Case Law Details
Nikita Jenishkumar Patel Vs ITO (Gujarat High Court)
The Gujarat High Court heard two petitions arising from reopening of assessment proceedings relating to the sale of immovable property situated at Revenue Survey No.4/A, Block No.10/A, Moje Abrama, Taluka Kamrej, Surat, sold on 06 February 2012 by six co-owners. The petitions challenged notices issued under Section 148 of the Income Tax Act for Assessment Year 2012-13.
The petitioners and other co-owners had executed a sale deed for Rs.1,42,17,840/-, while the market value for stamp duty purposes was Rs.3,76,46,896/-, resulting in a difference between sale consideration and jantri value. The Assessing Officer sought to invoke Section 50C of the Act on this basis. One petitioner had filed a return declaring total income of Rs.21,23,670/- and disclosed capital gains arising from sale of properties including the subject property. The case was selected for scrutiny and notices under Sections 143(3) and 142(1) were issued seeking details regarding the transaction, computation of income, purchase deeds, exemption claimed under Section 54B, and supporting documents.
The petitioner furnished detailed replies, including registered sale deeds, valuation reports, purchase deeds for agricultural land purchased for claiming exemption under Section 54B, and bank records. During assessment proceedings, the Assessing Officer specifically questioned why jantri value should not be adopted for computation of capital gains. The petitioner replied that the valuation difference related to Block No.9 and not Block No.10A, and submitted valuation reports and justifications regarding adverse features affecting the price of Block No.9 land. Thereafter, the Assessing Officer passed an order under Section 143(3) making an addition of Rs.72,245/- relating to Block No.9 and did not apply Section 50C to Block No.10A and 10B.
Subsequently, notices under Section 148 dated 30 March 2019 were issued for reopening the assessments on the ground that income had escaped assessment because the market value determined for stamp duty purposes exceeded the sale consideration. The reasons recorded referred to information received from another Income Tax Officer stating that there was a difference of Rs.2,34,29,056/- between the sale consideration and fair market value and that Section 50C was applicable. The Assessing Officer also referred to stamp duty valuation obtained from the Sub-Registrar and alleged that the petitioners had not shown true and proper capital gains.
The petitioners challenged the reopening contending that all material facts had already been fully and truly disclosed during original assessment proceedings and that the reopening was based on a mere change of opinion after expiry of four years. They argued that the Assessing Officer had already examined the applicability of Section 50C during scrutiny assessment and consciously accepted the valuation relating to Block No.10A and 10B. The petitioners further submitted that the agreement to sell had been executed on 30 September 2010 and possession was handed over on 31 March 2011 at the prevailing jantri value of Rs.3,098/-, while the conveyance deed was registered later on 06 February 2012.
The Revenue contended that reopening was based on fresh and tangible information received from another Assessing Officer and on valuation differences under Section 50C. It was also argued that in the case of another co-owner, addition had been made based on a DVO report and similar treatment should apply to the petitioners. The Revenue further argued that the Assessing Officer had not formed any opinion during original assessment regarding the subject matter and therefore reopening could not be termed a change of opinion.
The High Court observed that the issue regarding valuation of the land had already been scrutinised during the original assessment proceedings. The Court noted that specific inquiries were made regarding Section 50C applicability and valuation reports for Block No.10A and 10B had been examined. It held that the reasons recorded for reopening were not based on cogent and tangible material and that the petitioners had fully and truly disclosed all material facts necessary for assessment. The Court further observed that reliance on a DVO report relating to another co-owner could not justify reopening because such material did not form part of the recorded reasons.
The Court concluded that reopening of assessment amounted to a change of opinion and that the impugned notices under Section 148 could not be sustained. Accordingly, the notices dated 30 March 2019 and the orders rejecting objections were quashed and set aside in both petitions. The Court also held that since identical facts applied to the co-owner’s case, a different approach could not be adopted. Both petitions were allowed and Rule was made absolute with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr.Manish Shah for the petitioner and learned senior standing counsel Mr.Karan Sanghani for the respondent in both the petitions.
1.1 Rule, returnable forthwith. Learned advocate Mr.Karan Sanghani waives service of notice of Rule on behalf of the respondent in both the petitions.
