Case Law Details

Case Name : Rakesh Ambalal Patel Vs ITO (ITAT Ahmedabad)
Appeal Number : I.T.A. No. 465/Ahd/2016
Date of Judgement/Order : 19/02/2021
Related Assessment Year : 2010-11

Rakesh Ambalal Patel Vs ITO (ITAT Ahmedabad)

We have perused the assessment order and the order of the CIT(A) as well as the materials placed on record and referred to in terms of Rule 18(6) of the Income Tax (Appellate Tribunal) Rules, 1963. On perusal, we observe that at the time of original assessment proceedings, what was at the command of the AO was a sale deed executed by the seller assessee showing an agreed sale consideration of Rs.8Lakhs accruing to assessee on sale of property in question. It is claimed on behalf of the assessee that receipt issued by the registering authority showing registrable value at Rs.13,19,000/- was part of the record and hence, by necessary implication, it means that the AO had applied its mind to the aforesaid fact in the earlier assessment proceedings while admitting the capital gains as declared by the assessee with reference to the actual sale consideration. The aforesaid plea of the assessee does not detain us to think differently. Merely because some figures are written somewhere in a bundle of voluminous papers/document placed before the AO, it cannot, in our considered view, automatically mean that the AO has understood the purport of whole gamut of facts and figures. The assessee is under solemn duty to correctly apply the provisions of the Act and in case of a different stand taken on a particular issue, it is further duty of the assessee to properly disclose the relevant facts. The assessee has failed to show that the adoptable value of the property in sale under s.50C of the Act was put to the notice of the AO and reasons were cited for departure therefrom. The difference between the deemed full value of consideration accruing to the assessee as a result of transfer of property and the apparent sale consideration as recorded in the sale agreement is not found to be considered by AO. No explanation for vast difference in the sale consideration qua adoptable value is discernible from the record. Hence, the AO was in no position to accept or reject the sale consideration declared by the assessee in its return of income for the purpose of capital gains. Pertinently, no enquiry was shown to be made by the AO from the perspective of applicability of Section 50C of the Act or otherwise on the issue of computation of capital gains in the original proceedings. In the circumstances, it is difficult to record a finding of fact that a legitimate opinion on applicability or otherwise of Section 50C of the Act has been tested on facts by the AO in the original proceedings. Agreeably, Section 147 does not postulate conferment of the power upon the AO to initiate re-assessment proceedings upon a mere ‘change of opinion’ on a given issue. However, where it is found on fact that the AO has not examined the issue enjoined by the applicable law i.e. 50C of the Act, it would be axiomatic to say that the AO has not formed any opinion previously on the issue. The assessee has neither disclosed relevant details in the return of income in this regard nor has the AO opined as to how a vast difference between the deemed full value of consideration and apparent sale consideration cannot be brought within the ambit of Section 50C of the Act in the original assessment proceedings.

The doctrine of ‘change of opinion’ can plausibly come to the rescue of the assessee only when the AO has taken one of the permissible views at the time of original proceedings. The assessment order passed without taking note of the relevant facts and without appreciating law thereon cannot be equated with a valid formation of opinion. In the instant case, it is a case of omission to consider the deemed sale consideration and to form a bonafide opinion on substitution thereof by apparent sale consideration for the purposes of assessments of capital gains in original assessment proceedings. Hence, the assessee cannot claim a vested right arising from a palpably erroneous conclusion owing to non-consideration of significant fact having direct bearing on escapement of income. If a relevant fact not examined in original proceedings on the basis of which the re-assessment proceedings are sought to be initiated and came to the light of the AO subsequent to the original assessment, the doctrine of ‘change of opinion’ propounded by judicial fiat cannot act as embargo for exercise of powers under s.147 of the Act. The judgment relied upon in the case of Inarco Lted. (supra) is clearly distinguishable. In that case, it was recorded on facts by Tribunal that the issue of computation was subject matter of enquiry. However, in the instant case, it is found that while determining the capital gains the deemed sale consideration relevant to provision of Section 50C of the Act has not been seen at all. Mere production before AO of sale deed alongwith receipt of Registering Authority which encompasses some figures representing value on which stamp duty is payable will not, in the absence of anything more, necessarily amount to disclosure for the purpose presuming formation of opinion.

