Gujarat High Court
Aditya Hemang Patel vs The Income Tax Officer, Ward 3(3)(1) on 25 April, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 4889 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
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Approved for Reporting Yes No
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ADITYA HEMANG PATEL
Versus
THE INCOME TAX OFFICER, WARD 3(3)(1) & ANR.
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Appearance:
MR. TUSHAR HEMANI, SR.ADVOCATE WITH MS VAIBHAVI K
PARIKH(3238) for the Petitioner (s) No. 1
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 25/04/2025
ORAL JUDGMENT
(PER : HONOURABLE MR.JUSTICE D.N.RAY)
1. Heard learned Senior Advocate Mr.Tushar Hemani with learned advocate Ms.Vaibhavi Parikh for the Petitioner and learned Senior Standing Counsel Ms.Maithili D. Mehta for the Respondents.
2. With the consent of learned advocates for the respective Page 1 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined parties, the matter is taken up for hearing, as the issue involved is quite brief. Rule returnable forthwith. Learned Senior Standing Counsel Ms. Maithili D. Mehta waives service of notice of Rule on behalf of the Respondents.
3. The brief facts of the case are as follows:
3.1 During the Assessment Year 2016-17, the Petitioner effected the sale of an immovable property, being agricultural land, for a consideration of ₹4,05,91,000/-. The Petitioner filed the original4,05,91,000/-. The Petitioner filed the original return of income on 16.10.2016, declaring total income of ₹4,05,91,000/-. The Petitioner filed the original1,20,450/-. Subsequently, on 31.03.2017, a revised return was filed declaring the same income of ₹4,05,91,000/-. The Petitioner filed the original1,20,450/-, while claiming exemption under Section 54B of the Income-tax Act, 1961 (hereinafter, "the Act") in respect of capital gains purportedly arising from the sale of the said agricultural land.
3.2 The case was selected for limited scrutiny under the provisions of Section 143(2) of the Act vide notice dated 19.09.2017. The scope of scrutiny was confined, inter alia, to the issue of whether the claim Page 2 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined for deduction from capital gains had been made in accordance with law.
3.3 In response, the Petitioner furnished requisite information by letter dated 05.12.2018, including inter alia:
Explanation in relation to deduction under section 54B of the Act from capital gains.
Conveyance deed in relation to sale of agricultural land for Rs.4,05,91,000/-.
3.4 Further, vide communication dated 15.12.2018, the Petitioner submitted that the land in question did not fall within the definition of "capital asset" under Section 2(14) of the Act. It was accordingly contended that the transaction would not attract capital gains tax. A certificate from the competent revenue authority was also annexed in support of this contention.
3.5 The assessment proceedings culminated in an order passed under Section 143(3) of the Act on 24.12.2018, wherein the returned income as declared by the Petitioner was accepted without variation.Page 3 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025
NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined 3.6 Thereafter, the Respondent issued a notice under Section 148 of the Act dated 31.03.2021, seeking to reopen the assessment for the year under consideration on the ground of alleged income escaping assessment.
3.7 In response to the said notice, the Petitioner submitted a return of income on 23.04.2021 and simultaneously requested the Respondent to furnish a copy of the recorded reasons for reopening. 3.8. The reasons for reopening were supplied by the Respondent vide letter dated 12.05.2021. According to the Petitioner , the reasons disclose that the reassessment was initiated on the premise that the Petitioner had effected the sale of an immovable property and that capital gains arising therefrom had not been subjected to tax.
3.9 In essence, it is the stand of the Respondent that the Petitioner had sold a property valued at ₹4,05,91,000/-. The Petitioner filed the original4,05,91,000/- and that, in accordance with the provisions of the Act, capital gains arising therefrom are chargeable to tax. Since the Petitioner had declared no taxable Page 4 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined capital gain in the return of income, it was reasoned that income to the extent of ₹4,05,91,000/-. The Petitioner filed the original4,05,91,000/- had escaped assessment, thereby warranting reopening of the case under Section 147 of the Act. 3.10 The Petitioner, vide letter dated 12.02.2022, submitted detailed objections against the reopening, raising various factual and legal submissions and contending that the preconditions for exercise of powers under Section 147 of the Act were not satisfied. 3.11 The Respondent disposed of the said objections by an order dated 25.02.2022, wherein it was held, inter alia, that the reopening was legally justified.
