Gagan Omprakash Navani vs Income Tax Officer, ...
2022 Latest Caselaw 2529 Bom

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                IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                    ORDINARY ORIGINAL CIVIL JURISDICTION
                      WRIT PETITION (L) NO.1601 OF 2022
    Gagan Omprakash Navani                        )
    Residing at 12, 1st Floor,                    )
    Devi Bhawan, 38, Napean Sea Road,             )
    Mumbai - 400 006                              )
    PA No.AAJPN8047R                              ) ....Petitioner
                    V/s.
 Income Tax Officer                            )
 International Tax Ward - 3(3)(1),             )
           th
 1631, 16 Floor, Air India Building,           )
 Nariman Point, Mumbai - 400 021               ) ....Respondents
                               ----
Ms. Akshita Bhandari a/w. Mr. Nishit Gandhi for petitioner.
Mr. P.A. Narayanan for respondent.
                               ----
                                      CORAM : K.R. SHRIRAM &
                                                 N.R. BORKAR, JJ.

DATED : 15th MARCH 2022

ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)

1 Petitioner is an individual assessed to tax. For the Assessment

Year 2016-2017 petitioner, on 10th April 2017, filed a return of income

declaring an income of Rs.2,57,34,990/-. In the return of income, petitioner

has offered income under the heads "income from house property", "income

from capital gains" and "income from other sources" after claiming an

exemption under Section 54 of the Income Tax Act, 1961 (the Act)

amounting to Rs.51,57,29,543/-. The return was selected for scrutiny

assessment under CASS. The reason for selection of the said return for

scrutiny assessment was to examine the claim of exemption from long term

capital gains. Petitioner received a notice dated 1 st September 2018 under Gauri Gaekwad 2/8 904.WPL-1601-2022.doc

Section 142(1) of the Act seeking statement of capital gains and exemption

claimed alongwith evidences supporting the claim of exemption. Petitioner

replied and uploaded on 10th September 2018 their forwarding letter, ITR

statements and accounts, sale agreements and details regarding one Rishi

Gagan Trust. Physical copies were submitted on 11 th September 2018.

Thereafter, on 27th November 2018, petitioner once again submitted various

documents including capital gain and loss computation statement and also

explained how petitioner was entitled to the allowance under Section 54 of

the Act. Once again various documents were submitted. On or about

5th December 2018, respondent once again issued a notice under Section

142(1) of the Act calling upon petitioner for list of immovable properties

owned by petitioner. This was provided on 7th December 2018.

2 Thereafter, an assessment order dated 15 th December 2018

under Section 143(3) of the Act was passed accepting the return of income

of petitioner at Rs.2,57,34,490/-. In the assessment order, the Assessing

Officer has stated "the issue has been identified for complete scrutiny under

CASS for examination are whether the assessee has claimed the benefit of

substantial deduction/exemption u/s. 11(1A), other than Section 11(1A),

54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GA, 54GB, 115F etc ". It is also

mentioned in the assessment order that during the year under consideration

the assessee has earned income under the head income from house property,

income from capital gains and income from other sources and in response to

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the notices issued, the assessee has furnished relevant details online. The

details are verified and placed on record.

3 Thereafter, petitioner received a notice dated 11 th March 2021

for Assessment Year 2016-2017 under Section 148 of the Act stating that

Revenue has reasons to believe that petitioner's income chargeable to tax for

Assessment Year 2016-2017 has escaped assessment within the meaning of

Section 147 of the Act. Petitioner was provided the reasons for reopening by

a communication dated 29th June 2021. As it appears from the reasons for

reopening, petitioner had sold a residential property at Gulistan, Napeansea

Road and purchased a residential property being "Villa Orb" for a

consideration of Rs.56,18,30,000/-. Against the long term capital gains of

Rs.53,25,95,542/-, petitioner claimed deduction under Section 54 of the

Act. But from the documents relating to the acquisition of new property

being "Villa Orb", it related to six residential flats on the 9 th Floor

admeasuring 7,500 sq. ft. According to the Assessing Officer, since the

residential property at 9th Floor, Villa Orb consisted of six residential flats

and under Section 54 of the Act, if the assessee purchases more than one

residential house from the capital gain accrued from sale of original asset,

the exemption under Section 54 of the Act is not allowable.

4 Since the reopening proposed is within four years after expiry

of the relevant assessment year, what is required to be seen is whether there

is any tangible material made out for reopening the assessment. Since the Gauri Gaekwad 4/8 904.WPL-1601-2022.doc

assessment under Section 143(3) of the Act has been completed, the

assessment cannot be permitted to be reopened if it is based on change of

opinion.

5 As noted earlier, a specific query during the assessment

proceedings was raised calling upon petitioner to provide statement of

capital gains and exemptions claimed alongwith evidences supporting the

claim of exemption by a notice dated 1 st September 2018. Petitioner

provided all the details including copy of the sale agreement by a letter

dated 10th September 2018. Subsequently, petitioner provided further

details by a letter dated 24 th November 2018. Thereafter, respondent issued

a fresh notice under Section 142(1) of the Act dated 5 th December 2018

seeking further details on the immovable properties owned by petitioner.

