The order of the Bench was delivered by
CHANDRA POOJARI (Accountant Member).-This appeal is filed by the assessee, aggrieved by the order of the learned Commissioner of Income- tax (Appeals)-13, Chennai dated March 2, 2016 pertaining to the assessment year 2006-07.
The first ground in this appeal is with regard to reopening of the assessment under section 147 of the Act.
The facts of the issue are that after the assessment proceedings under section 143(3) of the Act, the assessee had offered long-term capital gain and the sale consideration taken by the assessee is much less than the guideline value under section 50C of the Act and there is difference in sale consideration of car parking area, that is to say, the assessee has received sale consideration of Rs. 9,05,090 for four persons for sale of car parking area. The Assessing Officer has a reason to believe that as the same has been mentioned in the sale deed of the property, it is a part of sale consideration, thus, the income has escaped assessment and therefore the Assessing Officer issued notice under section 148 of the Act and reopened the assessment passed under section 143(3) of the Act. The assessee during the appeal proceedings has objected the reopening on the ground that the assessee has disclosed all the material facts relating to the capital gain like copy of the sale deed, copy of the joint venture agreement etc., and discussed with the said Assessing Officer. The inference drawn subsequently after the completion of the assessment is objected to as there is no further or new information or particulars are available on the file except those given at the time of assessment. Aggrieved with the above reasons and by the assessment order, the assessee carried the appeal before the learned Commissioner of Income-tax (Appeals).
3.1 Before the learned Commissioner of Income-tax (Appeals), the assessee has placed reliance on the judgment of the apex court in the case of err v. Kelvinator of India Ltd. reported at [2010] 320 ITR 561 (sq. The conclusion drawn by the hon'ble Supreme Court cited supra was that after April 1, 1989, the Assessing Officer has only power to reopen the assessment under section 147 provided that the Assessing Officer has reason to believe that income has escaped assessment and there is tangible material to come to the conclusion that there is escapement of income ; mere "change of opinion" cannot per se be reason to reopen.
3.2. The learned Commissioner of Income-tax (Appeals) observed that after the introduction of changes with effect from April 1, 1989, the scope of reassessment was widened vis-a-vis the position of law as it stood earlier. After the amendment, the main restriction put in the section is "reason to believe". The expression "reason to believe" refers to the belief which prompts the Assessing Officer to apply section 147 to a particular case; that it will depend on the facts of each case; that the belief must be of an honest and reasonable person, based on reasonable grounds ; that the Assessing Officer is required to act, nor on mere suspicion, but on direct or circumstantial evidence, that the expression "reason to believe" does not mean a subjective satisfaction on the part of the Assessing Officer. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment.
3.3. The words "reason to believe", cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. They only mean that he forms a belief from the examination he makes or any information that he receives. If he discovers or finds or satisfies himself that the taxable income has escaped assessment, it would amount to saying that he had reason to believe that such income had escaped assessment. The justification of his belief is not to be judged from the standards of proof required for coming to a final decision A belief though justified for the purpose of initiation of the proceedings under section 147, may ultimately stand altered after hearing the assessee or on the basis of the intervening enquiry. At the stage where the learned Assessing Officer finds a cause or justification to believe that such income has escaped assessment, the Assessing Officer is not required to base his belief on any final adjudication of the matter accordingly the action of the Assessing Officer is upheld. By the Commissioner of Income-tax (Appeals). Against this, the assessee is in appeal before us.
Before us, the learned authorised representative submitted the following " points in support of his arguments.
(a) The notice under section 148 had been issued beyond four years from the end of the assessment year. We have already extracted the reasons recorded by the Assessing Officer for issue of notice under section 148 of the Act. In sum and substance, the reason is that the guidelines value of the land sold is more than the consideration and hence capital gains needs to be enhanced.
(b) There is no averment that the assessee failed to furnish any material/ document necessary for completion of assessment. The proviso to section 147, reads as under:
"Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall. be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all materials facts necessary for his assessment, for that assessment year."
(c) In the absence of any assertion/allegation to the effect that underassessment if any had occasioned by reason of any default on the part of the assessee, the reopening is bad in law. On the contrary the Assessing Officer comes to the conclusion that there is an underassessment only on the basis of the sale deeds that were produced in the course of the original assessment proceedings.