1.2 Having regard to the controversy in narrow compass and with consent of the learned advocates appearing for the parties, the matters are taken up for final consideration.
2. These two petitions are arising out of reopening of assessment in case of sale of immovable property situated at Revenue Survey No.4/A, Block No.10/A, Moje Abrama, Taluka Kamrej, Surat (for short ‘the subject property’) on 06th February, 2012 by six co-owners.
2.1 The petitions, therefore, were heard together and are being disposed of by this common judgment and order.
2.2 For the sake of convenience, Special Civil Application No.22046 of 2019 is treated as a lead matter.
3. The brief facts of the case are as under.
3.1 The petitioners along with other co- owners executed sale deed for value of Rs.01,42,17,840/- of the subject property on 06th February, 2012. Stamp duty of Rs.18,44,750/- was paid and market value of the property in terms of the stamp duty comes to Rs.03,76,46,896/-.
3.2 Therefore, there is difference between sale consideration and the fair market value. Accordingly, provision of Section 50C of the Income Tax Act, 1961 (for short ‘the Act’) would apply in the hands of the petitioner.
3.3 The petitioner of Special Civil Application NO.22046 of 2019 filed return of income on 31st August, 2012 declaring total income of Rs.21,23,670/-. Capital gains declared by the petitioner on sale of three properties which includes the property situated at Village Abrama being Revenue Survey No.4A, 14 and 10-A.
3.4 The case of the petitioner was selected for scrutiny assessment and notice under Section 143(3) dated 12th August, 2013 was issued followed by notice under Section 142(1) of the Act dated 03rd April, 2014 asking the petitioner to furnish the information called for including copy of trading and P&L account along with balance-sheet, computation of income and audit report for the A.Y. 2011-12 and 2012-13.
3.5 The petitioner filed detailed reply dated 10th May, 2014 providing requisite details including the registered sale deeds and purchase deeds of the property sold under the year under consideration on which short term capital gain was offered by the petitioner for the A.Y. 2012- 13 qua 12.5% share of the petitioner. The petitioner also pointed out that against the sale of the land, petitioner claimed exemption under Section 54B of the Act by purchasing agricultural land. Copies of purchase deeds were also provided by the petitioner along with bank book showing payment made for purchase of the land.
3.6The Assessing Officer thereafter, on perusal of the information furnished, asked the petitioner by notice dated 26th February, 2015 to show cause as to why jantri value should not be adopted while computing the capital gain and appropriate addition should not be made to the total income with regard to the sale of the land situated at Block No.9 of the properties sold by the petitioner.
3.7 The petitioner filed reply dated 13th March, 2015 along with valuation report pertaining to sale of land at Block No.10/A and 10/B along with detail justification with regard to the sale consideration received on the sale of property situated at Block No.9 stating that due to adverse features of the land at Block No.9 the said land was sold at the maximum available market price at a particular point of time and requested the Assessing Officer to accept the actual sale consideration and thereby requested the Assessing Officer not to invoke provision of Section 50C of the Act.
3.8 The Assessing Officer thereafter passed assessment order under Section 143(3) dated 24th March, 2015 making addition of Rs.72,245/- to the returned income of the petitioner by not accepting the contention of the petitioner with regard to substitution of the sake price under Section 50C in respect of the land situated at Revenue Survey No.4B, Block No.9.
3.9 The respondent – Assessing Officer thereafter issued the impugned notice under Section 148 dated 30th March, 2019 for A.Y. 2012- 13 for reopening of the assessment after a period of almost four years with the prior approval of the Income Tax Commissioner-1, Surat on the basis that he has reasons to believe that the income has escaped assessment. The petitioner, on receipt of the notice, by letter dated 01st April, 2019 addressed to the respondent submitted that return filed under Section 139(1) of the Act on 31st August, 2012 be treated as return in respect of the impugned notice dated 30th March, 2019 under Section 148 of the Act, and further requested to supply the copy of reasons recorded. The petitioner, thereafter, filed e-return of income in respect to the notice under Section 148 declaring same income as shown in the return filed under Section 139(1) of the Act.
