RAGBIRSINGH MALIKSINGH RAJPAL,,PUNE vs. DEPUTY COMMISSIONER OF INCOME-TAX,,

आदेश / ORDER PER SUSHMA CHOWLA, JM:

The appeal filed by assessee is against order of CIT(A), Pune-5, Pune, dated 18.03.2016 relating to assessment year 2007-08 against order passed under section 143(3) r.w.s. 147 of the Income-tax Act, 1961 (in short ‘the Act’).

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143(3) under the head Income from House Property ought to be taxed under the head Income from Other Sources / Miscellaneous Income. The appellant pleads that the AO has merely changed his opinion on the same set of facts and that the issue of notice u/s 148 and reassessment u/s 147 is not justified and valid. 2. The AO erred in assessing License Fees received Rs.47,52,000 under the head 'Income from Other Sources‟ when it was charged, declared and assessed under the head Income from House Property in the order u/s 143(3) dated 27.12.2009 of Income Tax Act. 3. Without prejudice the appellant pleads that License Fees Received Rs.47,52,000 was assessable under the head Profits & Gains of Business or profession of proprietary concern M/s. Malikram Builders. 4. The AO erred in disallowing claim for exemption of Rs.3,06,71,330 u/s 54F of the IT Act on grounds that the assessee had invested sale proceeds of capital assets under the Capital Gains Account Scheme beyond the due date of return u/s 139(1). The appellant pleads that the investment made on 25.09.2007 was within the due date of filing of return i.e. 30.09.2007. The appellant pleads that its claim for exemption u/s 54F is valid and allowable. 5. Without prejudice the assessee's claim for exemption u/s 54F was valid as investment was made within the due date of filing return u/s 139(4). 6. The Hon CIT(A) erred in holding that the assessee had resorted to a colorable device by filing his return along with audited accounts in September 2007 in order to claim benefit of extended time of filing return for the benefit of deduction u/s 54F of the IT Act and in upholding the rejection of the assessee's claim.

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proceedings were taken up and the assessee was show caused to explain why the license fees received from Jusko Inn as per agreement dated 15.09.2006 should not be treated as ‘Income from other sources’ as against ‘Income from house property’ declared by assessee. The assessee in reply, stressed that as per Leave & License Agreement, license was paid monthly on which tax was deducted under section 194I of the Act and hence, income should be assessed as ‘Income from house property’. The Assessing Officer noted that the building which has been given on license is part of stock-in-trade of assessee and therefore, receipts from the same should have been offered as ‘Income from other sources’. The Assessing Officer then, accordingly, assessed the same under section 56 of the Act.

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(Bom). The learned Authorized Representative for the assessee then stressed that in the absence of any tangible material, no re-assessment was possible. In this regard, he placed reliance on the decision of Pune Bench of Tribunal in DDIT Vs. Sandvik AB in ITA Nos.608/PUN/2014 & 623/PUN/2014, relating to assessment years 2006-07 & 2005-06, respectively, along with CO Nos.20/PUN/2015 & 28/PUN/2015, order dated 05.06.2018 and the Hon’ble Bombay High Court in State Bank of India Vs. ACIT in Writ Petition No.271 of 2018 along with Writ Petition No.278 of 2018, judgment dated 15.06.2018. In respect of grounds of appeal No.2 and 3, the learned Authorized Representative for the assessee pointed out that the issue is however, decided in favour of assessee. The ground of appeal No.4 raised by assessee is against denial of deduction under section 54F of the Act.

