP:46964-DB] (4 of 9) [CW-7385/2014] 6. The notice dated 31.03.2014 under section 148 of the Act was issued. The reasons for reopening were: The Long term capital gain shown before claim deduction u/s 54B of Rs. 9,97,577/- perusal of relevant sole deed of the Land (Plots) in the case of brother of the assessee, Shri Dinesh Saini. It reveal that the sler of said pieces of Land are Shri Dinesh Saini & Suresh Saini. Thus, the assesse is not the owner of of Land. The Land sold, hence deduction u/s 548 is not allowable his hand and accordingly the receipt in his hand is assessable under the head of Income from undisclosed sources of income. Thus, in view of the above I have reason to believe that income to the extent of LTCG Rs. 9,97,577/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961 for which notice u/s 148 of the IT Act, 1961 is required to be issued. 7. The explanation sought by the A.O during the assessment proceedings on issue no. 1 and reasons for initiation of reassessment proceedings are identical. The petitioner raised objection that issuance of notice under section 148 is a result of change of opinion. The objection was brushed aside vide order dated 05.06.2014. 8. It is a settled law that inspite of amendment made in the year 1998 under section 147 of the Act, the reassessment proceedings cannot be initiated on change of opinion. 9. The Supreme Court in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited reported in (2010)2SCC723 observed: 6. On going through the changes, quoted above, made to Section 147 of the Act, we

[2024:RJ-JP:46964-DB] (5 of 9) [CW-7385/2014] find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in Section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would stake place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to

[2024:RJ-JP:46964-DB] (6 of 9) [CW-7385/2014] believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. 10. The opinion expressed by the A.O on the issue involved may be express or by necessary implications. In the case in hand, explanation on two issues was sought by the A.O. One of the issues being of deduction claimed under Section 54-B of the Act. In view of the reply filed and material produced by the petitioner, the A.O dropped both the issues and assessment was finalized by making addition under other two heads. The inference being that the A.O had opined on the issue of claiming deduction by the petitioner under section 54-B. 11. The Supreme Court in Income Tax Officer Ward No. 16(2) Vs. TechSpan India Private Ltd. and Ors. reported in (2018) 6SCC 685 held as under: 12. Before interfering with the proposed re- opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. For concluding that AO had applied mind to an issue not only assessment order is relevant but it can also be determined from record. It is for AO to determine how to frame an order. The issue accepted may not be even discussed in the order

[2024:RJ-JP:46964-DB] (7 of 9) [CW-7385/2014] and assessee is not responsible for this. Non recording of reasons by the AO in assessment order for accepting the explanation on an issue shall not make a foundation for reassessment on same issue as AO had already dealt with it and formed an opinion. 12. The full bench of Delhi High Court in Commissioner of Income Tax-VI v. Usha International Ltd. reported in (2012) 348 ITR 485 after considering the judgment of Co- ordinate Bench in Commissioner of Income Tax versus Eicher Limited reported in (2007) 294 ITR 310 and the decision of Punjab & Haryana High Court in Hari Iron Trading Co. Vs. Commissioner of Income Tax reported in (2003) 263 ITR 437 held as under: 12. It is, therefore, clear from the aforesaid position that: (1) Reassessment proceedings can be validly initiated in case return of income is processed under Section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion; (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was

[2024:RJ-JP:46964-DB] (8 of 9) [CW-7385/2014] examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 13. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. 13. The Bombay High Court in Bedmutha Industries Ltd. v. Deputy Commissioner of Income Tax reported in 2012 SCC Online Bom 829 held as under: 8. It was submitted that the issue regarding depreciation on goodwill and set off of unabsorbed depreciation was an issue considered by respondent No. 1 in order dated 18-12-2006 and was not reviewed by him. The only basis for the above submission is that the order of assessment does not discuss the issues raised for the purposes of reassessment. 9. This very issue as raised by the counsel for the Revenue has been considered by this court in the matter of Idea Cellular Ltd. v. Deputy Commissioner of Income Tax in (2008) 301 ITR 407 (Bom) wherein it has been

held

follows: It was also sought to be contended that since the assessing officer had not expressed any opinion regarding this matter in his original assessment order, it could not be said that there was any change of opinion in this case. In our view, once all the material was before the Assessing officer and he chose not to deal with the several contentions raised by the Petitioner in his final assessment order, it cannot be said that he had not applied his mind when all the material was placed before

[2024:RJ-JP:46964-DB] (9 of 9) [CW-7385/2014] him. To a similar effect is the decision of the Full Bench of Delhi High Court in the matter of Commissioner of Income Tax v. Kelvinator of India Ltd. reported in (2002) 256 ITR 1 (Del) and the division bench of Gujarat High Court in the matter of CIT v. Nirma Chemical Works reported in (2009) 309 ITR 67 (Guj). In view of the above, the submission of the Revenue that the reopening is not on account of change of opinion as no opinion was expressed in the order of Assessment dated 18-12-2006 must be negatived. (emphasis supplied) 14. At the cost of repetition, the issue of deduction under Section 54B was raised and discussed in the assessment proceedings. The explanation of petitioner on the issue was accepted and deduction under Section 54-B of the Act was allowed. It is inferred that AO formed an opinion albeit, not recorded the reasons for it. 15. The notice issued under Section 148 for assessment year 2009-2010 and order dated 05.06.2014 rejecting the objections are quashed. 16. The writ petition is allowed. (UMA SHANKER VYAS),J (AVNEESH JHINGAN),J Riya/Danish/161 Reportable: Yes