3.10 The respondent by letter dated 1th July, 2019 provided reasons recorded for reopening of the assessment, relevant portion of which is reads as under.
“2. Brief details of information collected/received by the AO:
In this case, information has been received from the ITO, Ward – 3(3)(2), Surat vide letter No.SRT/ITO/Wd 3(3) (2)/Information/50C/75/2015-16, dtd. 22.04.2015. As per the information, during the year madhuriben rajendrabhai patel(“The assessee”) alongwith other five (06 sellers in all) Co-owners had sold immovable property situated at R.S. No. 4/A, Block No. 10/A, MojeAbrama, Kamrej Surat on 06.02.2012 vide registration no KMJ/766/2012 by executing a sale deed for document value of Rs. 1,42,17.840/- and stamp duty paid of Rs. 18,44,750/-. The market value of property works out as per stamp duty paid by assessee comes to Rs.3,76,46,896/- As such, there is a difference of Rs.2,34,29, 056/- between the sale consideration and the fair market value and accordingly the provisions of 50C apply in the hands of the assessee.
3. Analysis of information collected/ received:
On verification from the system, it has been noticed that the assessee has filed return of income for the A.Y.2012-13 but has not shown the true and proper capital gains as income, which has escaped assessment.
Therefore, there is reason to believe that the assessee has not shown the correct income for the year under consideration during the F.Y 2011-12 relevant to A.Y. 2012-13, and that forms escaped income in the hands of the assessee.
4. Enquiries made by the AO as sequel to information collected/ received:
For examination actual capital gains and the applicability of s. 50C, notice u/s.133(6) of the I.T. Act, 1961 was issued to the assessee. Vide the above, the assessee was specifically required to furnish complete details in respect of above referred capital gain on the said property. The assessee has not furnished relevant details of the asset as required by the notice u/s. 133(6) of the I.T. Act issued by the AO and only stated that the issue was dealt with in assessment proceedings. Thereturn of income for the A.Y 2012-13 filed by assessee has been verified. Upon verification, it has been found that assessee has shown certain income under the head of Capital Gains.
For examination the valuation of the property, a copy of stamp duty calculation sheet has been obtained from the Sub-Registrar, Surat-kamrej and as per stamp duty valuation the valuation of property has been found to be Rs.3,76,46,896/- as discussed above. Hence, there is a difference of Rs.2,34,29,056/- between the sale consideration received as per sale deed and the fair market value as per Circle rates. Assessee’s share being 1/6th, the difference comes to Rs. 39,04,842.
Accordingly, the provision of s.50C is applicable to the assessee. Thus, the differential amountis required to be assessed and taxed in the hands of the assessee u/s.50C of the Act. Therefore, the non-showing of the true and correct capital gain as per stamp valuation in the return of income has resulted in belief that the differential amount represents capital gain of the assessee which has escaped assessment.”
3.11 The petitioner thereafter by letter dated 21st August, 2019 requested the respondent to furnish the certified copy of the statutory form containing the reasons recorded along with the approval taken under Section 151 of the Act. However, the respondent understood the said letter as objection and disposed of the same by order dated 04th October, 2019. The petitioner thereafter raised objection by letter dated 07th November, 2019 which was disposed of by order dated 13th November, 2019 by the respondent– Assessing Officer. Being aggrieved, the petitioner has preferred this petition.
3.12 Special Civil Application No.22045 of 2019 is preferred by the co-owner whose case was also reopened by the notice under Section 148 dated 30th March, 2019 on the same reasons. The only difference in the case of the petitioner of Special Civil Application No.22045 of 2019 is that the assessment order under Section 143(3) of the Act after scrutiny was not passed but the return of income filed by the petitioner was accepted under Section 143(1) of the Act. The petitioner was also co-owner of the subject property having 12.5% share therein and the difference in the jantri value and the sale consideration received by the petitioner was worked out of Rs.23,44,443/- by the respondent – Assessing Officer.
