Case Law Details
Samet Estates Pvt. Ltd. Vs CIT (Bombay High Court)
It is Petitioner’s case that the same issue which is mentioned in the reasons for reopening was a subject matter of consideration during the assessment proceedings and the assessment order dated 20th December, 2010 in fact even discussed this item. Therefore, reopening is based on change of opinion which is not permissible. Third point of challenge to notice is the very subject matter of reasons for reopening was a subject of revision proceedings under Section 263 of the Act and Commissioner of Income Tax had issued a notice dated 21st January, 2013 under Section 263 of the said Act, calling upon Petitioner to show cause as to why the assessment order under Section 143(3) should not be modified or cancelled and profit on sale of investments of Rs.85,62,314/- should not be added as business receipts instead of capital gains.
in the assessment order dated 28th December, 2010, the assessing officer has recorded that assessee has in the profit and loss account shown profit on sale of investment of Rs.85,62,3 14/-. He has also recorded that assessee has carried out activities only in respect of capital gains. In fact, by this conclusion he has disallowed certain expenses and has added it back to total income by assessee as per Section 37(1) of the said Act. Therefore, issue raised by the assessing officer to reopen has been in the active consideration of the assessing officer who passed the original assessment order dated 28th December, 2010. Therefore, it is a clear case of change of opinion and it is not permissible to reopen based on change of opinions.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1] Petitioner was served a notice dated 28th March, 2013 under Section 148 of the Income Tax Act, 1961 (the said Act) for assessment year 2008-09 which is impugned in this petition. Petitioner was provided reasons for reopening by a communication dated 8th April, 2013. The basis for reopening is that Petitioner is a Company engaged in the business of real estate activities and has shown profit from sale of investment of Rs. 85,62,314/- in P & L Account, but has claimed capital gains to which it was not entitled to. According to assessing officer, properties sold should have been treated as business income and not capital gains.
2] It is Petitioner’s case at the outset, that the reasons to reopen is recorded after the notice has been issued. On this ground alone, the notice has to be quashed and set aside. It is also Petitioner’s case that the same issue which is mentioned in the reasons for reopening was a subject matter of consideration during the assessment proceedings and the assessment order dated 20th December, 2010 in fact even discussed this item. Therefore, reopening is based on change of opinion which is not permissible. Third point of challenge to notice is the very subject matter of reasons for reopening was a subject of revision proceedings under Section 263 of the Act and Commissioner of Income Tax had issued a notice dated 21st January, 2013 under Section 263 of the said Act, calling upon Petitioner to show cause as to why the assessment order under Section 143(3) should not be modified or cancelled and profit on sale of investments of Rs.85,62,314/- should not be added as business receipts instead of capital gains. It is Petitioner’s case that show cause notice issued under Section 263 has been dropped by the Commissioner of Income Tax by an Order dated 6th March, 2013. Therefore, once the same has also been subject of consideration of revision under Section 263 of the Act, the assessing officer cannot reopen assessment on the same issue.
3] Ms. Bharucha very strongly opposed and submitted that Petitioner was in the real estate business and profit made on flats should be treated as stock in trade and profit from sale of flats should be treated as business receipts and not capital gains. In other words, Ms. Bharucha was supporting the points raised by the assessing officer in the reasons for reopening.
4] We have heard Learned Counsels and also considered the Petition, documents annexed thereto, Affidavit-in-Reply, Affidavit-in-Rejoinder.
5] As regards, second and third points raised by Ms. Pawar, we are in agreement with her in as much as in the assessment order dated 28th December, 2010, the assessing officer has recorded that assessee has in the profit and loss account shown profit on sale of investment of Rs.85,62,3 14/-. He has also recorded that assessee has carried out activities only in respect of capital gains. In fact, by this conclusion he has disallowed certain expenses and has added it back to total income by assessee as per Section 37(1) of the said Act. Therefore, issue raised by the assessing officer to reopen has been in the active consideration of the assessing officer who passed the original assessment order dated 28th December, 2010. Therefore, it is a clear case of change of opinion and it is not permissible to reopen based on change of opinions.
6] It is also correct that after the assessment order was passed, the Commissioner of Income Tax had commenced revision proceedings under Section 263 of the Act on the very same issue of profit on sale of investment of Rs.85,62,314/- and the revision proceedings were dropped by an order dated 6th March, 2013. Therefore, the same issue cannot form a reason to believe for assessment officer to issue notice under Section 148. In our view, if only this fact has been brought to the notice of the Commissioner who accorded sanction under Section 151, certainly this sanction would not have been granted.
7] In the circumstances, without going into the first objection on the date of recording reasons and date of issuance of notice as raised by Petitioner, we allow Petition in terms of prayer clause (a), which is reproduced hereunder :
“(a) That the Hon’ble Court may be pleased to issue a writ of certiorari or a writ in the nature of certiorari or any appropriate writ, order or direction after calling for the records and proceedings of the Respondent and quash and set-aside the notice dated 28th March, 2013 i.e. Exhibit-G to the petition.”
8] Petition disposed.
