ITAT Delhi dismisses reopening as same was based on change of opinion

ITO Vs Sant Singh (ITAT Delhi)

Introduction: In a recent case involving ITO Vs Sant Singh, the Income Tax Appellate Tribunal (ITAT) Delhi made a significant decision to dismiss a reopening of the case. The basis for the reopening was a change of opinion by the assessing officer. This article provides a detailed analysis of the case, the arguments presented by both sides, and the final decision reached by the ITAT.

Detailed Analysis: The case revolved around the assessment of Sant Singh’s income, where he had filed a return in 2008, and the assessment was completed in 2010 under section 143(3) of the Income Tax Act. Later, during a survey at a business owned by Sant Singh, it was discovered that he had sold land to M/s. Amazon Enterprises Pvt. Ltd. for a substantial amount. The assessing officer observed that Sant Singh had claimed an exemption under section 54B of the Act, taking into account an advance of Rs. 55 lakhs made for the purchase of land.

The assessing officer also noted that the sale deed did not mention the advance of Rs. 55 lakhs, and there was no proof provided for the claimed exemption. Subsequently, the assessing officer issued a notice under section 148 for the assessment year 2008-09, leading to the reopening of the case.

Sant Singh objected to the reopening, but his objections were dismissed, and the assessing officer proceeded with the assessment. In response, Sant Singh provided a detailed explanation of the transaction and the exemption claimed. The assessing officer, however, was not satisfied and made the addition to the income, leading to an order under section 143(3)/147 of the Act in 2015.

Sant Singh appealed the assessing officer’s decision to the Commissioner of Income Tax (Appeals) [CIT(A)]. In his appeal, Sant Singh not only challenged the addition but also questioned the validity of exercising jurisdiction under section 147. The CIT(A) examined the records and concluded that there was no justification for the proceedings under section 147, as there was no new material or change in circumstances that warranted reopening the case. He quashed the order passed under section 143(3)/147.

The Revenue was not satisfied with the CIT(A)’s decision and filed an appeal against it. The Revenue’s main contentions were that the CIT(A) had not appreciated the facts in the original assessment and that the deduction claimed under section 54B was rightly disallowed.

The CIT(A)’s findings were supported by Sant Singh in cross objections.

Conclusion: After careful consideration of the case and submissions from both sides, the ITAT Delhi upheld the CIT(A)’s decision. The ITAT found that the assessing officer’s reasons for reopening the case were based on a mere change of opinion and did not involve any new material. The ITAT also emphasized that the facts regarding the payment of Rs. 55 lakhs and the deposit in the capital gain account were duly established. The Annotated Report that served as the basis for the reopening was considered a case of change of opinion, and the grounds raised by the Revenue were found to lack substance.

As a result, the ITAT dismissed the appeal by the Revenue and allowed the cross objections filed by Sant Singh. The case serves as an example of the importance of ensuring that reopening of a case is based on valid grounds rather than a change of opinion.

FULL TEXT OF THE ORDER OF ITAT DELHI

The appeal is preferred by the Revenue against the order dated 03.02.20 17 of Commissioner of Income Tax (Appeals)-Hisar (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in appeal no. 269/HSR/2014-15 arising out of an appeal before it against the order dated 24.02.2015 passed u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ITO, Ward-4, Hisar (hereinafter referred as the Ld. AO).

