Dinesh Singla v. Assistant Commissioner of Income Tax and Anr

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  final  assessment  order  has  been  passed 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 on that day the statement was found to be false as the final order of assessment had not been passed, an affidavit has also been CWP No. 19667 of 2021                             -2-

filed seeking apology by the Revenue. 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:- 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 2013-14 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 income chargeable for A.Y. 2013-14 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 holder. The land was sold by Manjit Singh to 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  source  and  genuineness  of  investment  made  as  well  as  short  term VARINDER SINGH CWP No. 19667 of 2021                             -3-

capital  gain  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" 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/- and Rs.3,75,75,000/- as unexplained investment. The  petitioner  submitted  his  objections  and  stated  that  he  had  already submitted  his  complete  bank  statements  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 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. 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 Section 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 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.   VARINDER SINGH CWP No. 19667 of 2021                             -4-

5.    It was further submitted that the additions proposed in the draft assessment order dated 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 the stand completely and contrary to the reasons recorded earlier and instead of treating the transfer of land under head capital gains, treated the entire consideration received as an adventure in the nature of trade. It has been argued that neither in 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, I Ward, District VI, Calcutta and others vs Lakhmani Mewal Das (1976) 3 SCC 757, Delhi High Court in  Emirates  Shipping  Line,  F?E  vs  Assistant  Director  of  Income-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.

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 VARINDER SINGH CWP No. 19667 of 2021                             -5-

which  may  be  supplied  subsequently.  It  is  her  submission  that  the assessement order issued by the respondents is based on reasons for which no show cause notice was given.

8.    Written  statement  on  behalf  of  the  respondents  through Assistant Commissioner of Income Tax, Circle, Panchkula has been 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  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, the assessment order generates first and immediately in succession, the demand notice and computation sheet is generated. 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 that 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. 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 which he had purchased the land from Manjit Singh, Jarnail Singh and Karnail Singh on 14.05.2012. But he failed to substantiate the source of investment and failed to fully disclose VARINDER SINGH CWP No. 19667 of 2021                             -6-

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 the assessment 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. As the petitioner was engaged in business of trading of land, the amount was rightly added and taxed as business income 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 objected 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, wherein it was held as under:- "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  sufficiency  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 CWP No. 19667 of 2021 -7-

8igh Court under Article 22% of the Constitution ought not to entertain the .etition +hen remed, of a..eal lies to the CIT &A..eals* under the statute. 1 .    Ce  ha4e  carefull,  considered  the  su'missions  and  the -udgments cited at 'ar as +ell as the la+ as exists toda, +ith regard to the issues +hich ha4e 'een raised hereina'o4e. 1!.    ?efore +e go into the merits of the case# it +ould 'e a..osite to quote Section 2&1!*&iii*&a* and &'* of the Act# +hich is re.roduced as under:@ Se$tion 140564iii64a6 and 436 o% the 'n$ome (a) A$t, 0780* Definitions.

¶2In this Act, unless the context otherwise requires.* xxx xxx xxx

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

(iii) agricultural land in India, not being land 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 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,—

(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 of more than one lakh but not exceeding ten lakh; or CWP No. 19667 of 2021                             -8-

(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-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  examined  is  with regard to the alternative 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 (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 court 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.  In  the  said  case  we  relied  on  judgments passed by the Supreme Court in The State of Maharashtra and others vs CWP No. 19667 of 2021 -9-

9reatshi  4'ndia6 Limited 2022 &1 * Scale 770 and (he State o% Madh.a Pradesh and another vs M:s &ommer$ial En!ineers and -od. -/ildin! &om an. Limited  2022 &1!* Scale $20. 8o+e4er# +e find that the Su.reme Court  Barger  ?ench  in  &al$/tta  Dis$o/nt  &om an.  &su.ra*  and  a su'sequent  -udgment  in  Red  &hilli  'nternational  Sales  vs  'n$ome  (a) +%%i$er  202  &!;2* IT2 222# the Su.reme Court after ha4ing considered too3 a different 4ie+. Chile the case of  Mahesh &hander Sharma &su.ra* +as  at  the  initial  stage#  +hereas  in  the  .resent  case  the  .leadings  are com.lete and the case is .ending since long 'efore this Court# therefore# the discretion is exercised in fa4our of the assessee and the case is heard on merits. There is no 'ar to hear a +rit .etition in relation to challenge to .roceedings initiated under Section 1!" of the Act. 1".    In Red &hilli 'nternational Sales &su.ra*# the Su.reme Court has held as 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 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 consideration 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 would 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) VARINDER SINGH CWP No. 19667 of 2021                             -10-