(d) The Assessing Officer has referred to section 147(c)(i). Possibly he is referring to Explanation 2(c)fi) to section 147. Even assuming for a moment that there is "income chargeable to tax has escaped assessment" as mentioned in Explanation 2(c)(i) to section 147; still as per the proviso.
" ... no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason the failure on the part of the assessee ... to disclose fully and truly all material facts necessary for his assessment."
(e) Even according to the reasons recorded, the reassessment had been on the basis of the four sale deeds by which the assessee conveyed the which already forms part of the assessment records. Thus there could be failure attributed to the assessee. At best it could be a case where the Assessing Officer not drawn proper inferences as observed by the hon'ble Delhi High Court in CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] affirmed in CIT v. Kelvinator India Ltd. [2010] 320 ITR 561 (SC).
(f) It is submitted that the notice under section 148 being ab initio void, the reassessment proceedings are liable to be quashed in toto.
On the other hand, the learned Departmental representative supported the order of lower authorities.
We have heard both the parties and perused the material on record. The main contention of the learned authorised representative is that in this case the assessment was completed under section 143(3) of the Act. While framing the assessment, the Assessing Officer vide questionnaire dated October 16, 2008 enquired about the details of immovable property owned, acquired and sold during the year. The assessee has furnished all details to the Assessing Officer at the time of original assessment and there was no failure on the part of the assessee to disclose all material facts necessary for the purpose of assessment. According to the learned authorised representative, the reopening after four years of end of the relevant assessment year vide notice under section 148 of the Act dated July 1, 2011, it is only a change of opinion. He submitted that the Assessing Officer going through the same documents, which were already on record, wanted to reopen the assessment, which is nothing but review of the earlier assessment order, which is not possible under section 147 of the Act. In this case, the assessment was reopened after recording the following reasons vide notice issued under section 148 dated July 1, 2011 :
"While going through the scrutiny record, it is seen that the assessee has sold four (4) flats during the year and there are total difference of Rs. 12,80,700 in sale consideration as per guideline value admitted in document. Therefore, as per section 50C of the Incometax Act the difference should be assessed or in other words the guideline value as on the date of sale should be sale consideration.
Further, as per the agreement entered into between the assessee and the purchaser in respect of sale of flats, the sale consideration works out to Rs. 28,02,720 but the assessee has offered only Rs. 21,51,415 therefore the difference of Rs. 6,50,305 has to be assessed as escaped assessment."
6.1 Admittedly in this case, the original assessment was completed under section 143(3) of the Act. It is a settled law that on the basis of material, prima facie, available before the Assessing Officer, opined that the income chargeable to tax has escaped assessment can be formed. The word "reason" in the phrase "reason to believe" would mean cause or justification. In case the Assessing Officer has a cause or justification to know or suppose that income has escaped assessment, action under section 148 can be taken. But obviously, there should be relevant material on which a reasonable man could have formed a requisite belief. Whether this material(s) would conclusively prove the escapement of income is not the concern at that particular stage. So what is required is the subjective satisfaction of the Assessing Officer based on the objective material evidence. The reason was recorded as discussed above. The argument of the learned authorised representative is that under section 147 in case the assessment order is completed under section 143(3), as has been done in this case, no action could be taken after the expiry of four years from the end of the relevant assessment year unless the assessee has disclosed fully and truly all material facts necessary for the assessment for that assessment year, inter alia.
6.2 As seen from the reasons recorded, it give a clear picture that the Assessing Officer has got material evidence to form his opinion for taking recourse to section 147 read with section 148 of the Act. There cannot be two opinions. The point of time when the reasons are recorded after forming opinion of "escapement of income" is only relevant. Hence, this plea of the learned authorised representative is not tenable in the eyes of law. It is true that under section 147, the Assessing Officer can either assess or re-assess but for taking action thereunder, he has to record reasons that income chargeable to tax has escaped assessment. It is also mandated by section 148(2) to record reasons in writing. The reassessment proceedings under section 147 are further subject to sections 148, 149, 150, 151, 152 and 153. But in the present case, we are required to decide the limited issue regarding the validity of proceedings undertaken after four years of the assessment year in question. The Assessing Officer is required to see if the conditions laid down in Explanation 2(e) because in this case the assessment was completed under section 143(3) are satisfied or not. In case, (i) income chargeable to tax has been underassessed ; or (ll) such income has been assessed at too Iowa rate; or (iii) such income has been made the subject of excess relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed, the Assessing Officer would have valid cognizance under section 147 of the Act. The reasons recorded by the Assessing Officer clearly speak for the underassessment of tax hence, the conditions laid above stand fulfilled in so far as reassessment proceedings are concerned. In so far as the reasons recorded, extracted in the above portion of this order, we are satisfied that the Assessing Officer has "reason to believe" that income has escaped assessment. This fact confers jurisdiction on him to reopen the assessment. The power to reassess post-April 1, 1989 are much wider than these used to be before. But still the schematic interpretation of the words "reason to believe" failing which section 147 would give arbitrarily powers to the Assessing Officer to reopen the assessment on the basis of mere change of opinion, which cannot be, per se a reason to reopen the case. The Act has not given power to the Assessing Officer to review but has only given power to reassess. There is a conceptual difference between the two aspects as the Assessing Officer has no power at all to review the assessment. The reassessment, as stated above, has to be based on fulfilment of certain pre-conditions but the concept "change of opinion" has to be taken into consideration otherwise it may give unbridled power to an Assessing Officer to reopen any and every assessment order which would simply amount to a review. The concept" change of opinion" is an in-built test to check the abuse of power by the Assessing Officer. So, now only when the Assessing Officer has a tangible material to base his conclusion that there is an escapement of income from assessment and the reasons recorded have a link with the formation of his belief, he has the power under section 147 of the Act.
6.3 Now the most material part which was argued by the learned authorised representative is regarding the time lag which is provided in the first proviso to section 147 which states that where an assessment under sub-section (3) of section 143 has been made for the relevant assessment year, which is 2006-07, in this case, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. There are two other conditions which are not relevant for deciding the legal issue under appeal. We have to see as to what "failure of the assessee" to disclose fully and truly all material facts signify. The expression "failure to disclose material facts" has been explained in the Taxman's Direct Taxes Manual Volume 3. It is true that "every disclosure" is not and cannot be treated to be a true and full disclosure. A disclosure can be even false or true. It may be a full disclosure or it may not be~ a full one. A part disclosure many a times may be misleading one. What is required under the law is a full and true disclosure of all material facts necessary for making assessment for that year. This law was laid down by the hon'ble Supreme Court in the case of Sri Krishna Pvt. Ltd. v. ITO [1996] 221 ITR 538 (SC). The words" omission or failure to disclose fully and truly all material facts necessary for assessment for that year postulates a failure of the assessee to disclose fully and trulyall"material facts necessary" for his assessment. What facts are "material" and "necessary" for assessment will differ from case to case. The material should not only be full but also be true. If some material found in the evidence produced before the Assessing Officer which the Assessing Officer could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. This omission or failure may be either deliberate, or even inadvertent, that is immaterial, but in case there is omission to disclose the material facts then subject to the other conditions jurisdiction to reopen is attracted.
6.4 In the present case, the assessee has shown the sale consideration of property lesser than the valuation considered for registration purposes. In our opinion, the provisions of the section 50C is applicable. As per Explanation 2 to section 147 it is very clear that due to disclose lower sale consideration by the assessee, the income chargeable to tax had escaped assessment. The assessee has not produced anything before the Commissioner of Income-tax (Appeals) to show as to how this fact was fully and truly disclosed before the assessing authority and that there was not failure on the part of the assessee, especially when provisions of the section SOC is applicable. Hence, the Commissioner of Income-tax (Appeals) considered the action of the Assessing Officer is fully covered by the provisions of Explanation 1 to section 147 of the Income-tax Act which reads as under:
"Production before the Assessing Officer of accounts books or other evidence from which material evidence could, with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso."
It is possible that with due diligence the Assessing Officer would have ascertained this fact at the time of original assessment also, but in view of the Explanation 1 it does not mean that there was no default on the part of the assessee. Hence, reopening under section 147 is held to be valid. The assessee has tried to take shelter under the exception provided by the above stated proviso where an assessment under sub-section (3) of section 143 has l1een completed, no action after the expiry of four years from the end of the assessment year can be taken. But as stated above, when the assessee has not disclosed fully and truly the facts necessary for the assessment, this proviso will not come to its rescue. Consequently, we hold that the entire reassessment proceeding in this case is valid and therefore, the action of the Assessing Officer is upheld. The assessee fails on this legal issue.
7 The next ground is with regard to confirming the action of the Assessing Officer in invoking the provisions of the section 80C of the Act.
9 The facts of the issue are that the learned Assessing Officer noticed that the assessee has sold 4 flats for sale consideration of Rs. 9,99,000 whereas the guideline value for the above four flats was amounting to Rs. 22,79,700. During the reassessment proceedings, the assessee was show caused as to why the guideline value as per section SOC should not be taken for the sale consideration of the four flats. In "response, the assessee replied that there was undue delay in selling the flats due to adverse economic factors. The assessee further stated that it is a low lying area and there is a factory adjacent to it due to which it was registered at a lower value. The contention of the assessee was not acceptable. Further the assessee requested to refer the same to the Valuation Officer for the exact value of the property. The Assessing Officer rejected the plea of the assessee to refer to the Valuation Officer and therefore the sale consideration was taken on account of sale of undivided share of land at Rs. 22,79,700 as per guideline value under section SOC of the Act. The difference on this account was Rs. 12,80,700 and the same was brought to tax. Aggrieved, the assessee carried the appeal before the learned Commissioner of Income-tax (Appeals).
8.1 On appeal, the learned Commissioner of Income-tax (Appeals) observed that it is mandatory on the part of the Assessing Officer when the sale deed value shown by the assessee is less than the guideline value which was arrived at for the purpose of stamp valuationl the Assessing Officer is duty bound to adopt the same. According to learned Commissioner of Income-tax (Appeals)1 the Assessing Officer has rightly adopted the sale consideration of the property at section 50C value of the Act. Accordingly the ground of appeal on this issue is dismissed. Against this the assessee is in appeal before us.
Before us1 the learned authorised representative argued that by virtue of 9 a deed of partition entered into by the assessee with his parhlers on February 81 19951 the assessee was allotted vacant land of an extent of 25/096 sq.ft in Madhavaram High Roadl Sembiurn Villagel Cnennai. The assessee along with the co-owners entered into a joint venture agreement with Mis Vijaya Santhi Builders on November 281 19951 according to which in lieu of 62.5 per cent. of land agreed to be transferred the assessee would get 37.5 per cent. of the built-up area in the proposed construction. This agreement underwent many changes and extensions thereafter and finally the developer handed over 16 flats to the assesses this year. Out of the said 16 flatsl the assessee sold 4 flats during this year. As is the practicel undivided share in the land was transferred to all the 4 of theml the details of which are attached in annexure 1. The assessee offered the capital gains arising thereon of Rs. 3,10/588 for taxation in the return of income filed on October 311 2006. The capital gains arising on the sale of built-up area of 24,573 sq. ft. was also offered for taxation. Further, the learned authorised representative submitted that various reasonsl advanced by the assessee before the lower authoritiesl which affects the market value of the land sold had been summarily rejected.
On the other hand, the learned Departmental representative relied on the orders of the lower authorities.
We have heard both the parties and perused the material on record. The main grievance of assessee is that the assessee made a request the Assessing Officer to refer the valuation issue to the valuation cell under section 50C(2) of the Act which was not considered by the Assessing Officer. When this was raised before the learned Commissioner of Income-tax (Appeals), he also rejected it. In our opinion we find merit in the argument of the learned authorised representative. Before considering valuation under section 50C(1) of the Act if the assessee requests for reference to Departmental Valuation Officer (OVO)I the Assessing Officer shall refer the matter to the Departmental Valuation Officer and he cannot overlook it Hence we direct the Assessing Officer to refer the matter to the DVO and thereafter frame the assessment in accordance with law. This ground of assessee is allowed.
12 The assessee raise one more ground is with regard to the levy of interest under section 234B and section 234C of the Act. Since we have remitted the issue on the merits to the file of the Assessing Officer, at this stage this ground is dismissed as infructuous.
13 In the result, the appeal of the assessee is partly allowed for statistical purposes.
The order pronounced in the open court on 13th January, 2017 at Chennai.