2. Heard and perused the record.

3. Facts in brief are that assessee had filed a return of income on 30.09.2008 and the assessment completed u/s 143(3) of the Act on 23.12.2010. The assessee had reflected the transaction of sale of land subsequently, there was a survey u/s 133A at the business of Smt. Bhawna Jain Props. M/s. Aakash Metal Industries, Hansi from where copy of registration deed no. 5381 dated 02.2008 was found and impounded. The deed disclosed the sale of 16 Kanal 5 marlas i.e. 9831 square yards land by assessee to M/s. Amazon Enterprises Pvt. Ltd. for Rs. 4,81,73,125/- . Ld. AO observed that while claiming exemption u/s 54B of the Act benefit was also taken in respect of advance Rs. 55 lakhs made for purchase of a piece of land. It is also observed that in the sale deed executed by the vendor Sh. Balwant Singh advance Rs. 55 lakhs is not mentioned, the same is not correct. Ld. AO further observed that the assessee has claimed exemption of 2.22 crores u/s 54B(2) of the Act on the ground that the said amount of Rs. 2.22 crores has been deposited in a capital gain scheme account. But no proof of same was furnished and accordingly notice u/s 148 was issued on 18.10.2014 for the assessment year 2008-09 after recording the reasons and obtaining necessary approval. The assessee submitted that return originally filed be treated for the purpose of reassessment. Assessee filed objection to reopening which were dismissed by order dated 09.12.2014. The assessee gave a detailed explanation of the transaction and the exemption however, Ld. AO being unsatisfied made the addition and passed order u/s 143C/ 147 of the Act on 24.02.2015 which was challenged by the assessee before ld. CIT(A) where apart from other grounds assessee had raised the validity of exercising jurisdiction u/s 147 and ld. CIT(A) after examining the records concluded as below :

“This is not substantiated by facts as the appellant has proved as under :-

a) Rs 5500000/- has been given as advance to Sh. Balwant Singh for purchase of land is duly shown in the Income Tax return computation. In the Annotated report sent by learned Dy. Commissioner of Income Tax on 13.08.2012 it is clearly mentioned in the reply submitted by learned Dy. Commissioner of Income Tax that assessee Has given advance of Rs 5500000/- to Sh. Balwant Singh s/o Pehlad on 06.08.2008 after withdrawing Rs 50,00,000.00 from cash Book.

b) Copy of date wise capital A/c of the assessee clearly depicts Rs 5500000/- given as advance to Sh. Balwant Singh had been submitted and placed on file.

c) Copy of bank certificates for deposit Rs 22000000/- in capital gain a/c in PNB clearly shown in computation of income and Bank Certificate was submitted at the time assessment.

d) This fact is also supported by the office note of Learned ACIT and from the notice issued under 154 of the Income Tax Act in which Capital Gain account are clearly mentioned.

e) Before disposing of objections to the initiation of proceedings u/s 147, assessee again submitted copy of capital gain a/c in response to notice clearly mentioning the fact that this has been submitted at the time of assessment and duly considered by AO at the time of assessment.

That in para no. 5 Learned AO has stated that no order u/s 154 was passed by the department. In this regard it is submitted that assessee was issued notice u/s 154 and after considering clarification given by the assessee, it was clear to AO that all the information is already on file and there is no mistake in the order passed by the AO on 23.12.2010, so there is no need to pass any rectification u/s 154. This stand taken by the AO clearly shown that there was no mistake in the order passed by AO on 23.12.2010 and so there was no need to pass the proposed rectification order u/s 154.

In Para 3.2 the Learned AO has mentioned that in the sale deed there is no specific mention of advance received by Sh. Balwant Singh and there is no mention of adjustment of Rs_50,00,000.00.

In this regard it is submitted that in the sale deed it is clearly mentioned that assessee had already received the full payment at home and now nothing is due.

In may view therefore, the proceedings u/s 147 were not justified and this is not a case where new material was found or came to the notice of the AO. I, therefore, quash the order passed u/s 143(3)/147 in this case.”

4. The Revenue is in appeal raising following grounds :

“1. On the facts and in the circumstances of the case, the Ld. CIT (Appeal) has erred in quashing the order dt. 24.02.2015 passed u/s 143(3)/147 of the Income Tax Act, 1961 without appreciating the facts that the AO has mentioned the detailed facts in assessment order itself.

2. On the facts and in the circumstances of the case, the Ld. CIT (Appeal) has erred in accepting the version of assessee filed ’ before the Ld. CIT(A) without appreciating the facts that the facts has been discussed in length in assessment order itself.

