PRINCIPAL vs. SHRI C.R.BADRINARAYANAN

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TCA/828/2017HC Madras27 July 2020Bench: HON'BLE DR.JUSTICE VINEET KOTHARI6 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the reassessment proceedings initiated by the Assessing Officer were not justified. The Tribunal had rightly concluded that the reassessment was based merely on a change of opinion by the Assessing Authority, which is impermissible in law. The Court found no error in the Tribunal's order. It was noted that the relevant facts and evidence regarding the cost of acquisition were available to the AO at the time of the original assessment. The Court opined that the assumed or guideline value of a capital asset could not override the real cost of acquisition established by the assessee with relevant evidence during the original assessment. Therefore, no substantial question of law arose from the Tribunal's order, and the appeal filed by the Revenue was devoid of merit and dismissed. No issue was expressly left undecided.

What were the facts?

The Principal Commissioner of Income Tax (PCIT), Chennai, filed an appeal under Section 260-A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Madras Bench. The ITAT had quashed reassessment proceedings initiated against the assessee, Shri C.R. Badrinarayanan, for Assessment Year 2006-07. The ITAT held that the reassessment was not justified beyond four years from the original assessment order as there was no failure on the assessee's part to disclose material facts. The reassessment was initiated to reduce the disclosed cost of acquisition per sq. ft. from Rs. 137/- to Rs. 16/-, based on guideline values, which would increase the capital gains tax.

What were the issues?

1. Whether reassessment proceedings initiated beyond four years from the original assessment order are justified when there was no failure on the part of the assessee to fully and truly disclose relevant materials, as per Section 147/148 of the Income Tax Act, 1961? Assessee's Contention (as per ITAT order): The reassessment proceedings were not justified because the Assessing Officer (AO) did not have any fresh information and merely ascertained guideline values from the Sub-Registrar. The AO's action amounted to a change of opinion, which is impermissible after four years, especially when the assessee had disclosed all material facts. The AO failed to establish any reason for the assessee's failure to disclose. Revenue's Contention: The Revenue pressed the appeal on merits, despite the stake being Rs. 3,00,000/-, citing an exception in CBDT Circular No. 17/2019 for cases involving reassessment proceedings. The Revenue sought to challenge the ITAT's finding that reassessment was based on a change of opinion.

Which sections of the Income-tax Act were involved?

Section 260-A,Section 147,Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, Madras ‘A’ Bench dated 11.7.2017 in in I.T.A.No.1600/Mds/2016.

Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 27.7.2020 CORAM THE HON'BLE DR.JUSTICE VINEET KOTHARI AND THE HON'BLE MR.JUSTICE KRISHNAN RAMASAMY T.C.A.No.828 of 2017 Principal Commissioner of Income Tax 6 No.121, Nungambakkam High Road, Chennai 600 034. Appellant vs Shri.C.R.Badrinarayanan 2/581, 1st Cross Street, Singaravelan Salai, Neelankarai, Chennai 600 041. PAN: AFVPB7105B Respondent Tax Case Appeal filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras ‘A’ Bench dated 11.7.2017 in in I.T.A.No.1600/Mds/2016. For Appellant : Mr.J.Narayanasamy, Senior Standing Counsel For Respondent : No appearance. ORDER (Made by Dr.Vineet Kothari,J) The Court was held by Video Conference, as per the Resolution of the Full Court dated 3 July 2020, by Judges at their respective residences and the counsel, staff of the Court appearing from their http://www.judis.nic.in Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan respective residences. 2. The Revenue has filed the present Appeal under section 260-A of the Income Tax Act aggrieved by the order of the learned Tribunal dated 11th July 2017 in I.T.A.No.1600/Mds/2016 for the Assessment Year 2006-07, by which the learned Tribunal held that the re- assessment proceedings initiated against the Assessee under section 147/148 of the Act were not justified beyond the period of four years from the date of passing of the original Assessment Order as there was no failure on the part of the Assessee to fully and truly disclose the relevant materials at the time of Original Assessment. 3. The relevant para 5 of the order of the Tribunal is quoted below for ready reference:- "(i) We have considered the rival submissions. It is clear from the reassessment order, as extracted supra, that the Assessing Officer did not have any fresh information. It appears that during the course of reassessment proceedings only he has ascertained from the sub-Registrar about the guideline value and proceeded to complete the re-assessment. Thus, there is merit in the submissions of the assessee that there was no tangible material before the Assessing Officer on the basis of which the reassessment could have been http://www.judis.nic.in Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan reopened. In the absence of tangible material, what the AO has done while reopening the assessment is to change his opinion which was formed earlier. The reassessment made after four years from the end of the assessment year on a change opinion can't be upheld. In this case, the assessee had disclosed fully and truly all material facts necessary for his assessment at the time of original assessment. The AO has not established the reasons for the failure on the part of the assessee and hence, the proceedings initiated after four years from the end of this assessment year is quashed.“

4.

It seems that the re-assessment proceedings were initiated to lower the figure of cost of acquisition from Rs.137/- per sq.ft, disclosed in the Original Assessment by the Assessee, to Rs.16/- per sq.ft, based on the guideline value fixed by the competent Government Committee. In other words, the amount of Capital Gains would be taxable at the hands of the Assessee on the sale of Capital Assets in question. 5. Though the Revenue's stake involved in the present case is merely a sum of Rs.3,00,000/- and according to the latest CBDT Circular No.17/2019 dated 8th August 2019, the Revenue could have http://www.judis.nic.in Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan withdrawn the present Appeal under its litigation policy. However, as the case pertains to re-assessment proceedings, in view of the exception carved out in the said CBDT Circular, the learned Senior Standing Counsel pressed the present Appeal on merits. 6. Nobody has put in appearance on behalf of the Respondent/Assessee though the name of the Assessee, Mr.C.R.Badrinarayanan, after service of notice, is shown in the cause list. 7. Having heard the learned Senior Standing Counsel appearing for the Appellant/Revenue, we are of the clear opinion that there is no error in the order of the learned Tribunal and the learned Tribunal has rightly held that the re-assessment proceedings were initiated merely on a change of opinion by the Assessing Authority, which is impermissible in law. 8. There is no dispute that the relevant evidence and facts about the cost of acquisition were very much available before the Assessing Authority at the time of passing of the Original Assessment Order and therefore, just to increase the quantum of Capital Gains on the basis of alleged Guideline Value to be treated as cost of acquisition in the hands of the Assessee, the Assessing Authority took the recourse to re-assessment proceedings under section 147 of the Act. 9. We are of the clear opinion that the assumed value or http://www.judis.nic.in Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan Guideline Value of the capital asset could not override the real cost of acquisition established by the Assessee on the basis of relevant evidence during the course of Original Assessment proceedings. 10. Therefore, we do not find any substantial question of law to be arising in the present Appeal filed by the Revenue from the order of the learned Tribunal. The Appeal is, thus, found to be devoid of any merit and is liable to be dismissed. The same is, accordingly, dismissed. No order as to costs. Copy of this order may be sent to the Respondent/Assessee at the address given. (V.K.J.) (K.R.,J.) 27.7.2020 Ssk/kpl Index:Yes/No Internet:Yes/No http://www.judis.nic.in Order dt 27.7.2020 in TCA 828 of 2017 PCIT v . C.R.Badrinarayanan Dr.VINEET KOTHARI, J. and KRISHNAN RAMASAMY, J. ssk. T.C.A.No.828 of 2017 27.7.2020 http://www.judis.nic.in

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