4. Learned advocate Mr.Manish Shah for the petitioner submitted that during the course of scrutiny assessment of the petitioner in Special Civil Application No.22046 of 2019, all details with regard to the transaction of sale of subject property was furnished before the Assessing Officer. It was pointed out that difference of jantri value pertains to Block No.9 and not to Block No.10 and therefore, the Assessing Officer has specifically considered the applicability of Section 50C of the Act in respect of the land at Block No.9 and framed assessment order under Section 143(3) of the Act wherein he has applied Section 50C of the Act to Revenue Survey No.4B, Block No.9 of Village Abrama and has consciously not applied to the subject property situated at Block No.10. It was, therefore, submitted that the assessment is sought to be reopened on the basis of mere change of opinion beyond a period of four years from the end of the relevant assessment year and hence, in absence of failure on part of the petitioner to disclose fully and truly all material facts, assumption of jurisdiction on part of the Assessing Officer under Section 147 lacks validity.
4.1 It was submitted that as the facts of both the petitions are same, it would not make any difference in case of petitioner of Special Civil Application No.22045 of 2019 who is a co-owner for the challenge to notice under Section 148 of the Act as the Assessing Officer, during the course of original assessment in case of petitioner of Special Civil Application No.22046 of 2019, has scrutinised the entire transaction pertaining to the Block No.10A of the land in question sold by the petitioners of both the petitions along with other co-owners.
4.2 Learned advocate invited attention of the Court to the inquiry made during the course of the original assessment by notice dated 26th February, 2015 wherein the Assessing Officer specifically asked details for valuation report submitted by the petitioner for Block No.10A and 10B, to which the petitioner replied by letter dated 13th March, 2015. It was pointed out that there is no difference between jantri value and sale price so far as Block No.10 is concerned and the difference pertains to Block No.9 due to adverse features of the land at Block No.9 and accordingly, the Assessing Officer made addition of Rs.72,245/- being difference in case of petitioner of Special Civil Application No.22046 of 2019 accepting that there is no difference between the jantri value and the sale price of the subject parcel of land situated at Block No.10A and Block No.10B. It was, therefore, submitted that in the reasons recorded for reopening, the Assessing Officer has taken valuation of Block No.9 and not Block No.10.
4.3 It was submitted that the impugned notice under Section 148 has been issued on the basis of the jantri rate adopted by the stamp valuation authority whereas the land in question has actual been transferred by agreement to sell dated 30th September, 2010 but the conveyance deed was registered on 06th February, 2012 and the land was sold at jantri rate of Rs.03,098/- prevailing at the time of execution of the agreement to sell dated 30th September, 2010 and later on the possession was handed over by possession deed dated 31st March, 2011. It was, therefore, submitted that the land has already been transferred in the A.Y. 2011-12 but the sale deed was registered in the A.Y. 2012-13, therefore capital gain was offered by the petitioner in A.Y. 2012-13.
4.4 Learned advocate, in support of his submissions, referred to and relied upon the applications dated 13th June, 2011 and 18th June, 2011 filed by the petitioner with the office of Deputy Collector for to find out the jantri value prevailing on the date of transfer of the land on 31st March, 2011 and the reply dated 12th August, 2011 of the Deputy Collector to the effect that jantri value was Rs.03,098/-.
4.5 It was, therefore, submitted that the above facts were considered by the Assessing Officer during the original course of assessment proceedings and the capital gain offered by the petitioner was also accepted. It was, therefore, submitted that the impugned notice issued for reopening is nothing but change of opinion.
4.6 Learned advocate Mr.Manish Shah for the petitioner has referred to and relied upon the following decisions in support of his submissions – (i) Kishorbhai Harjibhai Patel v. ITO [(2019) 107 taxmann.com 295 (Guj.)], (ii) CIT v. Shimbhu Mehra [(2016) 236 Taxman 561 (All)], (iii) CIT v. Kumararani Smt. Meenakshi Achi [(2007) 292 ITR 624 (Mad)], (iv) Jaswant Rai v. CWT [(1977) 107 ITR 477 (P&H)] and (v) Gujarat Paguthan Energy Corporation Pvt. Ltd. v. DIT [(2014) 45 taxmann.com 564].
