THE ASST. COMMISSIONER OF INCOME TAX vs. M/S STUMPP SCHEDULE AND SOMAPPA PVT LTD.,

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WA/960/2023HC KarnatakaKAHC01042856202311 February 2025Bench: KRISHNA S DIXIT,G BASAVARAJA5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal, broadly agreeing with the learned Single Judge's observations. The Court found that the Assessee had disclosed all material information relating to the sale transaction in its Financial Statement and had also disclosed the revaluation of the property at Rs. 21,57,75,680/- as its fair market value, as certified by an independent valuer. The Court noted that if the Assessing Officer had repeatedly asked pointed questions and clarifications about the transaction during the original assessment under Section 143(3) of the Income Tax Act, without making additions, it implies that the Assessing Officer had applied his mind and formed an opinion. The Court referred to the decision in Commissioner of Income-Tax vs. Kelvinator of India Ltd., which states that judicial and official acts are presumed to be regularly performed. Therefore, if detailed queries were made during the original assessment without any additions or disallowances, it leads to a deemed opinion, and proposing reassessment despite such an opinion would be a case of impermissible change in opinion. The Court held that the Revenue's argument that details were not available until scrutiny and survey proceedings was not acceptable, and the proposed reassessment was based on a clear change in opinion. Consequently, the impugned notice and order were quashed.

What were the facts?

This is an intra-court appeal by the Revenue (The Asst. Commissioner of Income Tax) challenging an order dated 03.03.2023 passed by a learned Single Judge of the High Court of Karnataka. The Single Judge had allowed the Assessee's (M/s Stump Schedule and Somappa Pvt Ltd.) writ petition, quashing a notice dated 05.02.2019 issued under Section 148 of the Income Tax Act, 1961, and a subsequent order dated 08.04.2019 which overruled the Assessee's preliminary objections. The Revenue contended that income from the transfer of land by the Assessee to a company had escaped Capital Gains tax, necessitating the Section 148 notice. The Assessee argued that all relevant information was disclosed in its financial statements and the property's revaluation was certified by an independent valuer.

What were the issues?

1. Whether the notice dated 05.02.2019 issued under Section 148 of the Income Tax Act, 1961, and the subsequent order dated 08.04.2019 overruling preliminary objections are valid, or if they are based on a change of opinion by the Assessing Officer, making reassessment impermissible. Assessee's Contention: The Assessee argued that it had disclosed all information regarding the sale transaction in its financial statements and that the property's revaluation, certified by an independent valuer, was also disclosed. The Assessee contended that the Assessing Officer had applied his mind during the original assessment proceedings under Section 143(3) of the Act, and therefore, the reassessment notice constituted a mere change of opinion, which is impermissible. Revenue's Contention: The Revenue argued that the income derived from the transfer of land by the Assessee to a company had escaped Capital Gains tax. The Revenue stressed that the issuance of the Section 148 notice was not a case of simple change of opinion and that the learned Single Judge's view was unsustainable.

Which sections of the Income-tax Act were involved?

Section 148,Section 143(3),Section 114

AI-generated summary — verify with the full judgment below

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NC: 2025:KHC:5988-DB WA No. 960 of 2023

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF FEBRUARY, 2025 PRESENT THE HON'BLE MR JUSTICE KRISHNA S DIXIT AND THE HON'BLE MR JUSTICE G BASAVARAJA WRIT APPEAL NO. 960 OF 2023 (T-IT) BETWEEN:

THE ASST. COMMISSIONER OF INCOME TAX LTU, CIRCLE-2, PRESENT CIRCLE, THE ASST. COMMISSIONER OF INCOME TAX CIRCLE-6(1)(1), 2ND FLOOR, 80 FEET ROAD, KORMANGALA, BENGALURU-560 095. …APPELLANT (BY SRI. RAVIRAJ Y V., ADVOCATE AND SRI. M DILIP.,ADVOCATE)

AND:

M/ STUMPP SCHEDULE AND SOMAPPA PVT LTD., REPRESENTED BY ITS MANAGING, DIRECTOR SRI. M.R SATISH, S/O SRI. M.R. RAMESH, AGED ABOUT 47 YEARS, PLOT NO. 4, BOMMASANDRA INDUSTRIAL AREA, ATTIBELE HOBLI, ANEKAL TALUK, BENGALURU-560 037. …RESPONDENT (BY SRI.ANNAMALAI S.,ADVOCATE)

THIS WRIT APPEAL FILED U/S 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO A)SET ASIDE THE ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP NO. 21146/2019 DATED 03/03/2023 AND B) PASS SUCH OTHER SUITABLE ORDERS.