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reopened. In this regard, it is necessary to look at the reasons recorded for reopening the assessment which read as under:- "In this case the assessee had filed revised return declaring total income of ₹85,50,640/- and the assessment u/s. 143(3) was completed on 27.12.2009. It is seen that the assessee is in business of construction of building under proprietary concern M/s. Malikram Builders. The assessee is following work completion method and entire work done was shown in stock in trade. No sales were also made during the relevant year. However, the assessee has earned license fee on this projects amounting to ₹ 47,52,000/- from M/s. Jusko inn (as per agreement] dated 15.09.06 for 60 months. The said receipt was offered under income from house property and claimed deduction at the rate of thirty percent which is not correct because the same is kept in stock-in-trade, this receipt is not covered under 'business income' as the project is not completed. Hence, this receipt should have been taxed under the head „income from other sources/misc. income' and thirty percent of deduction of ₹ 14,25,600/- claimed by the assessee needs to be withdrawn. Therefore, an amount of ₹ 14,25,600/- has escaped assessment which needs to be taxed by reopening the assessment u/s. 147 of the I.T. Act, 1961. In view of the above, I have reason to believe that an amount of ₹ 14,25,600/- has escaped assessment and the same is being reopened by issue of notice u/s. 148 of the I.T. Act, 1961. The approval of Addl. CIT-II has been received for reopening of the assessment for A. Y. 2007-08."

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“19. The Tribunal while deciding the issue had referred to the earlier decision in Sandvik System Development AB Vs. DDIT (IT) (supra), wherein the issue was tangible material available before the Assessing Officer while recording reasons for reopening the assessment under section 148 of the Act and reliance was placed on the ratio laid down by the jurisdictional High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra). The Hon‟ble Bombay High Court in turn, had relied on the ratio laid down by the Hon‟ble Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) and also on Orient Craft Ltd. Vs. CIT (supra), wherein the Hon‟ble High Court of Delhi had held the expression „reason to believe‟ does not have different meaning, where the assessments are framed under section 143(1) of the Act and where assessment was completed under section 143(3) of the Act. The findings of the Hon‟ble Bombay High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra) were reproduced, wherein the Hon‟ble High Court had referred to the ratio laid down in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) and also the decision of the Hon‟ble Apex Court in DCIT Vs. Zuari Estate Development & Investment Co. Ltd. (supra) and Zuari Estate Development Co. Ltd. & Investment Co. (P.) Ltd. Vs. JR. Kanekar, DCIT (2004) 271 ITR 269 (Bom). In both the cases, assessment was completed by way of intimation under section 143(1) of the Act and it was observed that in both the cases, the Hon'ble Apex Court reiterated that where the assessment has been completed by intimation under section 143(1) of the Act, there can be no question of change of opinion. This is the first finding of the Hon‟ble Apex Court in both the decisions which has been referred by the Hon‟ble Bombay High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra). Then, the Hon‟ble High Court goes on to observe that the Hon‟ble Apex Court in DCIT Vs. Zuari Estate Development & Investment Co. Ltd. (supra) has not dealt with the issue whether before invoking provisions of section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment was completed by intimation under section 143(1) of the Act. The Hon‟ble High Court further observed that the Revenue was trying to infer that because Hon‟ble Apex Court in DCIT Vs. Zuari Estate Development & Investment Co. Ltd. (supra) had set aside the order on this count and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Hon‟ble Apex Court had come to the conclusion that reason to believe was not necessary for issuing re-assessment notices where regular assessment was completed under section 143(1) of the Act. Vide para 5, the Hon‟ble High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra) reiterates that the decision of the Court had to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom. The Hon‟ble High Court further holds that the Hon‟ble Apex Court in DCIT Vs. Zuari Estate Development & Investment Co. Ltd. (supra) not having dealt with the issue of reason to believe that income chargeable to tax has escaped assessment on the part of Assessing Officer in cases where regular assessment was completed by intimation under section 143(1) of the Act, in categorical terms held it would not be wise for us to infer that the Supreme Court in Zuari Estate Development & Investment Co. Ltd. (supra) has held that the condition precedent for the issue of reopening notice namely, reason to believe that income chargeable to tax has escaped assessment, has no application where the assessment has been completed by Intimation under section 143(1) of the Act. The Hon‟ble High Court further held that the law on this point has been expressly laid down by the Apex Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra) and the same would continue to apply and be binding upon us. The Hon‟ble Bombay High Court further held that Thus, even in cases where no assessment order is passed and assessment is completed by Intimation under section 143(1) of the Act, the sine qua non to issue a reopening notice is reason to believe that income