We thus concur with the view taken by the CIT(A) and hold that where the relevant facts have been overlooked and has not taken cognizance of, resulting in escapement of chargeable income, such omission would not constitute ‘change of opinion’. In the absence of any other contention, we do not see any merit in the plea of assessee towards wrongful usurpation of jurisdiction under s.147 of the Act.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-3, Ahmedabad, (‘CIT(A)’ in short), dated 13.10.2015 arising in the assessment order dated 17.03.2015 passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (the Act) concerning AY 2010-11.

2. As per the grounds of appeal, the assessee herein has challenged the action of the CIT(A) in confirming the addition of Rs.5,17,000/- on account of short term capital gains under-reported having regard to the provisions of Section 50C of the Act.

3. Grounds of appeal raised by the assessee read as under:

“(1) That on facts and in law, the learned CIT(A) has grievously erred in holding that the reopening of assessment u/s 147 of the Act is valid.

(2) That on facts and evidence on record, it ought to have been held that it is a change of opinion on the same set of facts and circumstances, and hence the re-assessment order is invalid and void ab-initio.

(3) That on facts, and in law, the learned CIT(A) has grievously erred in confirming the addition on merits regarding the working of short term capital gains.”

4. When the matter was called for hearing, the learned AR for the assessee strongly voiced objection on legal ground of lack of jurisdiction available under s.147 of the Act.

5. As regards lack of jurisdiction to assess the alleged deemed short term capital gains (STCG) under s.50C of the Act in current proceedings under s.147 of the Act, the learned AR adverted to para 6 of the impugned re-assessment order and submitted that at the time of scrutiny in the original assessment proceedings, the assessee has placed the entire documents called for in connection with STCG arising on sale of immovable property. To prop up this case, the attention was invited to notice of the AO under s.142(1) of the Act dated 24.12.2012 as issued in the original assessment proceedings for AY 2010-11 in question. A reference was made to point nos. 11 & 15 of the aforesaid notice issued in the original proceedings whereby following queries concerning capital gains on transfer of property were raised:

“11. Pl. furnish the source of purchase of immovable property i.e. house property of Rs.1,57,813/- & land of Rs.30,000/- with copy of purchase deed. Also furnish the documents of assets sold of Rs.10,68,764/- during the year and explain whether you have shown capital gain thereon or not.

15. Please furnish the copy of sale deed of property sold and explain capital gain. Also explain the details of share investment source thereof and copy of demat account.”

6. It was thus submitted that the fact of sale of house property on 21.08.2009 for a consideration of Rs.8 Lakhs as per sale deed was very much present to the mind of the Assessing Officer and therefore invoking s.147 of the Act for substitution of ‘deemed sale consideration’ of Rs.13,17,000/- in place of Rs.8 Lakhs for the purposes of determination of capital gains with reference to Section 50C of the Act is not justified at all. It was pointed out that the aforesaid act of the AO is merely a ‘change of opinion’ in an existing fact on a completed assessment which is not permissible in law having regard to the plethora of judicial precedents including CIT vs. Kelvinator of India Ltd. (2002) 256 ITR 1 (Del)(FB). It was thus contended that having regard to the schematic interpretation to the expression ‘reason to believe’ used in Section 147 of the Act, the action of the AO in assuming jurisdiction under s.147 of the Act is arbitrary. It was asserted that having regard to the query raised in the context of capital gains arising to the assessee in the original proceedings as noted above, a presumption is raised that original assessment order was passed after application of mind on the subject matter. A reference was thereafter made to the decision of Hon’ble Bombay High Court in Pr.CIT vs. M/s. Inarco Limited Income Tax Appeal No. 102 of 2016 judgment dated 23rd July 2018 to contend that where the copy of sale deed was the very much part of the record before the AO and issue of computation of capital gains was subject matter of enquiry during regular assessment proceedings, a subsequent issuance of notice under s.148(2) of the Act to revisit the issue based on ‘change of opinion’ is bad in law. The learned AR thus urged that the notice issued under s.148 of the Act dated 21.01.2014 requires to be quashed on this score. On merits, it was pointed out that the assessee has disclosed the sale consideration as actually received for the purposes of computation of capital gains which ought not to have been replaced by deemed sale value of consideration, more so when independent valuation of property has not been carried out.