Digitally signed by SHARADA VANI B Location: HIGH COURT OF KARNATAKA

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NC: 2025:KHC:5988-DB WA No. 960 of 2023

THIS WRIT APPEAL, COMING ON FOR PRELIMINARY HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:

CORAM: HON'BLE MR JUSTICE KRISHNA S DIXIT AND HON'BLE MR JUSTICE G BASAVARAJA

ORAL JUDGEMENT

(PER: HON'BLE MR JUSTICE KRISHNA S DIXIT)

This Intra-Court Appeal by the Revenue seeks to call in question a learned Single Judge’s order dated 03.03.2023 whereby Assessee’s W.P.No.21146/2019 (T- IT) having been favoured, the Notice dated 05.02.2019 issued under Section 148 of the Income Tax Act, 1961 and the order dated 08.04.2019 overruling the preliminary objections have been quashed. 2. The learned Sr. Panel Counsel appearing for the Revenue seeks to falter the impugned order arguing that the income derived by the transfer of land by the Assessee to a Company had escaped Capital Gains tax and therefore, Section 148 Notice was issued followed by the order overruling the preliminary objections. He stresses

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NC: 2025:KHC:5988-DB WA No. 960 of 2023

that it is not a case of simple change of opinion and therefore, contra view of the learned Single Judge is unsustainable. Learned counsel appearing for the Assessee resists the Appeal making in justification of the impugned order and the reasons on which it has been structured. 3. Having heard the learned counsel for the parties and having perused the Appeal Papers, we decline indulgence in the matter broadly agreeing with the observations of the learned Single Judge that the Assessee had disclosed all information relating to sale transaction in question it his Financial Statement; he had also disclosed revaluation of the subject property at Rs.21,57,75,680/- as the fare market value as was certified by an independent valuer. Even Revaluation Reserve was also mentioned in that. 4. At Paragraph Nos. 15 & 16 of the impugned order what the learned Single Judge has observed cannot be faltered. The same are as under:

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NC: 2025:KHC:5988-DB WA No. 960 of 2023

“15. If the Assessing Officer has repeatedly asked pointed questions and clarifications about the transaction in the light of the declarations made in the Returns, but without additions while framing assessment under Section 143(3) of the I.T.Act, there must be a presumption that the Assessing Officer has applied his/her mind and has framed an opinion. In this regard, a useful reference could be made to the decision of the Full Bench of the High Court of Delhi in the Commissioner of Income-Tax, vs. Kelvinator of India Ltd., 2002 (64) DRJ 109 wherein it is exposited that in terms of clause (e) of section 114 of the Indian Evidence Act 1872 the judicial and official acts have been regularly performed. 16. It flows from the above that if repeated and detailed queries are asked after the issuance of noticed under Section14392) of the I.T.Act but without any addition, or disallowance, there is a deemed opinion and reassessment is proposed despite such opinion. It would be a case of change in opinion, and in that even reassessment would be impermissible. In the fact and circumstances of this case, this Court must opine that the respondent’s reasons to say that there is no change in the opinion because the details were not available until there was a scrutiny and survey proceedings, cannot be accepted and the proposed reassessment is based on clear change in opinion. Hence, the following: ORDER The petition is allowed. The impugned notice dated 05.02.2019 (Annexure-A) and the order dated 08.04.2019 (Annexure-B) are quashed.”

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NC: 2025:KHC:5988-DB WA No. 960 of 2023

In the above circumstances, this Appeal being devoid of merits is liable to and accordingly is dismissed, costs having been made easy.

Sd/- (KRISHNA S DIXIT) JUDGE

Sd/- (G BASAVARAJA) JUDGE

PMR/Bsv List No.: 1 Sl No.: 0

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