Madras High Court
S.Ganesan vs The Asst. Commissioner Of Income ... on 19 August, 2021
W.A.No.1777 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 19.08.2021
CORAM :
THE HON'BLE MR. JUSTICE T.S. SIVAGNANAM
AND
THE HON'BLE MR. JUSTICE SATHI KUMAR SUKUMARA KURUP
W.A.No.1777 of 2021
and
C.M.P.No.11108 of 2021
S.Ganesan ... Appellant
Vs.
The Asst. Commissioner of Income Tax,
Non-Corporate Circle, 15(1)
121, Nungambakkam High Road,
Chennai – 600 034. ... Respondent
Prayer : Writ Appeal filed under Clause 15 of the Letters Patent to set aside
the order dated 23.04.2021 made in W.P.No.34075 of 2017.
For Appellant : Mr.R.Sivaraman
For Respondent : Mr.A.N.R.Jayaprathap
Standing Counsel
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W.A.No.1777 of 2021
JUDGMENT
(Judgment was delivered by T.S. SIVAGNANAM, J.)
This Writ Appeal filed by the writ petitioner is directed against the
order, dated 23.04.2021, in W.P.No.34075 of 2017.
2.The writ petition was filed challenging the proceedings of the
respondent/Assessing Officer, dated 31.03.2017, initiated under Section 148
of the Income Tax Act, 1961 (“the Act” for brevity) and to quash the
consequential proceedings, dated 22.12.2017, as being without jurisdiction
and illegal.
3.The assessee is an individual and for the Assessment Year under
consideration, AY 2010-11, he had filed return of income on 30.07.2010
declaring a total income of Rs.4,46,870/-. The return was processed under
Section 143(1) of the Act on 08.04.2011 and subsequently, the assessment
was taken up for scrutiny and notice under Section 143(2) of the Act was
issued and the Assessing Officer called for details. The details were
furnished by the assessee and one of the details called for was in respect of
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W.A.No.1777 of 2021
the property which was sold by the assessee during the Financial Year 2009-
10 for a consideration of Rs.5,67,30,000/-. The Assessing Officer questioned
the assessee by stating that the capital gains was not offered to tax by the
assessee in the returns for the AY 2010-11. The assessee explained by
stating that the property was transferred and possession was handed over to
M/s.Vinayaga Land Developers, a partnership firm, for a sale consideration
of Rs.1,07,18,000/- through a sale agreement dated 15.12.2003 and a
registered Power of Attorney executed in favour of the partner of the firm to
sell the property. A copy of the sale agreement and the Power of Attorney
were placed before the Assessing Officer for consideration. The Assessing
Officer issued summons to the partner of the partnership firm, in whose
favour the registered Power of Attorney was executed. The assessee was also
summoned and after recording the statements given by all the parties, the
Assessing Officer was satisfied and accordingly, completed the assessment
under Section 143(3) of the Act, by order dated 12.03.2013.
4.This assessment was sought to be reopened by issuance of notice
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W.A.No.1777 of 2021
dated 31.03.2017. The assessee sought for reason for reopening, which was
furnished by the respondent along with letter dated 06.10.2017. On a
perusal of the reasons, the assessee came to know that the only reason for
reopening is the sale transaction that took place in the previous year, i.e.,
2009-10 relating to Assessment Year 2010-11, when the Power Agent has
executed the sale deed. Therefore, the Assessing Officer opined that he has
reasons to believe that the income chargeable to tax has escaped assessment.
The assessee submitted his reply, dated 21.10.2017, pointing out as to how
the Assessing Officer has sought to reopen the assessment after it was
completed under Section 143(3) of the Act and also having taken note of the
facts that the assessee had in his return of income filed for AY 2004-05 had
disclosed the transaction and the details of the long term capital gains were
furnished and intimation was issued under Section 143(1) for AY 2004-05
vide notice dated 01.07.2005, in response to which, the assessee had
submitted the proof of having deposited the capital gains as envisaged under
Sub-Section 2 of Section 54 of the Act in the Indian Bank and a letter given
by the Bank dated 07.08.2005 was also produced and subsequently,
rectification order was also passed on 18.08.2005. Further, in the return of
income filed for AY 2006-07 dated 31.10.2006, the assessee had disclosed
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W.A.No.1777 of 2021
the long term capital gain and had also paid taxes and the assessment was
accordingly completed under Section 143(3) of the Act by order dated
30.10.2008. Therefore, the assessee would submit that there was no fresh
tangible material for reopening the assessment and it was a clear case of
change of opinion. The objections raised by the assessee were disposed of
reiterating what had been stated in the reasons for reopening. It was the
argument of the learned counsel for the assessee that the Assessing Officer
did not form an opinion by himself that he had reason to believe that income
has escaped assessment to tax, rather he has verbatim copied the audit
objections raised by the Audit Wing, which came to the knowledge of the
appellant/assessee when he obtained information under the Right to
Information Act, which was furnished to the assessee much thereafter.
