Full Judgment Text
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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
st
Residing at 12, 1 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.
th
DATED : 15 MARCH 2022
ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)
1 Petitioner is an individual assessed to tax. For the Assessment
th
Year 2016-2017 petitioner, on 10 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
st
capital gains. Petitioner received a notice dated 1 September 2018 under
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Section 142(1) of the Act seeking statement of capital gains and exemption
claimed alongwith evidences supporting the claim of exemption. Petitioner
th
replied and uploaded on 10 September 2018 their forwarding letter, ITR
statements and accounts, sale agreements and details regarding one Rishi
th
Gagan Trust. Physical copies were submitted on 11 September 2018.
th
Thereafter, on 27 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
th
5 December 2018, respondent once again issued a notice under Section
142(1) of the Act calling upon petitioner for list of immovable properties
th
owned by petitioner. This was provided on 7 December 2018.
th
2 Thereafter, an assessment order dated 15 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.
th
3 Thereafter, petitioner received a notice dated 11 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
th
a communication dated 29 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
th
being “Villa Orb”, it related to six residential flats on the 9 Floor
admeasuring 7,500 sq. ft. According to the Assessing Officer, since the
th
residential property at 9 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
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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
st
claim of exemption by a notice dated 1 September 2018. Petitioner
provided all the details including copy of the sale agreement by a letter
th
dated 10 September 2018. Subsequently, petitioner provided further
th
details by a letter dated 24 November 2018. Thereafter, respondent issued
th
a fresh notice under Section 142(1) of the Act dated 5 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
th
Officer when the assessment order dated 15 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
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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
1
Commissioner of Income Tax has answered in negative. Ms. Bhandari,
relying upon Purity Techtextile Private Limited V/s. The Assistant
2
Commissioner of Income Tax , 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
3
Commercials Ltd. V/s. Deputy Commissioner of Income Tax 2 (1) ].
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
th
leading to passing of the assessment order dated 15 December 2018. It
would, therefore, follow that the reopening of the assessment by impugned
th
notice dated 11 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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th
about 11 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
th
8 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.)
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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
st
Residing at 12, 1 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.
th
DATED : 15 MARCH 2022
ORAL JUDGMENT : (PER K.R. SHRIRAM, J.)
1 Petitioner is an individual assessed to tax. For the Assessment
th
Year 2016-2017 petitioner, on 10 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
st
capital gains. Petitioner received a notice dated 1 September 2018 under
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Section 142(1) of the Act seeking statement of capital gains and exemption
claimed alongwith evidences supporting the claim of exemption. Petitioner
th
replied and uploaded on 10 September 2018 their forwarding letter, ITR
statements and accounts, sale agreements and details regarding one Rishi
th
Gagan Trust. Physical copies were submitted on 11 September 2018.
th
Thereafter, on 27 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
th
5 December 2018, respondent once again issued a notice under Section
142(1) of the Act calling upon petitioner for list of immovable properties
th
owned by petitioner. This was provided on 7 December 2018.
th
2 Thereafter, an assessment order dated 15 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.
th
3 Thereafter, petitioner received a notice dated 11 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
th
a communication dated 29 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
th
being “Villa Orb”, it related to six residential flats on the 9 Floor
admeasuring 7,500 sq. ft. According to the Assessing Officer, since the
th
residential property at 9 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
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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
st
claim of exemption by a notice dated 1 September 2018. Petitioner
provided all the details including copy of the sale agreement by a letter
th
dated 10 September 2018. Subsequently, petitioner provided further
th
details by a letter dated 24 November 2018. Thereafter, respondent issued
th
a fresh notice under Section 142(1) of the Act dated 5 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
th
Officer when the assessment order dated 15 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
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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
1
Commissioner of Income Tax has answered in negative. Ms. Bhandari,
relying upon Purity Techtextile Private Limited V/s. The Assistant
2
Commissioner of Income Tax , 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
3
Commercials Ltd. V/s. Deputy Commissioner of Income Tax 2 (1) ].
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
th
leading to passing of the assessment order dated 15 December 2018. It
would, therefore, follow that the reopening of the assessment by impugned
th
notice dated 11 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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th
about 11 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
th
8 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.)
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