SULOCHANA BHIMARAJA,CHENNAI vs. ACIT, CHENNAI

आदेश / O R D E R

Per A. Mohan Alankamony, AM:-

In the assessment proceedings of Shri S.A. Bhimaraja, it was observed that he had sold his land during the relevant assessment year 2008-09 which was partly transferred from his spouse (the assessee before us) along with the balance land owned by his spouse and claimed the land sold by them to be agriculture land which was found to be non-agricultural land. Based on this information received by the Ld.AO it was opined that the income had escaped in the hands of the assessee also. Therefore the Ld.AO reopened the assessment of the assessee U/s.147 of the Act by issuance of notice U/s.148 of the Act on 27.03.2014 after obtaining due sanctions. Thereafter the Ld.AO had furnished the reasons for reo-opening to the assessee against which the assessee objected. However the Ld.AO proceeded to reframe the assessment by rejecting the arguments advanced by the assessee. The Ld.CIT(A) also confirmed the order of the Ld.AO by relying on the rebuttal of the Ld.AO vide his letter dated 23.03.2015 addressed to the assessee. The concise gist of the rebuttal of the Ld.AO is stated herein below for reference:- (i) On verification of the order sheet entries and the covering letter addressed to the assessee at the time of scrutiny assessment proceedings, it was found that the issue regarding the correctness of exemption claimed towards the sale of land was never deliberated. (ii) From the assessment order, it is self-explanatory that the Ld.AO had not come to any conclusion on the nature of land sold. (iii) In the computation statement the figures shown representing “income exempt U/s.10”, the last two digits jumped to the next line just below, due to which the relevance with regard to its quantum was lost. (iv) From the order sheet entries and assessment records, it is evident that the Ld.AO had not made any enquiries to ascertain the nature of land sold while allowing the claim of exempt income at the time of original assessment. (v) The Ld.AO has failed to apply his mind at the time of original assessment even with regard to the addition made for Rs.1,50,00,000/- towards the source of investment in agricultural land, as there is no discussion in the assessment order on the determination of the value of the investment made by the assessee.

(vi) Reliance was placed in the decisions of Hon’ble High court of Delhi in the case Consolidated Photo and Finvest Ltd vs. ACIT reported in 281 ITR 394 vide order 17.01.2006 and in the case Delhi Glass Works Pvt. Ltd. vs. CIT reported in 81 ITR 95 etc., 4.1 Thereafter the Ld.CIT(A) upheld the re-opening by observing as under:- “13. From the perusal of the above observations and the findings of the Assessing Officer, it becomes quite evident that the AO had thoroughly and properly dealt with the relevant issues raised by the assessee. I do not find any infirmity in the above findings of the AO which could call for any adverse inference. The AO was within her jurisdiction and had rightly invoked the provisions of section 147. Regarding the contention of the assessee that there was a change of opinion in invoking section 147, the AO has rightly observed that there was no opinion formed by the earlier AO which could have been changed by the AO at a later stage. Therefore, in view of the above, it is noticed that the contentions raised by the assessee are not on a strong and legal footing which could overrule the action of the AO. Hence, the plea of the assessee in this regard is rejected.”

4.2 Before us the Ld.AR made the following submissions to establish that the reopening is bad:-

(i) In the case of the assessee the reopening was made beyond four years from the relevant assessment year.

(ii) The reasons for re-opening intimated by the Revenue to the assessee states as follows:

“The assessee Smt. Sulochana Bhimarja had sold some agricultural lands during the financial year relevant to the assessment year 2008-09. The assessee had purchased the agricultural lands by way of Power of Attorney and she subsequently sold them within a span of 1 year. The assessee claimed the sale proceeds as exempt since the properties sold are not capital assets specified u/s.2(14). On examining the records, the assessee is buying and selling the property frequently which can be confirmed from the table as below: Purchase Date of Sale Date Deed Purchase Deed of Sale 473/2007 14.03.2007 8829/2007 10.08.2007 473/2007 14.03.2007 8830/2007 10.08.2007 8321/2006 18.09.2006 9446/2007 21.09.2007 1333/2006 28.06.2006 9445/2007 21.09.2007

Along with the above mentioned properties, the assessee has purchased and sold around 28 properties during the same financial year relevant to assessment year 2008-09. So, it m assessment year be inferred that the assessee is doing business of real estate and that agriculture is not her actual profession. The assessee has failed to disclose fully and truly all material facts necessary for her assessment, for that assessment year. Also, as per Explanation 1 of Section 147 of the Income Tax Act, 1961 production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.