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chargeable to tax has escaped assessment. For the sake of clarity, relevant extract of the judgment referred in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra) is again reproduced hereunder:- “3. On hearing the parties, we find that the Apex Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500, had an occasion to deal with identical facts, namely reopening Notices issued under Section 148 of the Act where assessment is completed earlier by Intimation under Section 143(1) of the Act. In the above case, the Apex Court held that a Notice for reopening an assessment under Section 148 of the Act could only be justified if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This decision of the Supreme Court in Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) has not been disturbed by the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra). In fact, the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) makes a specific reference to its decision in Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) to hold that where the assessment has been completed by Intimation under Section 143(1) of the Act, there can be no question of change of opinion. 4. We further find that the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has not dealt with the issue whether before invoking Section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment has been completed by Intimation under Section 143(1) of the Act. The Revenue is trying to infer that because the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has set aside the order of this Court and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143(1) of the Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits. 5. It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213. The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra)not having dealt with the issue of reason to believe that income chargeable to tax has escaped assessment on the part of the Assessing Officer in cases where regular assessment was completed by Intimation under Section 143(1) of the Act, it would not be wise for us to infer that the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has held that the condition precedent for the issue of reopening notice namely, reason to believe that income chargeable to tax has escaped assessment, has no application where the assessment has been completed by Intimation under Section 143(1) of the Act. The law on this point has been expressly laid down by the Apex Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) and the same would continue to apply and be binding upon us. Thus, even in cases where

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no assessment order is passed and assessment is completed by Intimation under Section 143(1) of the Act, the sine qua non to issue a reopening notice is reason to believe that income chargeable to tax has escaped assessment. In the above view, it is open for the petitioner to challenge a notice issued under Section 148 of the Act as being without jurisdiction for absence of reason to believe even in case where the Assessment has been completed earlier by Intimation under Section 143(1) of the Act.” 20. The Hon‟ble Bombay High Court which is the jurisdictional High Court in Khubchandani Healthparks (P.) Ltd. Vs. ITO (supra) while deciding the issue of case where assessment was completed by way of intimation issued under section 143(1) of the Act had held that the Assessing Officer must have reason to believe that income chargeable to tax had escaped assessment. It was also clarified by the Hon‟ble High Court that the Hon‟ble Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) had laid down the law on the point that even in cases where intimation under section 143(1) of the Act was issued sine qua non to issue reopening notice is reason to believe that income chargeable to tax has escaped assessment. In case of absence of reason to believe even where assessment was earlier completed by issue of intimation under section 143(1) of the Act, it was open to the petitioner to challenge notice issued under section 148 of the Act. Such proposition has been laid down by the Hon‟ble High Court vide its judgment dated 10.02.2016. 21. Similar is the proposition which has been laid down by the Mumbai Bench of Tribunal in Third Member decision in Telco Dadajee Dhackjee Ltd. Vs. DCIT (supra), wherein the argument was that if no opinion was formed by the Assessing Officer when return was merely processed under section 143(1) of the Act by issuing notice under section 148 of the Act, he could not be said to have changed his opinion. The Third Member held that so far so good and further held that but it needed to be remembered that section 147 of the Act applies both to section 143(1) as well as section 143(3) of the Act, then it was still open to assessee to challenge notice on the ground that there was no reason to believe that income chargeable to tax had escaped assessment. The Third Member had elaborated upon the issue and referred to the decision of the Hon‟ble Apex Court in ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) and held thus fulfillment of conditions of section 147 of the Act, including the one that there should be reason to believe is essentially for the validity of notice issued under section 148 of the Act. Further, reference was made to the judgment of Hon'ble Supreme Court in later judgment in CIT Vs. Kelvinator of India Ltd. (supra), wherein it has been held that there should be tangible material to come to the conclusion that income had escaped income. In the absence of tangible material before the Assessing Officer from which he could entertain the belief of escapement of income chargeable to tax, re-assessment proceedings initiated were held to be bad in law.”