4. Aggrieved thereby, the Petitioner has instituted the present writ petition under Article 226 of the Constitution of India, seeking issuance of an appropriate writ for quashing and setting aside the impugned notice dated 31.03.2021 issued under Section 148 of the Act, along with consequential reliefs:
"(a) quash and set aside the impugned notice at ANNEXURE "A" to this petition;Page 5 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025
NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined
(b) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at ANNEXURE "A" to this petition and stay the further proceedings for the Assessment Year 2016-17;
(c) any other and further relief deemed just and proper be granted in the interest of justice;
(d) to provide for the cost of this petition."
5. Mr. Tushar Hemani, learned Senior Advocate along with Ms. Vaibhavi K.Parikh, learned Counsel for the Petitioner has submitted that the reasons for reopening are scanty, non-specific and vague. The case of the Petitioner has been sought to be reopened in a mechanical manner with no application of mind and there could be no prima facie "belief" for the escapement of income chargeable to tax. Further, considering the fact that the Petitioner's case was selected for scrutiny and assessed thereafter, the attempt to reopen the case on the same set of facts has to be termed as "change of opinion", which is impermissible in law.
6. On behalf of the Department, Ms.Maithili Mehta, learned Senior Standing Counsel has supported the impugned notice on the ground that the Assessee had sold the immovable property in Page 6 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined question for an amount of Rs.4,05,91,000/- and has earned income under the Head of Capital Gains thereon, which was not disclosed in the return of income for the Assessment Year 2016-17 and therefore, there was valid reason to believe that the income has escaped the assessment under the provision of Section 147 of the Act and hence, the reassessment proceedings have been rightly initiated by issuing impugned notice under Section 148 of the Act. Ms. Mehta, learned Senior Standing Counsel further relied upon the decisions of the Hon'ble Apex Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in {2007}(161) Taxmann 316 and in the case of Raymond Woolen Mills Ltd. Vs. ITO and others reported in [(1999) 236 ITR 34 (SC)], in support of her submission that no ground exists to stall the reopening at this stage.
7. DISCUSSION & FINDINGS :-
7.1 It will be seen that, by communication dated 19.09.2017, the Petitioner had received a notice under Section 143(2) of the Act for limited scrutiny under the Computer Aided Scrutiny Selection (CASS), wherein, the following issues were identified for Page 7 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined examination :-
"(i) Whether sundry creditors are genuine.
(ii) Whether deduction from the capital gains has been claimed correctly."
7.2 In response to the said limited scrutiny assessment, the Petitioner by communication dated 05.12.2018 had categorically submitted the sale deed of the property sold for Rs.4,05,91,000/-, which forms the subject matter of the impugned notice and by subsequent submission dated 15.12.2018 had further explained as under:-
"1. Submission of explanation on capital gain:
As required by you, we submit our explanation on capital gain as under:
The assessee has sold the plot of rural agricultural land situated at Sanathal at Rs.4,05,91,000/-. Though, the assessee has shown the sale of this land in his return of income and has offered capital gain thereon, it is submitted that the land in question is a rural agricultural land, situated beyond 8 Kms from the town Sanand having population below 10,000 as per 2011 census and hence not a "Capital Asset" as per section 2(14). We reproduce below section 2(14) for your ready reference and record:
"capital asset" means-
(a) property of any kind held by an assessee, whether or not connected with his business or profession;Page 8 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025
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(b) any securities held by a Foreign Institutional Investor which has invested in such securities in accordance with the regulations made under the Securities and Exchange Board of India Act, 1992 (15 of 1992), but does not include-
(i) any stock-in-trade other than the securities referred to in sub-clause (b), consumable stores or raw materials held for the purposes of his business or profession;
(ii) personal effects, that is to say, movable property (including wearing apparel and furniture) held for personal use by the assessee or any member of his family dependent on him, but excludes-
(a) jewellery;
(b) archaeological collections;
(c) drawings;
(d) paintings;
(e) sculptures; or
(f) any work of art.
Explanation 1. For the purposes of this sub-clause, "jewellery" includes-
(a) ornaments made of gold, silver, platinum or any other precious metal or any alloy containing one or more of such precious metals, whether or not containing any precious or semi-precious stone, and whether or not worked or sewn into any wearing apparel;
(b) precious or semi-precious stones, whether or not set in any furniture, utensil or other article or worked or sewn into any wearing apparel.
