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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI MANJUNATHA, HONBLE
(A.Y: 2008-09 CO NO.295/MUM/2017 Noshir D. Talati O R D E R PER C.N. PRASAD (JM)
This appeal and cross objection are filed by the Revenue and assessee respectively against the order of the Ld. Commissioner of Income Tax (Appeals) – 13 Mumbai for the Assessment Year 2008-09.
Revenue in its appeal challenged the order of the Ld. CIT(A) in quashing the reopening of assessment made u/s. 147 of the Act. In the cross objection, assessee challenged the order of the Ld.CIT(A) in not adjudicating the grounds on merits.
Briefly stated the facts are that, assessee filed return of income originally on 15.06.2009 declaring income of ₹.2,97,40,169/-. The assessment was completed u/s. 143(3) of the Act on 16.11.2010 determining the income of ₹.3,08,14,061/-. Subsequently notice u/s 148 dated 20.03.2013 was issued stating that income escaped assessment. The reasons for reopening the assessment was mentioned by the Assessing Officer at Page No. 1 of the re-assessment order, that assessee had purchased series of lands on various dates but shown agricultural income out of agricultural land purchased at Kunenama, Taluka Maval, Pune during the year 2004-05. A part of land converted into non-agricultural land in 2006 and after plotting out, three plots were (A.Y: 2008-09 CO NO.295/MUM/2017 Noshir D. Talati sold for ₹.2.58 Crores opting for indexation and long term capital gain of ₹.1,10,78,586/- being half share was offered for taxation. The Assessing Officer referring to the decision of Supreme court in the case Indramani Bai & another v. ACIT [200 ITR 594] and G Venkatswami Naidu & Co. v. CIT [35 ITR 594], he came to the conclusion that sale of land after plotting is a business venture and therefore the sale proceeds should have been assessed as business income instead of capital gains and therefore he was of the view that there is loss of revenue which escaped assessment. Accordingly notice u/s 148 was issued reopening the assessment and reopened assessment was completed on 28.03.2014 u/s. 143(3) r.w.s. 147 of the Act, from out of the sale proceeds of the land half share of the assessee amounting to ₹.1,13,13,287/- was brought to tax as business income.
On appeal the Ld.CIT(A) quashed the reopening of assessment holding that in the course of original assessment proceedings the Assessing Officer called for various details in respect of a non-agricultural land, he has examined all the transactions, applied his mind, addition was also made under long term capital gains while completing the original assessment proceedings and therefore he held that reopening of assessment is mere change of opinion by the Assessing Officer and following the decision of the Hon'ble Supreme Court in the case of (A.Y: 2008-09 CO NO.295/MUM/2017 Noshir D. Talati CIT v. Kelvinator of India Ltd. [320 ITR 561] he held that reopening of the assessment is invalid.
Before us, the Ld. Counsel for the assessee vehemently supported the order of the Ld. CIT(A) and Ld. DR supported the orders of the Assessing Officer.
We have heard the rival submissions perused the orders of the authorities below. On a perusal of the assessment order passed u/s. 143(3) of the Act and the order of the Ld. CIT(A), we find that assessee returned long term capital gains for the Assessment Year 2008- 09 on sale of non-agricultural land located in Pune district and the Bungalow at Pune. Assessing officer computed the long term capital gains and completed the assessment accordingly. It is the finding of the Ld. CIT(A) that this addition was made after calling for copies of sale and purchase agreements of the impugned non-agricultural land by way of notice u/s.142 of the Act and the Assessing Officer had examined them, applied his mind and made addition to the returned long term capital gains and therefore there is a change of opinion by the Ld. A.O, in coming to the conclusion subsequently that the said capital gain should be assessed as business income as against capital gains. It is also the finding that there are no tangible materials came on record to suggest that the income had (A.Y: 2008-09 CO NO.295/MUM/2017 Noshir D. Talati escaped assessment in the case of the assessee except for the reason that Assessing Officer opined that the gain from sale of lands should be assessed as business income instead of capital gains. In the circumstances, Ld.CIT(A) held that there is a change of opinion, without there being no material on record to suggest that the income had escaped assessment and therefore in view of the decision of the Hon’ble Supreme Court in the case CIT v. Kelvinator of India Ltd. (supra) as it is only a mere change of opinion by the Assessing Officer the reopened assessment u/s. 147 of the Act is invalid. While holding so it was observed as under; -
“5. Decision - I have carefully considered the AO's order and the appellant's submissions. The brief undisputed facts of this case are as follows. The appellant had returned LTCG of ₹.1.26 crore for AY 2008-09 by way of his half share on sale of non-agricultural land located in Pune district and a bungalow at Pune, the balance being the share of his wife. While the overall LTCG (of both husband and wife) for the non-agricultural land alone had been shown at ₹.2 21 crores in his return of income, the AO in his scrutiny assessment order had re-computed the same at ₹.2.24 crores, adding ₹.2.73 lakhs in the process The appellant's half share therein of ₹.1.36 Lakh had been added back in his hands in the original scrutiny assessment. The AO had made this particular addition after calling for copies of the sale and purchase agreements of the impugned non-agricultural land, by way of a notice Issued under section 142(1) of the Act. It is hence clear that the AO had called for certain details, examined them, applied his mind and made an addition to the returned LTCG. In these circumstances, he would be permitted to take recourse to the provisions of section 147 of the Act only if he is able to demonstrate escapement of income directly as a result of some information coming to his knowledge subsequent to the assessment proceedings. Such information and its source would be contained in the reasons for reopening, which have already been reproduced earlier in this order. There is however no mention of any additional information. Rather, there is only a mention of his belief that income had escaped assessment, it having been charged to LTCG as opposed to having been charged as business income. This is nothing but mere change of opinion on part of the AO, which cannot be a basis for reopening. The Hon'ble Supreme Court - in its decision in the case of CIT v Kelvinator of India Ltd. (supra) - had held that for the purpose of reopening under section 147 of the Act, the AO's reason to believe that income had escaped assessment has to be recorded in writing and that there must be tangible material for the formation of such belief. In the instant case, there is no material available in this regard. The reasons recorded by the AO - and reproduced in his order - give elaborate details of the real estate transaction, but merely record his satisfaction in the end that income had escaped assessment, on account of the application of the wrong head of income. In other words, there is absolutely no material - tangible or otherwise -that the AO has relied on for the formation of his belief that income has escaped assessment. His action thus directly runs counter to the ratio of the Hon'ble (A.Y: 2008-09 CO NO.295/MUM/2017 Noshir D. Talati Apex Court as laid down in its decision m the case of CIT v Kelvinator of India Ltd. (supra), namely the necessity of tangible material for reopening of an assessment. Accordingly, respectfully following the said ratio of the Hon'ble Apex Court, the AO's action in reopening this assessment is held lo be invalid. He is accordingly directed lo revert to the status quo ante as it existed on the gassing of the origin assessment order under section 143(3) of the Act.”.
On a careful reading of the Ld. CIT(A) order, we do not find any valid reasons to interfere with the decision of the Ld.CIT(A) in holding that it is only on account of mere change of opinion the Assessing Officer reopened the assessment without there being any tangible material on record to suggest that the income had escaped the assessment. Thus, we sustain the order of the Ld.CIT(A) and reject the grounds of the Revenue.
Since, we have sustained the order of the Ld. CIT(A) in holding that reopening of assessment is invalid, we are not inclined to go into the merits of the additions/disallowances made by the Assessing Officer as it was only academic at this stage.
In the result, both appeal of the Revenue and cross objection of the assessee are dismissed.
Order pronounced in the open court on the 23rd April, 2018.