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in the assessment order would not give the power to Assessing Officer to re- assess the same as that would amount to review the assessment order. The relevant findings are in para 6, which reads as under:- “6. We note that the Apex Court in Income-Tax Officer V/s. Techspan India Private Limited and Another, reported in [2018] 404 ITR 10 (SC) reiterated the settled principle of law laid down by the Supreme Court in CIT V/s. Kelvinator of India Ltd. [2010] 320 ITR 561(SC) that the Assessing Officer has a power only to reassess and has no power to review the assessment order. Thus, it held that no re-opening notice can be issued which is premised on a change of opinion. It further goes on to hold that before interference with a proposed reopening of the assessment, the Court should verify whether the assessment order made earlier has expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. Infact, in this case we find that the assessment orders passed in regular assessment proceedings do refer to examining the computation of income filed alongwith the Return of Income. Moreover, the Assessment order in regular assessment proceedings in terms disallowed some of the claims made for deduction under Section 143(3) of the Act. Therefore, in the present facts, we are prima-facie of the view that, the Assessing Officer has by necessary implication allowed the claim. Moreover, the basic document for completing the assessment under Section 143(3) of the Act is the computation of income. Therefore, to the extent the claims made for deduction in the computation of come, were disallowed by the Assessing Officer, discussion on the same is found in the assessment order. It is an accepted position that the assessment orders would necessarily deal only with the claims being disallowed and not with the claims being allowed. This is for the reason as observed by the Gujarat High Court in CIT Vs. Nirma Chemicals Ltd 309 ITR 67, that if the Assessing Officer was to deal with all the claims which were to be allowed in the assessment order, the result would be an epictome. This is so, as it would cast an impossible burden upon the Assessing Officer considering his workload and the period of limitation. There was also no reason in the present facts for the Assessing Officer to ask any queries in respect of this claim of the petitioner, as the basic document viz. computation of income at note 21 (Assessment Year 2013-14) and note 22 (Assessment Year 2014-15) thereof explained the basis of the claim being made to the satisfaction of the Assessing Officer. Thus, it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings. Thus, issuing the impugned notices on the above ground would, prima-facie, amount to a change of opinion.”

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also be pointed out that re-assessment proceedings were initiated on the ground that declaration of income from unsold flats by the assessee as ‘Income from house property’ was not correct and the Assessing Officer was of the view that income should be assessed as ‘Income from other sources’. However, the jurisdictional High Court in CIT Vs. Sane & Doshi Enterprises (supra) have held the same to be assessable as ‘Income from house property’. Accordingly, we find no merit in the jurisdiction exercised by Assessing Officer. Since we are deciding the issue on preliminary issue itself and even where the issue is in favour of assessee on merits, the appeal filed by assessee is thus, allowed.

Order pronounced on this 4th day of April, 2019.

Sd/- Sd/- (ANIL CHATURVEDI) (SUSHMA CHOWLA) ऱेखा सदस्य / ACCOUNTANT MEMBER न्याययक सदस्य / JUDICIAL MEMBER ऩुणे / Pune; ददनाांक Dated : 4th April, 2019. GCVSR आदेश की प्रयतलऱपप अग्रेपषत/Copy of the Order is forwarded to : अऩीऱाथी / The Appellant; 1. 2. प्रत्यथी / The Respondent; आयकर आयुक्त(अऩीऱ) / The CIT(A), Pune-5, Pune; 3. The Pr.CIT, Pune-4, Pune; 4. ववभागीय प्रतततनधध, आयकर अऩीऱीय अधधकरण, ऩुणे “ए” / DR 5. ‘A’, ITAT, Pune; गार्ड पाईऱ / Guard file. 6. आदेशािुसार/ BY ORDER, सत्यावऩत प्रतत //True Copy// वररष्ठ तनजी सधिव / Sr. Private Secretary आयकर अऩीऱीय अधधकरण ,ऩुणे / ITAT, Pune