- Anant Raj Ltd. Vs DCIT (ITAT Delhi)
- Assessment order cannot contain each and every fact verified by the assessing officer and assessment cannot be reopened on the basis of mere change of opinion
- Section 50 is applicable only on the block of assets which are used for business and on which depreciation has been claimed
Anant Raj Ltd. Vs DCIT (ITAT Delhi)
Assessment order cannot contain each and every fact verified by the assessing officer and assessment cannot be reopened on the basis of mere change of opinion
It is a settled law that the assessment cannot be reopened on the basis of mere change of opinion on the same set of facts on record. The Ld. DR relied on various case laws as referred above. On perusal of the same, it is seen that in those cases either new material had come to the notice of the assessing officer or there was some incorrect disclosure by the assessee in his return of income. Thus, the said cases are clearly distinguishable from the facts of the assessee and cannot be applied in this case.
We agree with the contention of the assessee that the assessment order cannot contain each and every fact verified by the assessing officer. What has been verified by him forms part of the assessment record. All the information regarding long term capital gain, depreciation, sale of asset was part of the return of income as well as the assessment record which only was later on referred to by the assessing officer to record reasons of escapement of income. Thus, the said facts were on the record of the assessing officer and verified by him. Further, the CIT(A) also verified the said information as has been mentioned in its order. Even, we have verified the said information from the documents placed in the paper book and have come to a conclusion that no depreciation was ever claimed or allowed on the land of building under consideration. Undisputedly, the said property was held by the assessee for more than three years as it was receiving the rent on the said property w.e.f. 1/5/2005 and no depreciation, was claimed thereon. Thus, there was true and full disclosure of the facts and no new information came to the knowledge of the assessing officer. On these facts and material already on record, the reopening of the assessment was invalid and the assessment so made on the basis of an invalid notice was correctly quashed by the CIT(A). Thus, ground no. 1 of the department is hereby dismissed.
Since the reopening of the assessment has been held invalid and no reassessment can be made, ground nos. 2 and 3 become infructuous. However, on merits,
Section 50 is applicable only on the block of assets which are used for business and on which depreciation has been claimed
Section 50 is applicable only on the block of assets which are used for business and on which depreciation has been claimed under the Income-tax Act / Rules. As mentioned above, the documentary evidence clearly shows that the property in question was let out since the date of its acquisition and was never used for the purpose of business by the assessee. On perusal of the returns of income filed for the AY 2006-07 to 2009-10 and the depreciation charts submitted under Rule 5 of the Income-tax Rules, it is clearly evident that no depreciation was ever claimed on the said property since the date of its acquisition. Since no depreciation was claimed by the assessee and allowed by the department on this property, the provisions of section 50 cannot be invoked in this case. Hence, there would not be any change in the value of the block of assets as shown by the assessee as on 31/03/2009. Hence, the action of the assessing officer to assess the said surplus as Short-Term Capital Gain against the law and otherwise is not sustainable and the assessee is entitled to depreciation claimed on value of the block of assets as declared and the disallowance of depreciation is hereby deleted because this property was never part of the said block of assets eligible for depreciation. Thus, the ground nos. 2 and 3 of the revenue are dismissed. Accordingly, the appeal of the revenue is dismissed.
FULL TEXT OF THE ITAT JUDGEMENT
The aforesaid appeals have been filed by the Revenue as well as by the Assessee against the impugned order dated 05.05.2017 for the quantum of assessment passed u/s. 148/143(3) for the Assessment Year 2009-10 and; appeal for the Assessment Year 2012-13 has been filed by the Revenue against impugned order dated 08.05.2017 for the quantum of assessment passed u/s.143(3), passed by Ld. Commissioner of Income Tax (Appeals)-I, New Delhi.
2. We will first take up the Revenue’s appeal in ITA No. 5237/Del/2017 for the Assessment Year 2009-10.
> In the first ground, the Department has challenged the quashing of the assessment order passed by the AO u/s 147 /143(3) of the Act where the CIT (A) held that there was a change of opinion as all the facts were on record and had been examined by the AO while passing the original assessment order.
> In the second ground, the Department has challenged the deletion of an addition of Rs. 98,60,63,613/- made by the AO by holding the claimed long term capital gain arising on sale of a property being 2 contiguous plots of land and building thereon as short term capital gain u/s 50 of the Act.
> In the third ground, the Department has challenged the deletion of disallowance of depreciation of Rs. 2,42,48,977/- made by the AO as the WDV of the relevant block of assets which in his opinion had become nil in terms of the provision of the section 50 of the Act.
3. The facts in brief are that the assessee filed its original return of income for the AY 2009-10 on 29/09/2009. The return of income was subject to scrutiny and income-tax assessment was completed u/s 143(3) on 28/12/2011 at the returned income. Thereafter, a notice 148 of the Act was issued on 30/03/2015 for reopening the assessment on the reason that the assessee had incorrectly declared LTCG instead of STCG and claimed incorrect depreciation on the block of building. AO has framed his reason to believe on the basis of the declaration of the said property by the assessee in the block of assets during the relevant period though in the earlier years the same had been declared separately in the returns of income where no depreciation at all on the said property was claimed.
4. The assessee company had sold one built up property built on the two contiguous plots of land falling in two adjacent villages to M/s International Institute of Planning and Management (P) Ltd. (IIPM) which was later known as Centre for Vocational and Entrepreneurship (COVS) vide two sale deeds dated 24/09/2008. The details of property were as under: –
i. Plot of land with Motel built thereon in Khasra nos. 2, 3, 4, 5, Village Shahurpur, Tehsil Main Chhatarpur Road, District Hauz Khas, New Delhi sold for Rs. 130 Crores;
ii. Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi sold for Rs. 21 Crores.