5. On the other hand, learned senior standing counsel Mr.Karan Sanghani for the respondent – Assessing Officer submitted that in case of other owner viz. Prakash Jayantilal Patel in respect of the subject land, scrutiny assessment under Section 143(3) was completed on 27th March, 2015 and the Assessing Officer, during the course of the proceedings, referred the matter to the DVO for fair market valuation and long term capital gain was computed by making addition under Section 50C of the Act based upon the valuation report of the DVO. It was, therefore, submitted that similar procedure is required to be adopted by the Assessing Officer during the original assessment proceedings of the petitioner of Special Civil Application NO.22046 of 2019 and no scrutiny assessment is made in case of petitioner of Special Civil Application No.22045 of 2019 who are also co-owners of the subject property. It was, therefore, submitted that there is no change of opinion as contended by the petitioner but in view of such fats that there was addition made by the Assessing Officer in case of co-owner, the same addition is also required to be made in case of the petitioners.
5.1 It was submitted that reopening has been made after evaluation and specific and tangible information received from ITO Ward 3(3)(2), Surat by letter dated 22nd April, 2015 that the assessee has transferred the property at a value below the valuation determined by the stamp valuation authority in violation of the provision of Section 50C of the Act and has furnished inaccurate particulars of income and accordingly, considering such information, the impugned notice for reopening was issued. It was, therefore, submitted that no inference may be made while exercising the extra-ordinary jurisdiction under Article 226 of the Constitution of India more particularly when the Assessing Officer during the course of the original assessment has not examined difference in valuation of jantri and value and sale consideration as per the sale deed.
5.2 It was further submitted that the petitioner claimed exemption under Section 54B of the Act in respect of the subject land and therefore, the Assessing Officer would not have inquired into the computation of the long term capital gain and therefore, there is no question of application of mind by the Assessing Officer during the original assessment and change of opinion for reopening of the assessment.
5.3 Learned senior standing counsel for the respondent relied on the decision in case of CIT v. Usha International Ltd. [(2012) 348 ITR 485] to submit that when the Assessing Officer did not examine a particular subject matter, entry or claim/deduction and therefore, had not formed any opinion and accordingly it must be presumed that he must have formed an opinion. It would be presumed that he must have formed an opinion as there cannot be a deemed formation of opinion even when the subject matter is not examined.
5.4 It was, therefore, submitted that the decision of the Apex Court in case of CIT v. Kelvinator of India Ltd. [(2010) 187 Taxman 312/320 ITR 561 (SC)] regarding change of opinion also would not apply in the facts of the case as in the present case, the subject matter of long term capital gain was claimed as deductible under Section 54B of the Act and was never shown in the original return and therefore, it cannot be said that there is change of opinion while reopening of the assessment.
5.5 Learned senior standing counsel for the respondent further submitted that merely because the transaction in question was examined by the Assessing Officer during the original assessment would not make any difference as scrutiny was on the basis of disclosure made and the materials supplied by the assessee pertaining to the valuation of the subject land which is prima facie found to be untrue on the basis of fresh material made available to the respondent – Assessing Officer on the basis of the assessment proceedings in case of another co-owner of the subject land. It was, therefore, submitted that the fact of scrutiny assessment being done in case of the assessee earlier would not help the assessee from reopening of the assessment in the facts of the case.
5.6 Learned senior standing counsel referred to and relied upon the decision of this Court in case of Yogendrakumar Gupta [(2014) 366 ITR 186/46 taxmann.com 56 (Guj.)] which is confirmed by the Apex Court by dismissing SLP reported in (2014) 51 taxmann.com 383 (SC). It was submitted that this Court has, in similar facts of the case before it, held that when the reopening is initiated, assumption of jurisdiction on part of the Assessing Officer based on fresh information, specific and reliable and otherwise sustainable under the law, challenge to reassessment proceedings warrant no interference.
5.7 Learned senior standing counsel Mr.Sanghani also relied on the decision in case of Surat District Co-op Milk Producers Union Ltd. v. Income-tax Officer reported in [2017] 77 taxmann.com 351 (Guj.) to submit that since the assessee did not deny higher valuation adopted by the stamp valuation authority by applying provision of Section 50C of the Act, it could be concluded that assessee failed to discharge its duty of true and full disclosure at the time of filing of return.