(iii) Though the Revenue had stated such reasons as mentioned herein above, all the relevant materials with respect to the issue of agricultural land was placed on record before the Ld.AO at the time of original assessment and the same was considered by him. Therefore there is no omission or failure on the part of the assessee to disclose any material facts. (iv) The Ld.AO had not mentioned categorically as to what was the failure on the part of the assessee to fully and truly disclose the material facts at the time of original assessment proceedings. (v) There is no new tangible evidence in the possession of the Ld.AO to justify the re-opening of the assessment. Therefore the re-opening is based on mere change of opinion.

With the above submission the Ld.AR argued before us by stating that, the re-opening is bad in the case of the assessee, because the reopening was beyond four years, without any new tangible evidence, on an issue already considered and decided by the Ld.AO at the time of original assessment and further there was no fault on the part of the assessee to disclose any material facts fully and truly. It was therefore pleaded that the assessment made based on re-opening is bad in law and hence requires to be quashed. The Ld.DR on the other hand argued in support of the orders of the Ld.Revenue Authorities, however could not successfully controvert to any of the above submissions made by the Ld.AR.

4.3 We have heard the rival submissions and carefully perused the materials available on record. From perusing the materials on record, the following facts are apparent:- i. The notice of re-opening in the case of the assessee is dated 23.07.2014, which establishes the fact that the case of the assessee was re-opened beyond the period of 4 years from the end of the relevant assessment year. ii. On perusing the original order passed U/s.143(3) of the Act dated 29.12.2010 for the relevant assessment year

2008-09, it is evident that the issue with respect to purchase and sale of agricultural land was considered by the Ld.AO. The relevant para is extracted herein below for reference:- “The assessee’s representative stated that the assessee had sold some agricultural lands during the year under consideration. The assessee had purchased the above agricultural lands by way of Power of Attorney. It is also stated that she belongs to an agricultural family and purchased the properties during the year with an intention to hold it and go in for horticulture in a big way meant for exports. She had also intended to grow a variety of plants and to run the same in future. She had taken possession of the lands during the beginning of the FY 2007-08 and continued the agricultural activities. She had stated that subsequently she sold them as her plans went awry on some extraneous reasons given in her letter filed on 27.12.2010 explaining the circumstances that forced her to sell the said agricultural lands. The assessee claimed the sale proceeds as exempt since the properties old are not capital assets specified under section 2(14). The assessee’s representative produced all the necessary documents and explanations in support of his claim made for the exemption. The details filed were examined.” iii. The notice issued U/s.142(1) dated 15.09.2010 and 20.10.2010 (Paper book page No.2 & 3) at the time of original assessment mentions about the documents call forward by the Ld.AO which includes the sale deed for the sale of agricultural land against which the assesse had claimed exemption with respect to capital gain tax. iv. From the impugned assessment order dated 31.03.2015, it is evident that re-opening was made based on the decision of the Ld.AO in the case of the assessee’s spouse Shri S.A. Bhimaraja, wherein the Ld.AO opined that the land sold by the assessee along with Shri S.A.