including the annexure thereto, the reply filed by the petitioner and  the  order  under  Section  148  (d)  of  the  Income  T??  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. 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 regular assessment  before  the  CIT  (Appeals).  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 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 of 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 of assessment but before the 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 was 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, the High Court allowed the petitioner to challenge the said assessment order in the present writ petition. CWP No. 19667 of 2021                             -11-

22.    We find that the assessment proceedings under Section 143(3) of the Act for the assessment year 2013-14 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  the 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 2013-14 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 2013-

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

24.    As per the written submissions and arguments raised before the Court the petitioner has made two fold arguments:-CWP No. 19667 of 2021 -12-

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 as 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/-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 presumptions and the orders of reassessment, therefore, are vitiated. 2;.    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 CWP No. 19667 of 2021                             -13-

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 activity, he could not claim any income chargeable under the capital gain in terms of Section 10(37) and Section  54  of  the  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 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 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 judgments cited therein.

27.    We  have  carefully  considered  the  submissions  as  mentioned above and the facts which have been placed on record. CWP No.

¶282013-14, we 2016 by the verification agricultural l the same to situated bey submitted his of final asses income as p income whic within the am the Act (sup meaning of I Revenue that of their first a case of ch reopening of

¶29three Judges . 19667 of 2021 The assessment year is 2013-14 e find that the final assessment A.O. Before he passed the said relating to the transactions d land for which he invested Rs. the company M/s DSS Mega yond the municipal limits. Th s verification report to the said e ssment done in March, 2016, th part of the business income nor ch falls beyond the municipal li mbit of capital asset in terms of pra), and would, therefore not l Income Tax Act. We are not sati t they have no information abou final assessment conducted in M hange of opinion which cannot f the case of reassessment. In CIT vs Kelvinator of India Bench of the Apex Court held a

¶7One must treat the concep in-built test to check abuse of p Hence, after 1-4-1989, the as reopen, provided there is "tang conclusion that there is escapem Reasons must have a live link w Our view gets support from the the Act, as quoted d hereinabo

¶4In relation to assessment year t orders were passed in March, order, he had got conducted the done by the assessee of the 3,75,75,000/- and later on sold a City Projects. The land was he ITO (Intelligence), Karnal effect on 30.03.2015. At the time he A.O. did not include the said r he included it as agricultural imits. Thus, it would not come f Section 2(14)(iii)(a) and (b) of iable to capital gain within the isfied with the submission of the ut the said transaction at the time March, 2016. It appears that it is be allowed to be a reason for Limited (2010) 2 SCC 723, a s under:- ept of "change of opinion" as an power by the assessing officer. ssessing officer has power to gible material" to come to the ment of income from assessment. with the formation of the belief. changes made to Section 147 of ve. Under the Direct Tax Laws r , e e d s l e d l e f e e e s r a n

o e

f f s CWP No.

f

¶30exercise of p

that they had the case wh exercised ca maintained. M the manner review asse reassessment

¶31notice dated along with th up before the assessment o case was take statement in final assessm

¶32that the asse . 19667 of 2021 (Amendment) Act, 1987, Parliam "reason to believe" but also i Section 147 of the Act. Howeve from the companies against om believe", Parliament reintrodu deleted the word "opinion" on arbitrary powers in the assessin We respectfully follow and h ower by the assessing officer. No document has been produc d any new information or docume hile the power is available wi arefully and sanctity of assessm Merely because a new assessing in which assessment was done essment. The power availabl t and not of review of earlier asse We also noticed that the petition