5.8 It was, therefore, submitted that both the petitions deserve to be dismissed.
6. Having heard learned advocates for the respective parties and having perused the facts of the case, it is not in dispute that the petitioners are co-owners of the land in question situated at Block No.10A which is the subject matter of reopening of the assessment proceedings for A.Y. 2012-13 on the basis that there is difference in the jantri value and the sale consideration received by the petitioner. However, it also emerges from the record that the issue with regard to valuation of the and in question was scrutinised during the course of the assessment proceedings in case of petitioner of Special Civil Application NO.22046 of 2019.
6.1 It is also a matter of fact that valuation made by the stamp valuation authority cannot be considered as a tangible material as held by this Court in case of Munir Ismail Voraji v. Income Tax Officer [(2018) 404 ITR 696] wherein it is held that report from the DVO in respect of the valuation in case of co-owner is not a tangible material to form belief of escapement of income without anything more on record.
6.2 Reliance placed on behalf of the respondent on the decision rendered in case of Surat District Co-op Milk Producers Union Ltd. (supra) is also misplaced as in the facts of the said case, despite query of the Assessing Officer on the calculation of the capital gain, the assessee did not disclose anything and in such circumstances, it was held that assessee failed to disclose fully and truly all material facts necessary for assessment. However, in the facts of the present case, during the course of the original proceedings in case of petitioner of Special Civil Application No.22046 of 2019, there was specific inquiry about the transaction of the sale of land from the perspective of Section 50C of the Act and the notice dated 26th February, 2015 calling upon the petitioner – assessee to justify the computation of capital gain in respect of the land situated at Block No.9 and the Assessing Officer also noted the fact that the petitioner submitted valuation report for land situated at Block No.10A and No.10B and examined the same. Therefore, it is apparent that the reasons recorded by the respondent – Assessing Officer to reopen the assessment are not based upon the cogent and tangible information. As against that, the petitioner has disclosed fully and truly all the materials necessary for the assessment.
6.3 The contention raised on behalf of the respondent to justify the reassessment proceedings on the basis of the report obtained from the DVO in case of co-owner Prakash Jayantilal Patel making allegation of suppression of lower valuation for sale of land in question, the reasons recorded nowhere mentioned about forming reason to believe due to the report of the DVO in case of co-owner and therefore, reliance placed on the report of the DVO by the respondent in the affidavit-in-reply to justify the reopening is not tenable as no fresh material to justify the reassessment forming part of the reasons recorded can be pressed into service to justify the validity of the reassessment notice.
7. In view of the foregoing reasons, when the petitioner of Special Civil Application No.22046 of 2019 has disclosed fully and truly all the material facts during the course of the original assessment, there was a change of opinion for reopening of the assessment by issuing the impugned notice under Section 148 of the Act. Therefore, the reliance placed on behalf of the respondent on the decision of Yogendrakumar Gupta (supra) would also not apply as the allegation in the said case pertains to the transaction with shell companies which stands on a different footing.
8. In view of the foregoing reasons, the impugned notice under Section 148 of the Act therefore cannot be sustained. The petition deserves to be allowed and the impugned notice dated 31st March, 2019 issued under Section 148 of the Act for reopening of the assessment for A.Y. 2012-13 and the order dated 13th November, 2019 rejecting the objections are accordingly quashed and set aside.
9. So far as Special Civil Application No.22045 of 2019 is concerned, facts being identical, different yardstick cannot be applied for treating the notice under Section 148 of the Act for reopening in view of the decision relied on by the petitioner in case of Kumararani Smt. Meenakshi Achi (supra), wherein it is held that the assessee who is also a co-owner of the property, is entitled to the benefit enjoyed by the other co-owners, whose valuation of the same property, at the same rate as that of the assessee, was accepted by the Commissioner of Income Tax and recorded in the order under appeal by the Tribunal. Therefore, in the present case also, when the notice of reopening is held bad in law in case of the co-owner, on the same ground, the impugned notice for reopening, on the same facts, would not sustain and permitting such notice to be proceeded would be an exercise in futility.
10. Accordingly, both the petitions are allowed and the impugned notices issued under section 148 of the Act are quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.
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