Explanation 2.-For the purposes of this clause-
(a) the expression "Foreign Institutional Investor" shall have the meaning assigned to it in clause (a) of the Explanation to Page 9 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined section 115AD;
(b) the expression "securities" shall have the meaning assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(iii) agricultural land in India, not being land situate-
(a) in any area which is comprised within the jurisdiction of a municipality (whether known as a municipality, municipal corporation, notified area committee, town area committee, town committee, or by any other name) or a cantonment board and which has a population of not less than ten thousand; or
(b) in any area within the distance, measured aerially,- (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item
(a) and which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item
(a) and which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) and which has a population of more than ten lakh. Explanation. For the purposes of this sub-clause, "population" means the population according to the last preceding census of which the relevant figures have been published before the first day of the previous year; Thus, the land in question qualifies as rural agricultural land which is not a "Capital Asset" as per section 2(14). Capital Page 10 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined Gain Is liable to be Included in total Income only in respect of transfe of capital asset as per charging section 45 of the Act. This is evidenced by a certificate issued by Taluka Panchayat Office, Sanand under which the village Sanathal falls which is enclosed as Annexure-1."
7.3 Upon receiving the said explanation the assessment order under Section 143(3) of the Act dated 24.12.2018 was passed wherein it had been held as under :-
"ASSESSMENT ORDER In this case, the original return of income was filed by the assessee on 16/10/2016 through electronic media (e-file) vide acknowledgement No. 504254491161016 declaring total income at Rs. 1,20,450/- there after assessee had filed revised return of income on 31/03/2017 through electronic media (e- file) vide acknowledgement No. 746804681310317 declaring total income of Rs. 1,20,450/-. The same was processed u/s.
143(1) of the IT Act. The case was selected for Limited scrutiny in CASS with the following reason.
1. Whether sundry creditors are genuine.
2. Whether deduction from capital gains has been claimed correctly.
Notice u/s. 143(2) of the IT Act was sent through E- Proceeding Facility on ITBA on 19/09/2017. Thereafter, Notice u/s. 142(1) of the Act was also sent through E- Proceeding Facility on ITBA along with questionnaire on 02/11/2018 and 28/11/18. In response to the notices issued, the assessee filed reply through E-Proceeding Facility on ITBA.
2. The assessee having income from Business or Profession and income from other sources. The assessee had submitted the details called for and the same are perused. Page 11 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025
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3. After considering the information and details submitted through E-Proceeding Facility on ITBA filed by the assessee, the total income is computed as per return of income at Rs. 1,20,450/-.
Total income assessed. Rs. 1,20,450/-.
4. Assessed u/s. 143(3) of the IT Act, 1961. Calculate tax and interest. Give credit for the prepaid taxes, if any. Issue demand notice and challan accordingly."
8. Thus, it is seen that the ground on which the reopening for the Assessment Year 2016-17 is being presently sought was the very same ground for scrutiny for the year 2016-2017 which culminated in the Assessment Order dated 24.12.2018. In such circumstances, the Respondent No.1 could not have assumed jurisdiction to assess/reassess the income for the Assessment Year 2016-17, inasmuch as, the Respondent No.1 could not be said to possess any "reason to believe" that any income chargeable to tax for the Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Act. Thus, in our view the decisions of the Hon'ble Apex Court in the case of Rajesh Jhaveri Stock Brokers (Supra) and Raymond Woolen Mills (Supra) have no Page 12 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025 NEUTRAL CITATION C/SCA/4889/2022 JUDGMENT DATED: 25/04/2025 undefined application whatsoever to the facts of the present case. On the contrary, the decision of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd. reported in 320 ITR 561 applies squarely to the facts of the present case as we are of the opinion that all the necessary information and details in respect of the property in question which form the subject matter of the present controversy in the reassessment proceedings were very much present before the Assessing Officer who had framed the original Assessment Order dated 24.12.2018 after a thorough scrutiny. Hence, the present proceedings have arisen wholly and solely on account of a mere change of opinion which has been deprecated in the case of Kelvinator (Supra). Accordingly, the present petition succeeds and the impugned notice dated 31.03.2021 under Section 148 of the Act is hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to costs.
(BHARGAV D. KARIA, J) (D.N.RAY,J) BINA SHAH Page 13 of 13 Uploaded by BINA SHAH(HC00353) on Thu May 22 2025 Downloaded on : Fri May 23 22:54:32 IST 2025