20.03.2020 as well as show he draft assessment order before e Court, it was informed that th order which actually had not bee en up, the apology was accepted the Court, however, the petition ment order dated 29.09.2021. From the perusal of the order ssing officer has now completel ment not only deleted the words inserted the word "opinion" in er, on receipt of representations mission of the words "reason to uced the said expression and n the ground that it would vest ng officer." hold the action to be arbitrary ed by the respondents to show entary evidence for reopening of th them. The same has to be ments already done should be g officer may not be happy with e earlier, cannot be a reason to le, as noticed above, is of essment. ner had challenged the order and cause notice dated 23.09.2021 this Court. When the case came he Revenue has passed the final n passed. By that time when the d by this Court of giving a wrong ner was allowed to challenge the passed on 29.09.2021, we find ly changed his stand from what s n s o d t y w f e e h o f d

e l e g e d t CWP No.

he had taken cause notice Rs.19,34,100 From the sh escape in ass a sum of R 3,75,75,000/- income to be clearly based

¶33the responde produced in claim under But the asses all times ass therefore, be contention h A.O. does no submissions power. When of the Act, it the said pow the case und the capital ga authority ava assessment, w . 19667 of 2021 n while issuing the draft assess e issued to the petitioner a 0,00/-was acquired as 'adventu how cause notice, we find that sessment on account of treating i Rs.15,58,35,000/-and unexplain -. Such change of reasons for e under the heading of 'adventu d on surmises of the assessing off We have extensively quoted the ents, who has proceeded to sub support of any agricultural acti the capital gain under Section 1 ssee, as we find, had not claime serted the same to be falling be eyond the provisions of Secti as been supported by the report ot refer either to the report of th of the assessee. We, thus, find it n an authority is empowered to e t has to remain within the four wer is required to be exercised. O er Section 147 of the Act is of ain and non-disclosure of sources ailable in law to pass order ho which was following as 'adventu sment order. There is no show alleging that the income of ure in the nature of business'. t the same was categorized as it as a short term capital gain for ned source of investment Rs. reassessment and treating the ure in the nature of business', is fficer. e submissions of the counsel for mit that there was no evidence vity and would now, therefore, 10(37) of Section 54 of the Act. ed it as a capital gain, but has at eyond the municipal limits and, ion 2(14)(iii) of the Act. His t of the ITO (Intelligence). The he ITO (Intelligence) nor to the t a case of colourable exercise of exercise and pass orders in terms corners of the manner in which Once the basis for re-opening of non-disclosure of income under s of investment, the A.O. had no olding that income had escaped ure in the nature of business'. w f . s r . e s r e , . t , s e e f s h f r o d CWP No. 19667 of 2021                             -17-

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 concerned, the same was issued on the premise that the assessee had not filed his income tax return for the year 2016-17. Later on, while passing the order it proceeded to hold that certain  income  has  escaped  assessment for  the  year 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 with 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 of opinion" and "reasons to believe" while considering the provisions of the Central Sales Tax Act, 1956 and held as 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  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.    We find that the Income Tax Officer or the Assessing Officer may re-open any assessment already done by him if he finds that there has been any relevant material which is disclosed subsequently relating to the CWP No. 19667 of 2021                             -18-

said year or assessment and of such a nature which would reflect that such non-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 assessments already finalized based on his opinion that the earlier assessment was wrongful or that he has a reason to suspect that the assessment was done wrongfully. Re-assessment, therefore, has to be based on cogent material available before it, which was not  available  at  that  relevant  time.  The  material  on  which  the  assessing officer based its opinion, therefore, cannot be 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, cannot be a reason to believe for initiating reassessment (ref. Delhi Cloth and General Mills Co. Ltd. vs State of Rajasthan (1980) 4 SCC 71) nor can the reason to believe for re-opening of assessment be based on an opinion that from the same perusal of some material a case of escaped assessment 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  of  the  agricultural  land  to  M/s  DSS Megacity Projects Private Limited would not 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, and therefore, would not come within the ambit of Section 2 (14)(iii) (a) of the Act  which  required  conducting  of  agricultural  activity  and  would  be agricultural land within the ambit of Section 2(14)(iii)(b) of the Act. VARINDER SINGH CWP No. 19667 of 2021                             -19-

39.    In the present case, we are satisfied that there is no case of escaped  income  also  as  the  said  aspect  stood  already  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  any  interference  or  warrant  any  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, 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

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.