These details were also provided.

6 In the assessment order, accepting petitioner's explanations and

return of income, it is mentioned specifically that benefit of deductions/

exemption under Section 54 of the Act was one of the reason for scrutiny

under CASS and petitioner was issued notices and petitioner also provided

all details online. Therefore, all the material relied upon by the new

Assessing Officer proposing the reopening were available with the Assessing

Officer when the assessment order dated 15th December 2018 was passed.

7 Ms. Bhandari also relied upon various judgments of this Court

to submit that the reason to believe that income chargeable to tax had Gauri Gaekwad 5/8 904.WPL-1601-2022.doc

escaped assessment within four years from the end of the relevant

assessment year has to arise not on account of mere change of opinion but

on the basis of some tangible material. Ms. Bhandari submitted - can

respondent take recourse to the provision of Section 147 of the Act for his

own failure to apply his mind to the material which was relevant and was

available on record and this Court in Asian Paints Limited V/s. Deputy

Commissioner of Income Tax1 has answered in negative. Ms. Bhandari,

relying upon Purity Techtextile Private Limited V/s. The Assistant

Commissioner of Income Tax2, also submitted that the statement contained

in the reasons, on the basis of which the assessment is sought to be

reopened, is belied by the record which shows that the Revenue was in

possession of the material produced by the assessee during the course of the

assessment proceedings and, therefore, the Assessing Officer had no

additional material at all to form a belief that income had escaped

assessment.

8 Mr. Narayanan argued that there is no specific discussion in the

assessment order about the deduction claimed under Section 54 of the Act

and the query raised and answers given. We cannot accept

Mr. Narayanan's objections because this Court has, time and again, held that

once a query is raised during the assessment proceedings and the assessee

has replied to it, it follows that the query raised was a subject of

1. (2009) 308 ITR 195 (Bombay)

2. (2010) 325 ITR 459

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consideration of the Assessing Officer while completing the assessment. It is

not necessary that an assessment order should contain reference and/or

discussion to disclose its satisfaction in respect of the query raised [ Aroni

Commercials Ltd. V/s. Deputy Commissioner of Income Tax 2 (1)3].

9 There can be no doubt in the facts of the present case that the

issue of deduction under Section 54 of the Act was a subject matter of

consideration by the Assessing Officer during the assessment proceedings

leading to passing of the assessment order dated 15 th December 2018. It

would, therefore, follow that the reopening of the assessment by impugned

notice dated 11th March 2021 is merely on the basis of change of opinion of

the Assessing Officer from that held earlier during the course of assessment

proceedings. This change of opinion does not constitute justification and/or

reason to believe that income chargeable to tax has escaped assessment.

10 A point came to light as pointed out by Mr. Narayanan that in

the reasons for reopening, there is reference to six residential flats being

purchased to claim capital gains. Whereas, there is no such discussion

earlier. In our view, this also does not help the Revenue because the same

documents, on which this officer has relied upon, were subject matter of

consideration during the assessment proceedings.

11 First of all, no reply to this petition has also been filed though

the petition was served long ago and even Vakalatnama has been filed on or

3. (2014) 44 taxmann.com 304 (Bombay)

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about 11th February 2022. Moreover, in an undated objections to reopening,

petitioner has expressly provided that the flat, when purchased by the

assessee in auction under Securitisation and Reconstruction of Financial

Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), was

one flat comprising of an area of approximately 7500 sq. ft. alongwith four

car parking spaces. Petitioner has also provided all evidences to justify that

when petitioner purchased the flat, it was one residential unit/flat

comprising of around 7500 sq. ft. having common kitchen and common

areas. Documentary evidence to that effect was also provided. These facts

have not been denied or disputed by the Assessing Officer in the order dated

8th December 2021 which is also impugned in the petition alongwith notice

issued under Section 148 of the Act.

12 In the objections, petitioner has also relied upon certain

judgments where it says that " Section 54/54F only requires the assessee to

acquire a residential house and so long as the assessee acquires a building,

which may be constructed, for the sake of convenience, in such a manner as

to consist of several units which can, if the need arises, be conveniently and

independently used as an independent residence, the requirement of the

Section should be taken to have been satisfied" . Even during the course of

submissions today, Mr. Narayanan did not disagree with the proposition

submitted by petitioner.

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13 In the circumstances, petition is allowed in terms of prayer

clause - (a), which reads as under :

(a) That this Hon'ble Court may be pleased to issue under Article 226 of the Constitution of India an appropriate direction, order or a writ, including a writ in the nature of Certiorari, calling for the records of the case and, after satisfying itself as to the legality thereof, quash and set aside the Notice u/s 148 dated 11.03.2021, Ex. "I" herein and the order disposing objections dated 08.12.2021, Ex. "M" herein passed by the respondent.

14                Petition accordingly disposed.




(N.R. BORKAR, J.)                                              (K.R. SHRIRAM, J.)




Gauri Gaekwad