3. The A. 0 has rightly disallowed the deduction claimed u/s 54 B of the Income Tax Act, 1961 and the facts has not been appreciated by the Ld. CIT (Appeal) while deciding the appeal.

4. On the facts and in the circumstances of the case, the Ld. CIT (Appeal) has erred in quashing the order u/s 143(3)/ 147 of the Income Tax Act. 1961 without appreciating the provisions of section 54B of the Income Tax Act, 1961 which are discussed in the assessment order itself and rightly been disallowed.

5. On the facts and in the circumstances of the case, the Ld. CIT (Appeal ) has erred in quashing the order u/s 143(3)/ 147 of the Income Tax Act. 1961 without appreciating that the case of assessee is not fit to avail exemption in view of the provisions of section 54B of the Income Tax Act, 1961 which are discussed in the assessment order itself and disallowance has rightly been made.

6. On the facts and in the circumstances of the case, the Ld. CIT (Appeal) has erred in quashing the order u/s 143(3)/ 147 of the Income Tax Act. 1961 without appreciating that the assessee has not deposited unutilized funds into capital gain scheme which is not invested in purchasing the new assest within stipulated time and has also not provided the proof during the assessment The Bank has also not provided any proof in this regard.

7. The A. O has rightly rejected the objection to issuance of notice u/s 148 of the Income Tax Act, 1961 vide order dt. 09-12-2014 which has not been appreciated by the Ld. CIT (Appeal) while deciding the appeal.

8. The CIT(A) has failed to appreciate that the AO in this case has reopened the case after following the due procedure/ provisions of the Income Tax Act, 1961.

9. The Appellant craves leave to add, amend or modify the grounds of appeal subsequently, before the appeal is disposed off.”

4.1 The assessee has also filed cross objections supporting the findings of ld. CIT(A).

5. Heard and perused the record.

6. DR primarily submitted that Ld. CIT(A) has failed to appreciate the fact that under original assessment u/s 143(3) the issue of allowability of exemption was not duly examined and Ld. CIT(A) has heavily relied Annotated Report of DCIT dated 13.08.20 12 which was a mere internal document. Ld. AR however, supported the findings of Ld. CIT(A).

7. Giving thoughtful consideration to the matter on record and submissions it comes up that in the computation of income filed at the time of original assessment available at page no. 100-102 of the paper book, the assessee had given the detail of the capital gains calculation. As the reasons of reopening available on record and also examined from the assessment record made available by the ld. DR, are considered, it is apparent that the failure has been attributed to the assessee for not disclosing fully and truly all material facts. Ld. CIT(A) during the first appellate proceedings observed that the issue has arisen only out of audit objections and in regard to which even there was an office note from the Additional CIT wherein nothing adverse was noticed so requiring no It appears that merely on the basis of borrowed satisfaction the reopening was initiated.

8. CIT(A) has also taken into consideration the fact that even there were rectification proceedings u/s 154 of the Act, initiated by the Ld. AO in which too the information provided by the assessee was duly taken into consideration and no mistake was found in the order dated 23.12.2010.

9. The factual findings given by Ld. CIT(A) could not be disputed by Ld. The fact of payment of Rs. 55 lakhs to Sh. Balwant Singh stand establish as the same was through a banking channels and the bank certificate of deposit of Rs. 2.22 crores in the capital bank account is duly established. Ld. AR has also canvassed before us as to how the amount deposited in the capital gains account was used for purchase of the land.

10. The Bench is of considered opinion that the Annotated Report dated 19.03.2012 of DCIT, Hisar, as made available to us in the paper book at page no. 46 to 49, was not a mere internal document but formed the basis for the reopening and which Ld. CIT(A) has rightly held to be a case of change of opinion. The grounds raised by Revenue have no substance so the appeal of Revenue is dismissed and consequently the C.O stand allowed.

Order pronounced in the open court on 11^th October, 2023.