7. The learned DR for the Revenue, on the other hand, relied upon the observations made by the AO in re-assessment order as well as on the appellate order rendered by the CIT(A). It was further pointed out that certain details towards accrual of capital gains were routinely asked and details as furnished by the assessee were kept on record by the AO in the original proceedings. The apparent sale consideration declared by the assessee in the return of income as per sale deed was summarily accepted without necessary enquiry as incumbent upon him towards an intrinsic value of immovable property having regard to stamp duty valuation. The deemed sale consideration for determination of capital gains with reference to statutory provisions of Section 50C of the Act was totally omitted to be considered. It was pointed out that there are concurrent observations of both the AO in its reassessment order as well as CIT(A) thereon that the assessee has not made any disclosure towards ‘deemed sale consideration’ for the purposes of stamp duty value being different to the AO in the original proceedings and therefore no opinion per se could be said to be formed by the AO for non-applicability of fiction created by Section 50C of the Act despite vast difference between apparent consideration referred to in the sale deed qua adoptable sale consideration. It was thus contended that in the absence of any conscious opinion discernible from the record on the applicability or otherwise of Section 50C of the Act in the facts of the case, the question of alleged ‘change of opinion’ thereon does not arise at the first place. It was further pointed out that the assessee has not challenged the additions on merits in the reassessment proceedings even before CIT(A) and therefore, the re-assessment order framed by the AO as upheld by the CIT(A) does not call for any interference by the Tribunal at this belated stage.

8. We have carefully considered the rival submissions. We shall straightaway address ourselves to the validity of assumption of jurisdiction under s.147 of the Act in the instant case. As enlightened by the facts noted in earlier paras, the case of the assessee was re-opened by issuance of notice under s.148 of the Act alleging under-reporting of capital gains arising to Assessee on sale of immovable property having regard to the provisions of Section 50C of the Act. The reasons recorded under s.148(2) of the Act in respect of AY 2010-11 as duly communicated to the assessee is reproduced hereunder for easy reference:

“In this case, the assessment was finalized u/s. 142(3) of the I.T. Act, 1961 for A.Y. 2010-11 on 15/03/2013 determining total income of Rs.17,32,690/- as against the returned income of Rs. 16,81,894/- after making addition of Rs. 50,798/-.

It is observed that the assessee has sold a house of Shahibag, Ahmedabad on 21/08/2009 for Rs.8,00,000/-. Assessee has shown the same amount in his Return of Income filed on 12/08/2010 while the Dy. Collector (VOP)-2, Ahmedabad has valued the property at Rs.13,17,000/- and asked the assessee to pay short stamp duty of Rs.25,333/- and the same was paid by the assessee. The assessee might have shown the value of house at Rs.13,17,000/- instead of Rs.8,00,000/-. There is under assessment of Rs.5,17,000/-.

In view of the assessment is required to be reopened u/s 147 of the I.T. Act, 1961.”

