M/S SANGAM LAND DEVELOPERS AND BUILDERS,BELGAVI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), BELAGAVI

The ACIT Circle -2(1) Belagavi erred in invoking the provisions of section 45(4) in respect of plots transferred to the partners of the appellant firm thereby further erred in adding a sum of Rs. 5,68,51,556 to the returned income. The reasons stated are neither as per law nor crores pond to the facts of the case. Hence it is prayed that the addition made to returned income of Rs 5,68,51,556 be deleted in full.

The ACIT Circle -2(1) Belagavi erred in drawing a conclusion that the plots have been first converted into capital and then withdrawn. Th ACIT has misconceived the facts of the case and thereby concluded the assessment on incorrect legal preposition. The ACIT ought to have understood the fact that plots were transferred to the partners by way of debit to their capital accounts and no conversion was involved as understood by the ACIT. Hence it is prayed that t he assessment on this account be annulled and returned income be replaced.

The ACIT Circle -2(1) Belagavi erred in imposing a deemed dissolution of the firm when in fact it was not.

The ACIT Circle -2(1) Belagavi ought to have taken into consideration the fact that the plots transferred to the partners were its stock in trade and not a capital asset and should have refrained from holding it as a capital asset.

The ACIT Circle -2(1) Belagavi further erred in drawing a conclusion that the appellant fir m had no stock in trade left as on 31/03/2013.The calculation made in the Assessment order is incorrect and in fact the appellant firm had c losing stock in trade of 4.941 guntha as on 31. 03.2013. The ACIT ought to have taken into consideration the revised return filed and the earlier MOU between the partners and should have refrained from drawing a conclusion that the appellant firm had no stock in trade as on 31.3.2013. 7. The ACIT Circle-2(1) Belagavi ought to have appreciated that there is no dissolution of the firm and that the partnership continues even in future and therefore should have refrained from drawing a conclusion that there was a dissolution of the firm.

The ACIT Circle -2(1) Belagavi ought to have appreciated the fact that the consideration for transfer of plots was adjusted against the capital of partners in the firm.

Without prejudice to the above grounds of appeal a) The reopening of the assessment und er sec. 147 is bad in law and out of juri iction and hence is void ab-initio b) The ACIT, Circle -2(1) ought to have appreciated the fact that the issue dealt with in the reopened assessment was already discussed and concluded in the original assessment. A mere change of opinion cannot be the basis to form a belief that income has escaped assessment so as to warrant, issue of notice under sec. 148. c) The ACIT, Circle-2(1) ought to have taken into consideration the fact that there was no fresh or additional material on record to substantiate the fact that ACIT ha d reason to believe that the income has escaped assessment. This is very much evident from the grounds mentioned in the reasons to issue notice under sec. 148. d) The ACIT, Circle -2(1) has failed to follow the procedure required to be followed by not passing a speaking order disposing of the objection raised by the appellant and proceeded to pass an order under sec. 143(3) r.w.s. 147. Therefore the entire reassessment proceedings are vitiated.

The assessment made is excessive, arbitrary and is based on assumption and suffers from illegality.

The appellant craves to add, alter, amend or delete any of the above grounds at the time of hearing.”

That the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeals Centre (NFAC), ("CIT(A)" for short) is unjustified, unsustainable and opposed to the applicable laws and facts of the case.

That the reopening of the Appellant's assessment for AY 2013-14 under Section 148 and the reassessment proceedings under Section 147 are wholly bad in law, without juri iction, contrary to the settled legal principle, unjustified in the facts and circumstances of the case, and improper, and thus, on this ground alone, the impugned orders passed by the CIT(A) and the Respondent are liable to be set aside.

That the Learned CIT(A) has erred in law by upholding the reassessment proceedings of the Respondent for the reasons that the CIT(A) has failed to consider, that the Respondent did not issue the mandatory Speaking Order containing reasons for reopening assessment and further, that the Respondent did not even have valid "reasons to believe" or materials to come to the conclusion that there were "reasons to believe" to re-open the said Assessment.

That the Respondent erred in law and on facts by wrongly invoking and making additions under Section 45(4) of the Act of a sum of Rs. 5,68,51,556/- to the total income of the appellant, and the CIT(A) erred in law and on facts in upholding the same.

That the Learned CIT(A) has erred in law and on facts by upholding the Order of the AO wherein Section 45(4) of the Act was wrongly invoked to consider "withdrawal of plots as stock-in-trade" by the Partners of the Appellant Firm as "dissolution" of the said Partnership Firm and the very plots itself as "capital asset" instead of "stock in trade".

That the Respondent erred in law and on facts in making an addition of 4,76,420/-to the total income of the appellant, and the CIT(A) erred in law and on facts in upholding the same.

That the impugned order of the CIT(A) is a bald, unreasoned, and abrupt order containing no independent reasoning or analysis whatsoever and, hence, the same is violative of the principles of natural justice and unsustainable in law and on facts.

That the Learned CIT (A) has erred in law, by upholding the assessment order, wherein the AO has initiated penalty proceedings under Section 271(1)(c) of the Act on the grounds that the Appellant had concealed particulars of income.

That the reliance placed by the Learned CIT(A) on the decisions cited in the impugned order is wholly misplaced as the facts involved and the ratio emerging from the said decisions are not applicable to the facts of the instant case.

That since the very additions made by the AO vide the assessment order is unsustainable, the consequential interests levied under Section 234B and Section 234C of the Act are also unjustified and not maintainable.

That, in any event, the reassessment proceedings concluding in the order passed by the AO are barred by limitation and the impugned orders are otherwise unsustainable in law and on facts and thus liable to be set aside by this Hon'ble Tribunal. The Appellant most humbly craves leave of this Hon'ble Tribunal to add to or alter, by deletion, substitution or otherwise, the above grounds of appeal, at any time before or during the hearing of the appeal. The Appellant further submits that the above grounds are independent of and without prejudice to one another.”

However, in contravention of the law laid down by the Supreme Court in GKN Driveshafts, the Respondent did not pass a speaking order and instead merely proceeded with the reassessment proceedings in a manner directly contrary to the binding law and without any consideration whatsoever to the objections filed by the Appellant. Consequently, the reassessment order and the appellate order are liable to be set aside by this Hon'ble Tribunal on this fundamental ground alone.”