Bhimaraja is not agriculture land. Therefore it is apparent that no fresh tangible materials have been relied on by the Ld.AO in the case of the assessee, because he had relied only on the view of the Ld.AO in the case of the assessee’s spouse. Moreover, the issue with respect to the nature of land had been already considered in the case of the assessee at the time of original assessment. v. At the time of original assessment, the issue with respect to unexplained source for the investment in agriculture land was considered by the Ld.AO and additions were made to the extent of Rs.1,50,00,000/- in order dated 29.12.2010. Therefore, the findings mentioned in the rebuttal letter dated 23.03.2015 (mentioned herein above at page No.4, para No.4(v)) stating that the Ld.AO has failed to apply his mind on that regard is erroneous. vi. From the order of the Ld.AO and the Ld.CIT(A), it is also evident that the Ld.AO had not pointed out any failure on the part of the assessee to fully and truly disclose material facts at the time of original assessment proceedings. vii. The assessee has also relied on the following case laws which is quite significant with respect to the plea of the Ld.AR:- a) CIT vs. Arvind Remedies Ltd reported in 378 ITR 547, wherein the Hon’ble Jurisdictional Madras High Court held “where complete details of claim have been provided before the Assessing Officer during the regular course of assessment, the department cannot seek relief under Explanation (1) to Section 147 of the Income Tax Act, 1961.” b) CIT vs. Schwing Stetter India P. Ltd. reported in 378 ITR 380 wherein the Hon’ble Jurisdictional Madras High Court held “When Assessing Officer fails to record anywhere his satisfaction or belief that income chargeable to tax escaped assessment on account of failure of Assessee to disclose truly and fully all material facts necessary for assessment, notice issue u/s 147 beyond period of four years is wholly without jurisdiction and cannot be sustained.” c) CIT v Kelvinator of India Ltd., reported in 320 ITR 561, wherein the Hon’ble Apex Court held “After 1st April 1989, AO has power to reopen the assessment under s.147 provided AO has reason to believe that income has escaped assessment and there is tangible material to come to the conclusion that there is escapement of income; mere “change of opinion” cannot per se be reason to reopen.” d) ACIT v ICICI Securities Primary Dealership Ltd., reported in 348 ITR 299, wherein the Hon’ble Apex Court held “Assessment cannot be reopened on the mere change of opinion of the Assessing Officer.” e) Donaldson India Filters Systems Pvt. Ltd. v. Deputy Commissioner of Income Tax reported in 371 ITR 87, wherein the Hon’ble Jurisdictional Delhi High Court held “When the assessment had earlier been concluded u/s 143(3), the restrictions on the exercise of the power of re-assessment as contained in the first proviso to Section 147 would inhibit further action in absence of material showing default by the assessee to fully or truly disclose.” f) Technico Agri Sciences Ltd. v DCIT & Anr reported in 97 CCH 163, wherein the Hon’ble Jurisdictional Delhi High Court held “Notice for re-opening the assessment is permissible only when it does not amount to “change of opinion”; is based on tangible material/evidence but is not opposed to the existing record and points to suppression of material facts by the assessee in the original return.”

From the above facts of the case and the ratio laid down by the higher judiciary it is apparent that the reopening in the case of the assessee is bad in law because the reopening was beyond four years, without any new tangible evidence, on the issue already considered and decided by the Ld.AO at the time of original assessment and further there was no fault on the part of the assessee to disclose any material facts fully and truly at the time of original assessment. Hence respectively following the ratio laid down by the Hon’ble Higher Judiciary we hereby quash the assessment made by the Ld.AO based on reopening U/s147 of the Act.

On merits the issue is with respect to the nature of land sold by the assessee i.e., whether the land sold by the assessee is agriculture land or non-agriculture land. In the case of the assessee this issue is debatable. Moreover it appears that that the land sold by the assessee is agriculture land, which was partly kept vacant without performing agricultural activities.

Further there is no finding by the Revenue that the land is situated within the municipality limit or attracting any of the clause mentioned in Section 2(14)(iii) of the Act by which the land sold by the assessee has to be treated as non-agriculture land. However, we restrain ourselves from further examining the issues with respect to the merits of the case because we have already decided that the reopening is bad in law in the case of the assessee and therefore the assessment based on such reopening requires to be quashed.

Order pronounced on the 17th August, 2017 at Chennai.