Dinesh Singla vs Assistant Commissioner Of Income Tax ...
2024 Latest Caselaw 15896 P&H

Punjab-Haryana High Court

Dinesh Singla vs Assistant Commissioner Of Income Tax ... on 2 September, 2024

Author: Sanjeev Prakash Sharma

Bench: Sanjeev Prakash Sharma

                                 Neutral Citation No:=2024:PHHC:113336-DB

     CWP No. 19667 of 2021                                           -1-

      IN THE HIGH COURT OF PUNJAB AND HARYANA
                   AT CHANDIGARH

                                                Reserved on :      01.08.2024
                                                Date of Decision : 02.09.2024


                                              CWP No. 19667 of 2021 (O&M)

Dinesh Singla                                                  ...Petitioner
                                Versus
Assistant Commissioner of Income Tax and another               ...Respondents


CORAM: HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA
       HON'BLE MR. JUSTICE SANJAY VASHISTH


Present:    Ms. Radhika Suri, Senior Advocate assisted by
            Ms. Parnika Singla, Advocate, and
            Mr. Abhinav Narang, Advocate, for the petitioner.

            Mr. Saurabh Kapoor, Senior Standing Counsel
            for the respondents.


SANJEEV PRAKASH SHARMA, J.

1. The writ petition was originally filed by the petitioner seeking

quashing of notice dated 20.03.2020 issued under Section 148 of the Income

Tax Act, 1961 (hereinafter to be referred as "the Act"), draft assessment

order under Section 144 read with Section 147 of the Act dated 08.09.2021

and the order dated 22.09.2021 whereby the objections filed by the assessee

were rejected.

2. The writ petition came up for hearing on 29.09.2021 when the

respondents' counsel stated that th final assessment order has been pa passed ssed

whereafter this Court allowed the petitioner to amend his writ petition and

also challenge the final assessment order. However, when the case was taken

up in the Court, since since on that day the statement was found to be false as the

final order of assessment assessment had not been passed, an affidavit has also been

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filed seeking apology by the Revenue.

evenue. Be that as it may, we have heard the

case finally now.

3. Brief facts which required to be noticed for adjudication of this

case are as under:-

under:

The petitioner had purchased 92 kanals 2 marlas of agricultural land from

three brothers, namely, Manjit Singh, Karnail Singh and Jarnail Singh on

14.05.2012. He further transferred the same to DSS Mega City projects

company on 12.06.2012. As the land was agricultural land, it was not

eligible to tax as it was not a capital asset, therefore, no income was taxable

either in the hands of the seller or with the petitioner. The fact that the land

was agricultural was verified by the ITO Intelligence, Karnal in its

verification report dated 30.03.2015, which was forwarded to the Director of

Income Tax, Intelligence and Criminal Investigation. The petitioner's

assessment proceedings were completed and finalized for the year 2013 2013-14

under Section 143 (3) of the Act on March, 2016 and no additions were

made on account of any undisclosed income of capital gain. The petitioner

was served with a notice dated 20.03.2020 under Section 148 of the Act

wherein it was stated that there had been reasons to believe that the inc income ome

chargeable for A.Y. 2013-14 2013 had escaped assessment within the meaning of

Section 147 of the Act. The order was passed under Section 144 read with

Section 147 of the Act giving out the reasons of the sale of the land by the

petitioner as power of attorney attorn holder.

The land was sold by Manjit Singh to petitioner petitioner- Dinesh Singla allegedly by

a registered power of attorney and the other two brothers also sold their land

through him. On the basis of said reasons, it was stated that the income to

the extent of Rs. 19,34,10,000/- had escaped assessment. It was stated that

"the the source and genuineness of investment made as well as short term

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capital gain received received by the assesee remained unexplained. The assessee

failed to submit the supporting evidence as to whether this investment is

from disclosed sources of income"

income and accordingly draft assessment order

was prepared rounding off the total income of the petitioner as Rs.

24,69,09,300/ by adding the short term capital gain of Rs. 15,58,35,000/-- 24,69,09,300/-

and Rs.3,75,75,000/-

Rs.3,75,75,000/ as unexplained investment.

The petitioner submitted his objections and stated that he had already

submitted his complete bank statements statement with narrations and details of

property sold and purchased during the relevant financial year. It was stated

that he was engaged in the business of sale and purchase of propert property and

submitted that merely because of change of opinion fresh notice could not

have been issued. It was also stated that the amount was part of the financial

statement which was part of the A.O's record and there was no fresh

tangible material. The petitioner thereafter preferred the writ petition

assailing the said proceedings.

proceedings It has been submitted that the land did not fall

within the municipal limits of Panchkula and was 15 kms far from

Panchkula and 20 kms far from municipal limits of Naraingarh, therefore,

the agricultural land was not a capital asset within the meaning of Sec Section tion

2(14)(iii)(b) of the Act and no capital gain would arise on the sale of the

agricultural land.

4. Learned counsel for the petitioner has further challenged the

final assessment order, which was allowed to be challenged by this Court by

amending ing the writ petition. It was submitted that there was no reason to

believe to initiate proceedings under Section 148 of the Act and there was no

document which had come on record as all the bank statements and material

was already filed at the time of final assessment done under Section 143 (3)

of the Act.

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5. It was further submitted that the additions proposed in the draft

assessment ssment order dated 08.09.2021 08.09.2021 related to capital gains and unexplained

investment as the source of the same was doubted. However, after furnishing

of the reply, the respondents proceeded to pass the order dated 29.09.2021

wherein the assessing officer changed changed the stand completely and contrary to

the reasons recorded earlier and instead of treating the transfer of land under

head capital gains, gains treated the entire consideration received as an adventure

in the nature of trade.

trade It has been argued that neither iin n the reasons recorded

nor in the final order of assessment any material was referred indicating the

purchase and sale of land as a commercial venture by the assessee. It is

submitted that the final assessment order passed by the assessing officer was

not based on the draft assessment order and the reasons to believe mentioned

therein for initiating proceedings under Section 148 of the Act.

6. Learned counsel for the petitioner has relied on judgment of

Supreme Court in The Income-Tax Officer, r, I Ward, ard, District VI, Calcutta

and others vs Lakhmani Mewal Das (1976) 3 SCC 757, Delhi High Court

in Emirates Shipping Line, FZE vs Assistant Director of Income-Tax Tax

(2012) 349 ITR 493 and Vanita Sanjeev Anand vs Income Tax Officer

(2020) 422 ITR 1, to submit that the reasons to believe have to be based on

any new material which may be unearthed after the final assessment has

been made and cannot be on the basis of the documents which have already

been considered and examined earlier.

earlie

7. Learned counsel for the petitioner has also relied on a recent

judgment of Delhi High Court in Banyan Real Estate Fund Mauritius vs

Assistant Commissioner of Income Tax Circle International Tax 112 and

another 2024 SCC OnLine Del 5312 to submit that the assessing officer

could not have passed the order of assessment on additional reasons or those

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which may be supplied subsequently.

subsequently. It is her submission that the

assessement order issued by the respondents is based on reasons for which

no show cause caus notice was given.

8. Written statement on behalf of the respondents through

Assistant Commissioner of Income Tax, Circle, Panchkula has been filed filed.. It

is objected that the petition would not lie as the final assessment order has

been passed against which appeal before the Commissioner of Income Tax

(Appeals) lies. The respondents have further stated that the order impugned

dated 29.09.2021 was uploaded on the he portal at 04.39 p.m. and demand

notice issued at 04.24 p.m. wherein it is stated that the time of generation of

assessment order was 15:37:03 and notice of demand is 15:38:06. The same

are auto selected for generating in one go only. As a defined sequence, ce, the

assessment order generates first and immediately in succession, the demand

notice and computation sheet is generated.

d. No fault can be found with the

procedure.

9. Learned counsel for the revenue further submits that at this

stage the petitioner cannot be allowed to raise the grievance that he was not

given any opportunity and have tabulated the dates from 20.03.2020 when

the initial notice under Section 148 of the Act was issued to the date of

passing of the order dated 29.09.2021 to point out th that at several opportunities

were given to the petitioner to submit his reply and put up his case but he did

not avail the same at his own peril for which the action of the revenue cannot

be said to be violative of principles of natural justice justice.. It is further stated that

the petitioner sold the land measuring 92 kanals 2 marlas to M/s DSS Mega

City Projects Private Limited on 12.06.2012 whi which he had purchased the

land from Manjit Singh, Jarnail Singh and Karnail Singh on 14.05.2012. But

he failed d to substantiate the source of investment and failed to fully disclose

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all material facts necessary for assessment and, therefore, the assessing

officer found the belief that the income chargeable to tax escaped assessment

and re-opened opened the assessment under under Section 147 of the Act after seeking

necessary satisfaction of the Principal Commissioner of Income Tax,

Panchkula.

10. It was also stated that the order passed by the assessing officer

was appealable, and therefore, the writ petition should not be entertained.

The reliance placed on verification report of the ITO Intelligence dated

30.03.2015 was misconceived.

misconceived As the petitioner ioner was engaged in business of

trading of land, land, the amount was rightly added aand taxed as business incomee

and the benefit under Section 10(37) and Section 54B of the Act was not

available to the petitioner. It is stated that the petitioner though objecte objected d to

the draft assessment order but did not provide any documentary evidence to

substantiate his claim, and therefore, the objection was rejected. It is stated

that the assessee has worked as an agent/ middle man and the earning was,

therefore, to be treated as business income.

11. Learned counsel for the revenue has relied on the judgment of

Supreme Court in Raymond Woolen Mills Limited vs Income Tax Officer

and others (1999) 236 ITR 34, 34 wherein it was held as under:

under:-

"In In determining whether commencement of reassessment proceedings under section 147 is valid, the court has only to see whether there is prima facie some material on the basis of which revenue could reopen the case, the suffi sufficiencyy or correctness of the material is not a thing to be considered at the stage of notice."

12. Learned counsel for the revenue also relied on judgment of

Supreme Court in Commissioner of Income Tax and others vs Chhabil

Dass Agarwal (2013) 357 ITR 357 in support of his submission that the

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High Court under Article 226 of the Constitution ought not to entertain the

petition when remedy of appeal lies to the CIT (Appeals) under the statute.

13. We have carefully considered the submissi submissions ons and the

judgments cited at bar ar as well as the law as exists today with regard to the

issues which have been raised hereinabove.

14. Before we go into the merits of the case, it would be apposite to

quote Section 2(14)(iii)(a) and (b) of the Act, which is reproduced as under:

under:-

Section 2(14)(iii)(a) and (b) of the Income Tax Act, 1961 1961- Definitions.

2. In this Act, unless the context otherwise requires.

requires.-

              xxx                                xxx           xxx
        (14) "capital asset" means--
              xxx                                xxx           xxx

(iii) agricultural land in India, not being land situate 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 ny 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, 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 lation of more than one lakh but not exceeding ten lakh; or

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(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 sub-clause, 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;"

15. The first question which is required to be examine examined d is with

regard to the alternative remedy.

remedy. It is true that in the ordinary course, this

Court should refrain from entertaining a writ petition where there is a

statutory alternative remedy of appeal provided.

16. In Calcutta Discount Company Limited vs Income Tax

Officer, Companies District I, Calcutta and another 1961 961 (41) ITR 191,

the Larger Bench of the Supreme Court by 3:2 ratio held that a writ petition

against reassessment and reopening would be maintainable even if there is a

provision available for filing an appeal. The said view expressed in Calcutta

Discount Company (supra) was sought to be distinguished by the Supreme

Court in Commissioner of Income Tax and others vs Chhabil Dass

Agarwal (2013) 357 ITR 357. However, we find that the Supreme ccourt ourt

reiterated the law as laid down in Calcutta Discount Company (supra) and

Jeans Knit Private Limited vs Deputy Commissioner of Income Tax

Bangalore and others (2018) 12 SCC 36.

17. We are conscious that this Court in CWP No. 4583 of 2024 -

Mahesh Chander Sharma vs National Faceless Assessment Centre and

others decided on 28.02.2024 had dismissed the writ petition on the ground

that alternative remedy exists.

exist . In the said case we relied on judgments

passed by the Supreme Court in The State of Maharas Maharashtra htra and others vs

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Greatship (India) Limited 2022 (13) Scale 770 and The State of Madhya

Pradesh and another vs M/s Commercial Engineers and Body Building

Company Limited 2022 (14) Scale 920. However, we find that the Supreme

Court Larger Bench in Calcuttaa Discount Company (supra) and a

subsequent judgment ju in Red Chilli International Sales vs Income Tax

Officer 2023 (452) ITR 222, 222, the Supreme Court after having considered

took a different view. While the case of Mahesh Chander Sharma (supra)

was at the initial stage, whereas in the present case the pleadings are

complete and the case is pending since long before this Court, therefore, the

discretion is exercised in favour of the assessee and the case is heard on

merits. There is no bar to hear a writ petition in relation to challenge to

proceedings initiated under Section 148 of the Act.

18. In Red Chilli International Sales (supra), the Supreme Court

has held as under:-

under:

"We are with the petitioner that the impugned judgment rejecting the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court on the jurisdiction of High Court, as writ petitions have been entertained to be examined whether the jurisdiction preconditions for issue issue of notice under Section 148 of the Income Tax Act, 1961 is satisfied. The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in depth consid consideration eration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue w would ould be examined in depth by the High Court if and when it arise for consideration. We do deem it open to examine this issue in the present case after having examined the notice under Section 148A (b)

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including the annexure thereto, the reply filed by the petitioner and the order under Section 148 (d) of the Income Tах Act 1961."

19. The petitioner in the present petition challenges the proceedings

initiated against him by reopening the final assessment invoking powers

under sections 147 and 148 of the Act.

Act. The question would arise whether

this court should entertain the writ petition. Reassessment and reopening of

assessment are two issues which are different from regular assessment

conducted under Section 143 of the Act. Regular appeal lies against regul regular ar

assessment before the CIT (Appeals).

ppeals). It is true that an appeal would lie

against the final order passed under Section 147 of the Act. However, the

Supreme Court has been considering and examining that the case of

reassessment and reopening is different dif from regular assessment and has

expressly time and again entertained writ petitions under Article 226 of the

Constitution of India wherein the challenge is made to notice under Section

148A or 148B of the Act or thereafter for reassessment.

20. In view off above, we need not further delve into the question of

alternative remedy of appeal and examine the case on merits.

21. In the present case, we find that the petitioner had initially

challenged the notice issued for re-opening re opening of assessment but before the he case

could be taken up for arguments, the respondents stated before the Court that

the final order of assessment has been passed. The said statement wass found

to be incorrect. Thereafter assessment order was passed in the evening and

uploaded on the portal on 29.09.2021.

Upon finding that the Court was wrongly informed informed,, the High

Court allowed the petitioner to challenge the said assessment order in the

present writ petition.

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22. We find that the assessment proceedings under Section ction 143(3)

of the Act for the assessment year 2013-14 2013 were concluded in March, 2016..

With regard to the agricultural income, the petitioner had placed all

information in his books of accounts and the ITO, Karnal had submitted his

verification report dated 13.03.2015 with regard to the purchase and sale of

the agricultural land. The same was then forwarded to the Director of

Income Tax on 30.03.2015 itself.. Thus, when the final assessment

proceedings were completed in March, 2016, details relating to tthe he

agricultural land and verification report were available on record. No

additions were made on account of purchase and sale of the land and no

undisclosed income or capital gain was added and the returns were finally

accepted.

23. The notice under Section 148 of the Act was issued to the

petitioner on 20.03.2020 and the subsequent order under Section 144 read

with Section 147 of the Act for the assessment year 2013 2013-14 reflects that the

assessing officer has made additions of Rs. 19,34,10,000/ and held that the

assessee has failed to furnish the facts regarding the source of investment as

well as any other income relating to it and the income to the extent of Rs.

19,34,10,000/ has escaped assessment in the case of assessment year 20 19,34,10,000/- 2013--

14.. The order further treats the amount as a short term capital gain for sum

of Rs.15,58,35,000/ 15,58,35,000/- and unexplained investment amounting to Rs.

3,75,75,000/--.. However, the final assessment order under Section 143(3)

read with Section 147 of the Act holds the entire income of Rs.

19,34,10,000/ as adventure in the nature of business. 19,34,10,000/-

24. As per the written submissions and arguments raised before the

Court the petitioner has made two fold arguments:

arguments:-

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Firstly, there was no reason to believe that there is a case of

escape assessment nor there was any new material available

with the ITO to reach to a conclusion that the earlier assessment

required to be re-assessed; and

Secondly, that while notice was issued to the petitioner on

20.03.2020 under Section 148 of the Act alleging that the

agricultural land had been purchased without showing the

source of investment, and therefore, the income to the extent of

Rs.19,34,10,000/- had escaped assessment; an amount of Rs.

15,58,35,000/- was liable to be treated aass a short term capital

gain; and Rs. 3,75,75,000/- was to be treated as unexplained

source of investment; at the time of final assessment done under

Section 147 read with Section 143(3) of the Act, the

respondents have held the amount of Rs.19,34,10,000/ Rs.19,34,10,000/- as

unexplained income under the heading of "adventure in the

nature of the business".

It is his submission that the notice under Section 148 of the Act

and the final order passed, are totally on different presumption presumptions and the

orders of reassessment, therefore, therefore, are vitiated.

25. On the other hand, learned counsel for the respondents has

submitted that at the time of reassessment, the assessing officer cannot be

said to only limit himself to the contents of the show cause notice issued for

reassessment. The entire reassessment can be done and the scope is large for

him. He will look into the different aspects which are brought to his notice

at the time of passing of order of reassessment under Section 143 (3) read

with Section 147 of the Act. The tentative view taken at the time of initial

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stage of draft assessment under Section 144 of the Act cannot limit his

powers. It is his further submission that while passing the order dated

29.09.2021, the A.O. has noticed and recorded the fact that the land was

agricultural land, however, it proceeded to hold that the assessee has not

conducted any agricultural activities on the said land and had not produced

any evidence in support of his any agricultural activit activity,, he could not claim

any income chargeable under the capital gain in terms of Section 10(37) and

Section 54 of the Act.

Act Thereafter, the A.O. has proceeded to hold the

petitioner, who had been given power of attorney by the three owners of the

land, namely, Manjit Singh, Jarinal Singh and Karnail Singh that the he land

was actually purchased from them and the petitioner was merely a mediator

and he had earned income as nature of business and the same would,

therefore, fall within the meaning of undisclosed income from business. He,

therefore, has proceeded to examine examine the case in terms of Section 50C of the

Act as inserted by the Finance Act, 2002 with effect from 01.04.2003

relating to transfer by an assessee of capital asset being land or building or

both.

The A.O. has also proceeded to hold adventure in nature of

business as the total income under the said heading under Section 56(2)(vii)

and Section 50C of the Act.

26. Learned counsel for the respondents relies on judgment of

Supreme Court in Phool Chand Bajrang Lal vs ITO (1993) 4 SCC 77 as

well as various arious judgments cited therein.

27. We have carefully considered the submissions as mentioned

above and the facts which have been placed on record.

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28. The assessment year is 2013-14.

14. In relation to assessment year

2013-14, 14, we find that the final assessment assessment orders were passed in March,

2016 by the A.O. Before he passed the said order, he had got conducted the

verification relating to the transactions done by the assessee of the

agricultural land for which he invested Rs. 3,75,75,000/ 3,75,75,000/- and later on sold

the same to the company M/s DSS Mega City Projects. The land was

situated beyond the municipal limits. The ITO (Intelligence), Karnal

submitted his verification report to the said effect on 30.03.2015. At the time

of final assessment done in March, 2016, the the A.O. did not include the said

income as part of the business income nor he included it as agricultural

income which falls f beyond the municipal limits. Thus, it would not come

within in the ambit of capital asset in terms of Section 2(14)(iii)(a) and (b) of

the Act (supra), and would,, therefore not liable to capital gain within the

meaning of Income Tax Act. We are not satisfied with the submission of the

Revenue that they have no information about the said transaction at the time

of their first final assessment assessment conducted in March, 2016. It appears that it is

a case of change of opinion which cannot be allowed to be a reason for

reopening of the case of reassessment.

29. In CIT vs Kelvinator of India Limited (2010) 2 SCC 723, a

three Judges Bench of the Apex Court held as under:

under:-

7. One must treat the concept of "change of opinion" as an in-built built test to check abuse of power by the assessing officer.

Hence, after 1-4-1989, 1989, the assessing officer has power to reopen, provided there is "tangible material" to com comee to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted d hereinabove. Under the Direct Tax Law Lawss

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(Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer."

30. We respectfully follow and hold the action to be arbitrary

exercise of power by the assessing officer.

offi

No document has been produced by the respondents to show

that they had any new information or documentary evidence for reopening of

the case while the power is available with them. The same has to be

exercised carefully and sanctity of assessment assessments already done should be

maintained. Merely because a new assessing officer may not be happy with

the manner in which assessment was done earlier, cannot be a reason to

review assessment. The power available, as noticed above, is of

reassessment and not of review of earlier assessment.

31. We also noticed that the petitioner had challenged the order and

notice dated 20.03.2020 as well as show cause notice dated 23.09.2021

along with the draft assessment order before this Court Court. When the he case came

up before the Court, it it was informed that the Revenue has passed the final

assessment order which actually had not been passed. By that time when the

case was taken up, the apology was accepted by this Court of giving a wrong

statement in the Court, however, the petitioner petitioner was allowed to challenge the

final assessment order dated 29.09.2021.

32. From the perusal of the order passed on 29.09.2021, we find

that the assessing officer has now completely changed his stand from what

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he had taken while issuing the draft assessment order.. There is no show

cause notice issued to the petitioner alleging that the income of

Rs.19,34,100,00/ was acquired as 'adventure in the nature of business'. Rs.19,34,100,00/-

From the show cause notice, we find that the same was categorized as

escape in assessment sessment on account of treating it as a short term capital gain for

a sum of Rs.15,58,35,000/-

Rs.15,58,35,000/ and unexplained source of investment Rs.

3,75,75,000/--. Such change of reasons for reassessment and treating the

income to be under the heading of 'adventure in the nature of business', is

clearly based on surmises of the assessing officer.

33. We have extensively quoted the submissions of the counsel for

the respondents, respondents who has proceeded to submit that there was no evidence

produced in support of any agricultural agricultural activit activity and would now,, therefore,

claim under the capital gain under Section 10(37) of Section 54 of the Act.

But ut the assessee, assessee as we find, had not claimed ed it as a capital gain, but has at

all timess asserted the same to be falling beyond the municipal limits and,

therefore, beyond the provisions of Section 2(14)(iii) of the Act. His

contention has been supported by the report of the ITO (Intelligence) (Intelligence).. The

A.O. does not refer either to the report of the ITO (Intelligence) nor to the

submissions of the assessee.

ssessee. We, thus, find it a case of colourable exercise of

power. When an authority is empowered to exercise and pass orders in terms

of the Act, it has to remain within the four corners of the manner in which

the said power is required to be exercised. O Once the basis for re-opening opening of

the case under Section 147 of the Act is of non non-disclosure disclosure of income under

the capital gain and non-disclosure non of sources of investment, the A.O. had no

authority available in law to pass order holding that income had escape escaped d

assessment, which was following as 'adventure in the nature of business'.

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34. In Banyan Real Estate Fund Mauritius (supra), Delhi High

Court, the assessee was assessed of income having escaped assessment,

however, so far as the show cause notice is conc concerned, erned, the same was issued

on the premise that the assessee had not filed his income tax return for the

year 2016-17.

17. Later on, while passing the order it proceeded to hold that

certain income has escaped assessment for the year 2014 2014-15 thereto, the

basis for issuing show cause notice was different from that of the final

assessment order and the same was accordingly quashed.

35. We find that the record was available at the time when the

assessment proceedings were completed in March, 2016 wi with th the A.O. and

the report of the ITO was obtained with regard to the nature of the land but

no additions were made at that level.

36. In the case of State of Uttar Pradesh and others vs Aryaverth

Chawal Udyog and others (2015) 17 SCC 324, a three Judges Bench of the

Supreme Court examined the issue and difference between the "change change of

opinion" and "reasons to believe"" while considering the provisions of the

Central Sales Tax Act, 1956 and held as under:

under:-

"19. Under Section 21(1) of the Act, the reassessment proceedings can only be initiated if the assessing authority has "reason to believe" that there is a case of escaped assessment and not otherwise. It is now trite law that whenever a statute provides for "reason "reason to believe", either the reasons should appear on the face of the notice or they must be available on the material which have been placed before him."

37. Wee find that the Income Tax Officer or the Assessing Officer

may re-open open any assessment already done by him if he finds that there has

been any relevant material which is disclosed subsequently relating to the

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said year or assessment and of such a nature which would reflect that such

non-disclosure disclosure has resulted in an under assessment, he can issue notice

under Section 148 of the Act and proceed accordingly. However, the ITO

cannot be allowed to merely reopen the assessment assessments already finalized based

on his opinion that the earlier assessment was wrongful or that he has a

reason to suspect that that the assessment was done wrongfully. Re-assessment, assessment,

therefore, has to be based on cogent material available before it it, which was

not available at that relevant time. The material on which the assessing

officer based its opinion, therefore, cannot be irre irrelevant, irrational or vague.

Merely on account of there being an error found based on a personal opinion

of the ITO in relation to the earlier assessment assessment, cannot be a reason to believe

for initiating reassessment (ref. Delhi Cloth and General Mills Co. Ltd. vs

State of Rajasthan (1980) 4 SCC CC 71) nor can the reason to believe for re re--

opening of assessment be based on an opinion that from the same perusal of

some material a case of escaped assessment exist exists (ref. Binani Industries

Limited vs CCT (2007) 15 SCC 435.

38. On merits of the case, we also find that the petitioner had

purchased agricultural land from three agriculturists, namely, Manjeet Singh,

Karnail Singh and Jarnail Singh for a sum of Rs. 3,75,75,000/-.. He had

disclosed in his earlier return of the amount having been obtained from

release of FDRs. Further selling ling of the agricultural land to M/s DSS

Megacity Projects Private Limited would not eve even come within the ambit of

capital asset and no capital gain was liable to be taxed. It is an admitted

position that the land was agricultural and beyond the municipal limits limits, and

therefore, would not come within the ambit of Section 2 (14)(iii) (a) of the

Act which required require conducting of agricultural activity and would be

agricultural land within the ambit of Section 2(14)(iii)(b) of the Act Act.

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39. In the present case, we are satisfied that there is no case of

escaped income also as the said aspect stood alr already eady noticed vide final

assessment order passed after conducting an enquiry by the A.O. at the

relevant time based on the report of the ITO (Intelligence), Karnal.

40. Thus, we are satisfied that the assessment proceedings as

undertaken in 2016 did not warrant warrant any interference or warrant any re re--

opening for fresh assessment. The entire proceedings initiated vide notice

dated 20.03.2020 are contrary to law and are found to be illegal.

Accordingly, the same shall not be sustainable in the eyes of law. The writ

petition is accordingly allowed. The notice dated 20.03.2020 20.03.2020,, orders dated

22.09.2021, dated 24.09.2021, dated 29.09.2021 and demand notice dated

29.09.2021 are quashed and set aside.

41. All pending applications shall stand disposed of.

42. No costs.

                                            (SANJEEV PRAKASH SHARMA)
                                                     JUDGE


02.09.2024                                       (SANJAY VASHISHT)
vs                                                    JUDGE


Whether speaking/reasoned                   Yes/No

Whether reportable                          Yes/No




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