JUDGMENT
A.S. Supehia, J.- By way of present writ petition, the petitioner has assailed the Notice dated 28.03.2019 issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) for reopening the assessment for Assessment Year (A.Y) 2012-2013.
FACTS OF THE CASE
2. The petitioner was originally engaged in the business of manufacturing wire harnesses. The petitioner-company discontinued its business operations with effect from 02.02.2009 and, thereafter, ceased to be a going concern. Upon closure of its business, the petitioner decided to dispose of its assets. Accordingly, during the Assessment Year 2011-12, it entered into an agreement for sale of its land, building, plant and machinery, and furniture and fixtures for a total consideration of Rs.7.30 crores. Subsequently, during the Assessment Year 201213, the petitioner executed the sale deed in favour of the purchaser and transferred the aforesaid assets. The petitioner filed its original return of income for the Assessment Year 201213 on 29.11.2012 declaring a total income of Rs.5,99,67,930/-, wherein it disclosed capital gains of Rs.2,56,39,346/- arising from the aforesaid transaction. Thereafter, the case of the purchaser came to be examined by the stamp valuation authority, which enhanced the value of the land and building for the purpose of levy of stamp duty. Consequently, in view of the deeming fiction contained in Section 50C of the Act, the sale consideration was required to be substituted by the value adopted by the stamp valuation authority, resulting in an enhancement of the capital gains in the hands of the petitioner. Accordingly, the petitioner filed a revised return of income on 06.03.2014 declaring a total income of Rs.3,73,60,400/-.
2.1 The revised return was taken up for scrutiny and an assessment came to be framed under Section 143(3) of the Act vide order dated 08.01.2015, accepting the income as returned. It is pertinent to note that, during the course of the scrutiny assessment, the respondent issued a notice dated 08.08.2014 raising specific queries with regard to the computation of capital gains. The petitioner furnished a detailed reply, together with all relevant particulars and supporting documents, vide letters dated 24.12.2014 and 07.01.2015, and also explained the issue during the course of personal hearing. Thus, the computation of capital gains formed the subject matter of scrutiny and was duly examined by the Assessing Officer before framing the assessment under Section 143(3) of the Act.
2.2 Thereafter, the respondent issued the impugned notice dated 28.03.2019 under Section 148 of the Act seeking to reopen the assessment for the Assessment Year 2012-13. The reasons recorded for reopening the assessment were supplied to the petitioner on 22.05.2019. The petitioner, by its letter dated 25.07.2019, filed detailed objections challenging the assumption of jurisdiction as well as the proposed reassessment on facts and in law, and requested the respondent to drop the reassessment proceedings. However, by order dated 30.07.2019, the respondent rejected the objections in their entirety without dealing with or adjudicating upon the specific contentions raised by the petitioner.
SUBMISSIONS ON BEHALF OF PETITIONER
3. Learned advocate Mr. Kusal Fofaria has submitted that the respondent has primarily recorded only one reason for alleging that the income chargeable to tax has escaped assessment. It is submitted that the petitioner in its return of income claimed a set-off of the capital loss arising on sale of plant and machinery and furniture against the capital gains arising on sale of land, however, the respondent believed that the petitioner has not sold any plant and machinery and furniture as the said assets were not reflected in the balance sheet, hence, the set-off of loss arising on furniture and fixtures amounting to Rs. 83,68,557/-and the loss arising from sale of plant and machinery amounting to Rs.3,10,96,233/- is claimed against capital gain on sale of land was wrongly claimed.
3.1 It is submitted that the reopening of the assessment beyond period of four years is only permissible if the assessee i.e. the petitioner has failed to disclose fully and truly, all the material facts required for the assessment, which is not in the present case. It is therefore submitted that the reopening of the assessment is fully premised on change of opinion. It is submitted that during the original assessment proceedings specific query regarding computation of capital gains was raised by the Assessing Officer and also during the personal hearing, to which, the petitioner responded by his reply dated 24.12.2014 and 07.01.2015. Hence, it is urged that the impugned Notice may be quashed and set aside.
SUBMISSIONS ON BEHALF OF RESPONDENT
4. Per Contra, learned Senior Standing Counsel Mr. Aaditya Bhatt while referring to the contents of the affidavit-in-reply filed by the respondent has submitted that the reasons recorded clearly justify the reopening of the assessment. It is submitted that the Assessing Officer noticed that the transactions done by the petitioners were not exibited in profit and loss account and that even in cash flow statement, only the receipt of cash of Rs.7.30 crores is exhibted. It is submitted that assessee claimed to have sold the alleged sale of assets in the form of plant and machinery and after close scrutiny, it has been noticed by the Assessing Officer that the assessee had not sold the furniture, plant and machinery and had wrongly claimed the short term capital loss, due to sale of the same which led to adjustment of short term capital gain and long term capital gain against the loss in the year under consideration, and hence the Assessing Officer was of the opinion that the substantial amount of income of Rs.3,94,64,790/- has escaped assessment. It is thus urged that at this stage, the reassessment proceedings may not be scuttled as there is enough tangible material found against the petitioner-company for justifying the reopening of the assessment.
ANALYSIS & OPINION
5. We have heard the learned advocates appearing for the respective parties. From the documents on record we find that the reopening of the assessment vide Notice dated 28.03.2019 issued under Section 148 of the Act is nothing but a change of opinion on behalf of the Assessing Officer. It is not disputed that after the petitioner filed its return of income for A.Y 2012-13, the scrutiny assessment was undertaken with regard to claim of setoff of capital loss of Rs.3,74,85,957/- on sale of plant and machinery and furniture against the capital gain of Rs.4,37,31,514/- arising from the sale of land. The petitioner in its objections tendered vide letter dated 25.07.2019 clarified that in the scrutiny proceedings, the issue with regard to capital gain has already been justified by the petitioner and accepted by the Assessing Officer by passing the Assessment Order on 08.01.2015, under Section 143(3) of the Act. Upon a scrutiny of the returns which has been placed on record, we find that the petitioner was specifically called upon to explain the aspect of capital gains and from the balance sheet, it is noticed by us that in the balance sheet the petitioner had already clarified about the fixed assets held for sale along with the cash flow from investing activities. The petitioner has also furnished the computation of capital gain as per revised return of income and a copy of stamp duty and the order in respect of valuation of land and building and a copy of relevant Circular of GIDC prescribing the rates and a copy of the sale deed in relation to the sale of land and building plant and machinery were also enclosed.
6. The petitioner also disclosed the entire index of sale value along with long term gains and loss as well as short terms gains and loss. All these facets were considered by the Assessing Officer and ultimately the Assessment Order dated 08.01.2015 has been passed under Section 143(3) of the Act. Thus, we find that there is no new or fresh tangible material which has been unearthed by the Assessing Officer subsequent to passing of the Assessment Order and hence, as per the settled legal precedent the reopening of the assessment beyond the period of four years under Section 147 of the Act is permissible only if the escapement of income had occasioned due to failure on the part of the assessee to disclose fully and truly all material facts. Hence, in our considered opinion and on analysis of the documents on record and facts as well as the contentions assigned for the reason for reopening the assessment vide letter dated 22.05.2019, we find that reopening of the assessment is nothing but a mere change of opinion.
7. Hence, the writ petition succeeds. The impugned Notice dated 28.03.2019 is hereby quashed and set aside.