8.1 We have perused the assessment order and the order of the CIT(A) as well as the materials placed on record and referred to in terms of Rule 18(6) of the Income Tax (Appellate Tribunal) Rules, 1963. On perusal, we observe that at the time of original assessment proceedings, what was at the command of the AO was a sale deed executed by the seller assessee showing an agreed sale consideration of Rs.8Lakhs accruing to assessee on sale of property in question. It is claimed on behalf of the assessee that receipt issued by the registering authority showing registrable value at Rs.13,19,000/- was part of the record and hence, by necessary implication, it means that the AO had applied its mind to the aforesaid fact in the earlier assessment proceedings while admitting the capital gains as declared by the assessee with reference to the actual sale consideration. The aforesaid plea of the assessee does not detain us to think differently. Merely because some figures are written somewhere in a bundle of voluminous papers/document placed before the AO, it cannot, in our considered view, automatically mean that the AO has understood the purport of whole gamut of facts and figures. The assessee is under solemn duty to correctly apply the provisions of the Act and in case of a different stand taken on a particular issue, it is further duty of the assessee to properly disclose the relevant facts. The assessee has failed to show that the adoptable value of the property in sale under s.50C of the Act was put to the notice of the AO and reasons were cited for departure therefrom. The difference between the deemed full value of consideration accruing to the assessee as a result of transfer of property and the apparent sale consideration as recorded in the sale agreement is not found to be considered by AO. No explanation for vast difference in the sale consideration qua adoptable value is discernible from the record. Hence, the AO was in no position to accept or reject the sale consideration declared by the assessee in its return of income for the purpose of capital gains. Pertinently, no enquiry was shown to be made by the AO from the perspective of applicability of Section 50C of the Act or otherwise on the issue of computation of capital gains in the original proceedings. In the circumstances, it is difficult to record a finding of fact that a legitimate opinion on applicability or otherwise of Section 50C of the Act has been tested on facts by the AO in the original proceedings. Agreeably, Section 147 does not postulate conferment of the power upon the AO to initiate re-assessment proceedings upon a mere ‘change of opinion’ on a given issue. However, where it is found on fact that the AO has not examined the issue enjoined by the applicable law i.e. 50C of the Act, it would be axiomatic to say that the AO has not formed any opinion previously on the issue. The assessee has neither disclosed relevant details in the return of income in this regard nor has the AO opined as to how a vast difference between the deemed full value of consideration and apparent sale consideration cannot be brought within the ambit of Section 50C of the Act in the original assessment proceedings.

8.2 The doctrine of ‘change of opinion’ can plausibly come to the rescue of the assessee only when the AO has taken one of the permissible views at the time of original proceedings. The assessment order passed without taking note of the relevant facts and without appreciating law thereon cannot be equated with a valid formation of opinion. In the instant case, it is a case of omission to consider the deemed sale consideration and to form a bonafide opinion on substitution thereof by apparent sale consideration for the purposes of assessments of capital gains in original assessment proceedings. Hence, the assessee cannot claim a vested right arising from a palpably erroneous conclusion owing to non-consideration of significant fact having direct bearing on escapement of income. If a relevant fact not examined in original proceedings on the basis of which the re-assessment proceedings are sought to be initiated and came to the light of the AO subsequent to the original assessment, the doctrine of ‘change of opinion’ propounded by judicial fiat cannot act as embargo for exercise of powers under s.147 of the Act. The judgment relied upon in the case of Inarco Lted. (supra) is clearly distinguishable. In that case, it was recorded on facts by Tribunal that the issue of computation was subject matter of enquiry. However, in the instant case, it is found that while determining the capital gains the deemed sale consideration relevant to provision of Section 50C of the Act has not been seen at all. Mere production before AO of sale deed alongwith receipt of Registering Authority which encompasses some figures representing value on which stamp duty is payable will not, in the absence of anything more, necessarily amount to disclosure for the purpose presuming formation of opinion.

8.3 We thus concur with the view taken by the CIT(A) and hold that where the relevant facts have been overlooked and has not taken cognizance of, resulting in escapement of chargeable income, such omission would not constitute ‘change of opinion’. In the absence of any other contention, we do not see any merit in the plea of assessee towards wrongful usurpation of jurisdiction under s.147 of the Act.

8.4 We thus decline to interfere with the action of the CIT(A). No arguments have been advanced either before the CIT(A) or before us on merits as to why deemed sale consideration is not required to be adopted in this instant case. We thus are in no position to examine the issue on merits at this belated stage.

9. In the result, appeal of the assessee is dismissed.

This Order pronounced in Open Court on 19/02/2021

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