5. The said property was purchased by the assessee in the F.Y. 2005-06. Admittedly, as per the records the assessee never claimed any depreciation on the said property as the same was never used for its business but was let out from the day one to the purchaser IIPM itself. Accordingly, the assessee declared LTCG of Rs. 143,85,67,404/- on sale of the said property after taking benefit of the indexation as per law in its original return of income.
6. IIPM paid Rs. 21 crores against the sale deed for the property at Plot of land in Khasra no. 584/2, 585, Village Satbari, Tehsil Hauz Khas, New Delhi; and paid Rs. 12 Crores out of Rs. 130 Crores against the sale deed for the Plot of land with Motel built thereon in Khasra nos. 2, 3, 4, 5, Village Shahurpur, Tehsil Main Chhatarpur Road, District Hauz Khas, New Delhi; and the balance payment of Rs. 118 crores by way of postdated cheques. Possession of the property was also handed over to the buyer IIPM alongwith the sale deeds on 24/09/2008 as such, because the IIPM was already in possession of the property as tenant. In order to secure the postdated cheques, a mortgage deed dated 24/09/2008 was also executed. However, the purchaser IIPM was unable to meet the financial obligation of those postdated cheques and therefore, a supplementary mortgage deed dated 28/08/2009 was executed and the due payment was rescheduled. But again, IIPM failed to honour its obligations even as per the supplementary mortgage deed.
7. Due to failure of IIPM to make the payments, the assessee filed a suit before the Hon’ble Delhi High Court, which was referred for mediation and conciliation by the Hon’ble High Court. After deliberations in the mediation proceedings, a settlement deed dated 30/05/2015 was executed between the assessee and IIPM. In view of the settlement deed, the Hon’ble Delhi High court passed the decree vides its order dated 05/06/2015 cancelling the aforementioned sale deeds. Cancellation deeds giving effect to the said cancellation of those sale were also executed on 06/06/2015 between the assessee and IIPM.
8. The AO recorded his reasons for reopening the assessment which have been incorporated on page nos. 1-3 of the assessment order. The AO in his reasons has stated that, a perusal of the records shows that the asset on which the assessee declared LTCG during AY 2009-10 formed part of the block of assets on which depreciation had been claimed. A perusal of the record of AY 2009-10 shows that the treatment of sale of one asset was not made as per the provision of section 50 of Income-tax Act as per which excess between full value of consideration and WDV of the block of asset shall be deemed to be capital gain arising from the transfer of a short-term capital asset. The full value of consideration of asset sold was Rs. 151 Crores, whereas the total value of the block of assets after adjustment of the additions and deletions was Rs.46,29,29,064/- and therefore, the value of the entire block of building shown shall be reduced to ‘Nil’. The AO also stated that it is seen from the assessment records that the assessee was claiming depreciation on the block of asset which should have been reduced to ‘NIL’ as per the provisions of the Act. Thus, as per him the assessee failed to disclose the material facts truly and fully as to the fact that the asset on which long term capital gain was declared in AY 2009-10 was included in the block of assets on which depreciation was claimed and thus, the case was reopened by the AO by issuing notice u/s 148 of the Act by recording reasons to believe that income has escaped assessment as short term capital gain taxable @ 30% was taxed as Long term capital gain @ 20% and excess depreciation was claimed.
9. The assessee submitted a letter dated 20/04/2015 to treat the original return of income as return of income filed in response to the notice u/s 148 of the Act.
10. However, during the course of reassessment proceedings when the sale of above property through 2 separate sale deeds as above stood cancelled by the Hon’ble Delhi High Court’s order dated 05/06/2015, the assessee revised its return of income filed in response to the notice u/s 148 of the Act and filed with it a letter dated 29/02/2016. The assessee explained the sequence of events and submitted all the documents to explain its case in the said letter which has been placed at page nos. 14-20 of the PB. The assessee explained that there arose no capital gain at all to the assessee in the year under consideration as the sale deeds have been cancelled by a decree order of the Hon’ble Delhi High Court. Since the assessee had already declared long term capital gain on the said sale in its original return of income, the same was to be excluded as it was not at all chargeable to income-tax.
11. The assessing officer held the return of income filed with a letter dated 29/02/2016 as null and void by holding that the assessee is not entitled to revise the return of income filed in response to the notice u/s 148 of the Act.
12. The assessing officer held that the depreciation was charged on the property sold. The said asset was included in the block of assets on which depreciation was charged and treatment of sale of the said asset was not made as per provision of Section 50 of the Act. Since depreciation was charged on the asset sold and the sale consideration was more than the WDV of the block of assets, the excess was held by him as a short-term capital gain chargeable u/s 50 of the Act. Further, the assessing officer held that since the sale consideration was more than the WDV of the block of assets, the WDV of the block was reduced to ‘nil’ and therefore, no depreciation was allowable on the same, whereas the assessee had claimed depreciation of Rs. 2,42,48,997/- on this block of assets and therefore, the AO disallowed the said depreciation also.
13. As regards the reopening, the CIT(A) held that on going through the computation of assessable income for the AY 2006-07 to 2009-10 and other record with the AO, it was seen that the said property consisting of plots of land and building had been given on rent to IIPM after its purchase by the assessee in the year 2005. The assessee had also declared rental income from the said property as under:
