Deepak Kapoor v. Principal Commissioner of Income Tax

Case snapshot

Sections / provisions: 147; 148; 45; 47

Questions before the Court / Tribunal

• Held in detail by division bench of Delhi High Court comprising of Justice Vibhu Bakhru and Justice Amit Mahajan that AO cannot assume jurisdiction u/s 147 for re-opening the assessment in order to correct an error in the original assessment order framed u/s 143(3). Held that re-opening for reviewing the earlier assessment order is forbidden under the law. Held that re-opening on the grounds that market value of property sold was not offered to tax and expenses incurred in connection with transfer of property (comprising of compensation paid by assesse to its sisters pursuant to Court decree & expenses incurred…
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

DEEPAK KAPOOR ..... Petitioner versus PRINCIPAL COMMISSIONER OF INCOME TAX-2, NEW DELHI & ORS. ..... Respondents Advocates who appeared in this case: For the Petitioners : Mr. Piyush Kaushik, Adv. For the Respondents : Mr. Sanjay Kumar & Ms. Easha, Advs.

1. The petitioner (hereafter ‘the assessee’) has filed the present petition under Article 226 / 227 of the Constitution of India impugning a notice dated 31.03.2021 (hereafter ‘the impugned notice’) under Section 148 of the Income Tax Act, 1961 (hereafter ‘the Act’). By the impugned notice, the assessee was called upon to file the return of income for the relevant assessment year within a period of thirty days from the said date, on the ground that his income chargeable to tax, for the Assessment Year 2016-17, has escaped assessment within the meaning of Section 147 of the Act.

2. The Assessing Officer (hereafter ‘the AO’) believed that a part of the assessee’s income, by way of capital gains resulting from the sale of property at Vasant Vihar, had escaped assessment. Signature Not Verified Digitally Signed By:Dushyant Rawal W.P.(C) No.13918/2022 Page 1 of 19 Signing Date:09.11.2022

2022/DHC/004724 It is the assessee’s case that his return of income duly disclosed the transaction regarding sale of property and the computation of capital gains resulting from the said transaction. The assessee’s return was picked up for scrutiny and his income was assessed under Section 143(3) of Act. The AO did not accept the assessee’s computation and recomputed the capital gains. The assessee, thus, claims that the impugned notice, in effect, seeks to re-examine the assessment, which is impermissible.

4. The controversy in the present case relates to the assessment of income by way of long-term capital gains arising from sale of immovable property bearing no. A-53, Vasant Marg, Vasant Vihar, New Delhi-110057 (hereafter ‘the Property’). According to the assessee, the Property belonged to his parents in equal share. He acquired the Property by virtue of a will dated 17.06.1999 (hereafter ‘the Will’) executed by his father, late Sh. B.S. Ramdas Kapoor and by virtue of a Gift Deed dated 10.02.2006 (hereafter ‘the Gift Deed’) executed by his mother Mrs. Achla Kapoor. The assessee sold the said Property at a consideration of ₹60,00,00,000/- (Rupees Sixty Crores Only) and it was conveyed to the Vendee by a Sale Deed executed on 28.04.2015.

Appellant / assessee submissions

20. Mr. Kaushik, learned counsel appearing for the assessee, has referred to the various decisions in support of his contention that re-opening of assessment was not permissible merely on the ground of change of opinion.

21. Mr. Kumar, learned counsel appearing for the respondent, contended that the notice for seeking re-assessment has been issued on the basis of audit objections. He contends that the same constitutes tangible material on the basis of which assessments can be re-opened. He referred to the decision of the Supreme Court in Commissioner of Income Tax v. P.V.S. Beedies Pvt. Ltd.: 237 ITR 13 SC and contended that an assessment could be reopened on the basis of any factual information given by the internal auditors. He submitted that in the present case, the auditor had pointed out that the income had escaped assessment as the legal expenses incurred by the assessee in contesting the suit filed by one of his sisters was not justifiable and should not have been allowed. He further contended that the amount of ₹19,20,00,000/-

Revenue / respondent submissions

21. Mr. Kumar, learned counsel appearing for the respondent, contended that the notice for seeking re-assessment has been issued on the basis of audit objections. He contends that the same constitutes tangible material on the basis of which assessments can be re-opened. He referred to the decision of the Supreme Court in Commissioner of Income Tax v. P.V.S. Beedies Pvt. Ltd.: 237 ITR 13 SC and contended that an assessment could be reopened on the basis of any factual information given by the internal auditors. He submitted that in the present case, the auditor had pointed out that the income had escaped assessment as the legal expenses incurred by the assessee in contesting the suit filed by one of his sisters was not justifiable and should not have been allowed. He further contended that the amount of ₹19,20,00,000/-

Court / Tribunal analysis and reasoning

2022/DHC/004724 officer in the course of the original assessment proceedings it may yet be held that the assessing officer had examined the subject matter. This is so because the aspect or question in issue may be too apparent and obvious. However, the Full Bench cautioned by stating that such cases would have to be examined individually. It is, therefore, clear that even where no query is raised by the assessing officer and there is no discussion in the assessment order, it may yet be a case where the assessing officer would be considered to have examined the issue. However, we are not concerned with those type of cases inasmuch as in the present case the assessing officer had clearly raised a specific query with regard to bad debts/advances written off and the petitioner/assessee had given details in respect thereof. It is obvious that since no such addition was made on that count, the assessing officer had considered and examined the position and held in favour of the petitioner/assessee. Therefore, we can safely conclude that, in the facts and circumstances of the present case, the assessing officer had, indeed, examined the issue at the time of the original assessment…

Operative decision and relief

18. By an order dated 26.07.2019, the CIT (Appeal) partly allowed the said appeal. It accepted that the assessee was entitled to indexation benefit for the entire property, however, it did not accept the assessee’s valuation as to the fair market value of the Property as on 01.04.1981.

38. In view of the above, the petition is allowed and the impugned notice dated 13.03.2021 is, accordingly, set aside. The pending application is also disposed of.

Ratio and legal principle

• The packaged judgment addresses Held in detail by division bench of Delhi High Court comprising of Justice Vibhu Bakhru and Justice Amit Mahajan that AO cannot assume jurisdiction u/s 147 for re-opening the assessment in order to correct an error in the original assessment order framed u/s 143(3). Held that re-opening for reviewing the earlier assessment order is forbidden under the law. Held that re-opening on the grounds that market value of property sold was not offered to tax and expenses incurred in connection with transfer of property (comprising of compensation paid by assesse to its sisters pursuant to Court decree & expenses incurred…. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with held in detail by division bench of delhi high court comprising of justice vibhu bakhru and justice amit mahajan that ao cannot assume jurisdiction u/s 147 for re-opening the assessment in order to correct an error in the original assessment order framed u/s 143(3). held that re-opening for reviewing the earlier assessment order is forbidden under the law. held that re-opening on the grounds that market value of property sold was not offered to tax and expenses incurred in connection with transfer of property (comprising of compensation paid by assesse to its sisters pursuant to court decree & expenses incurred… Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

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Section / provision impact

• 147 - apply the exact version considered in the judgment.
• 148 - apply the exact version considered in the judgment.
• 45 - apply the exact version considered in the judgment.
• 47 - apply the exact version considered in the judgment.

Case network

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Different outcome / possible distinction

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