5.The learned Single Bench was of an opinion that the Income Tax
authorities are entitled to reopen the proceedings to examine the genuineness
and validity of the transactions and also whether the transactions are legal
transactions recognized under the provisions of the Act. Further, the learned
Single Bench was of the view that, Power of Attorney alone was executed by
the appellant/assessee in the year 2003 and admittedly, the Power Agent sold
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W.A.No.1777 of 2021
the property only during the Assessment Year under consideration and
therefore, the assessee should raise all grounds before the Assessing Officer
and avail the remedies under the provisions of the Act.
6.In our considered view, moot question which was required to be
decided in the writ petition was whether the reopening of the assessment was
valid and whether it is a case of change of opinion. For such an exercise, the
only issue to be considered was whether there was a transfer of the
immovable property during the previous year relevant to AY 2004-05 or did
the transfer take place at the behest of the appellant/assessee in the
Assessment Year 2010-11.
7.Therefore, to decide the said question, we are guided by the
definition of transfer as defined under Section 2(47) of the Act. If the
assessee had executed the agreement of sale on 15.12.2003 and executed the
registered General Power of Attorney on 19.12.2003 in favour of the partner
of the partnership firm, which was the purchaser in the sale agreement
irrevocably empowering the Power Agent to sell the property in whole or in
pieces, and also admitted having receiving the full sale consideration and put
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W.A.No.1777 of 2021
the purchaser in possession of the property in question, then all elements of
transfer as envisaged under Section 2(47) of the Act stood complied with.
Added to that, the assessee has filed his return of income for the Assessment
Year 2004-05 and has offered the sale consideration for capital gains and
deposits were made in the Bank Account. All these aspects were called for
by the Assessing Officer by issuing intimation and after considering the
documents produced by the assessee, summons were issued to the partner of
the firm, who had purchased the property, their Books of Accounts were
perused and the Assessing Officer having been fully satisfied that the transfer
has taken place in terms of Section 2(47) of the Act in the Assessment Year
2004-05, had passed the scrutiny Assessment Order under Section 143(3).
Admittedly, the Assessing Officer did not have any new or tangible material
to show that the assessee failed to fully and truly disclose all particulars and
the assessment warrants reopening. In our considered view, the assessee has
been put to sheer harassment on account of notice under Section 148 of the
Act, dated 31.03.2017. Had the Assessing Officer perused the letter of the
Assessing Officer dated 26.07.2005, wherein, the details were sought for
with regard to the deposit of capital gains, the information furnished by the
assessee through his Chartered Accountant on 08.08.2005, the certificate
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W.A.No.1777 of 2021
issued by the Indian Bank, North Usman Road Branch, Chennai, dated
07.08.2005, and the order of assessment under Section 143(3) dated
30.10.2008, the present reopening would not have been made and could not
have been made. Therefore, we are convinced that the reopening is a clear
case of change of opinion and therefore, not valid in law.
8.For all the above reasons, the Writ Appeal is allowed and the order
passed in the Writ Petition is set aside and consequently, the Writ Petition is
allowed and the proceedings which are impugned in the Writ Petition are
quashed. No costs. Consequently, connected miscellaneous petition is
closed.
(T.S.S., J.) (S.S.K., J.)
mkn 19.08.2021
Internet : Yes
Index : Yes / No
Speaking order / Nonspeaking order
To
The Assistant Commissioner of Income Tax,
Non-Corporate Circle, 15(1)
121, Nungambakkam High Road,
Chennai – 600 034.
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W.A.No.1777 of 2021
T.S. SIVAGNANAM, J.
and
SATHI KUMAR SUKUMARA KURUP, J.
mkn
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W.A.No.1777 of 2021
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