IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 30.07.2019 CORAM: HONOURABLE MR.JUSTICE T.S.SIVAGNANAM AND HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal Nos.1940 and 1941 of 2008 M/s.C.Venkatachalam [HUF], Chennai 600 010. Appellant in T.C.A.No.1940/2008 M/s.C.Sudarsana Srinivasan [HUF] Chennai 600 010. Appellant in T.C.A.No.1941/2008 Vs Assistant Commissioner of Income Tax, Business Circle XIV, Chennai. ... Respondent in both appeals Tax Case Appeals filed under Section 260-A of Income Tax Act, 1961, against common order of Income Tax Appellate Tribunal Madras 'A' Bench, dated 13.06.2008 in ITA Nos.95 and 96/Mds/2006 for assessment year 2000-01. For Appellants : Mr.M.P.Senthil Kumar [in both appeals] For Respondent : Ms.V.Pushpa [in both appeals] Junior Standing Counsel 1/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 COMMON JUDGMENT [Judgment of Court was made by T.S.SIVAGNANAM, J] These appeals filed by assessees under Section 260-A of Income Tax Act, 1961 (hereinafter referred to as Act ) are directed against common order dated 13.06.2008 passed by Income Tax Appellate Tribunal Madras 'A' Bench (hereinafter referred to as 'the Tribunal') in ITA Nos.95 and 96/Mds/2006 for assessment year 2000-01. 2. Tax Case Appeals were admitted on 15.12.2008 on following substantial questions of law: 1. Whether on facts in circumstances of case, Income Tax Appellate Tribunal was right in law in not holding that in view of assessment order for A.Y.1996-97 treating entire capital gains to be liable for tax in that year, assessing officer cannot travel beyond reasons for which assessment was reopened, since it would amount to contradicting views of assessing officer for two assessment years, viz. 1996-97 and 2000-01, where it was held that entire capital gains was chargeable to tax in both years ? 2) Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in 2/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 holding that there was no transfer within meaning of 2(47)(v) during A.Y.1996-97? 3) Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in not holding that capital gains would arise only in relevant assessment years in which sale deeds were executed in respect of transfer of undivided share of land in favour of nominees of Developer? 4) Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in holding that entire capital gains was taxable in A.Y.2000-01, when there was no transfer in respect of entire land either u/s.2(47)(v) or section 45 of Income Tax Act, 1961? 5) Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in holding that CIT(A) had given direction to modify assessment order for all assessment years by deleting sum assessed by way of Long Term Capital Gains and accordingly to re-compute taxes payable and there was no double taxable of capital gains? 6) Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in not holding that Assessing Officer having held that capital gains was taxable in A.Y.1996-97 in terms of Section 2(47)(v), was precluded from assessing same in A.Y.2001-02 on basis of receipt of consideration? 3/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 3. facts, which would be necessary for disposal of these appeals, are culled out as hereunder: - appellant/assessees are Hindu Undivided Families, which owned properties at Chennai. Both assessees entered into Development Agreement with builder, in terms of which, assessees were entitled to 60% of total built up area to be constructed by developer at its cost and in consideration, developer was entitled to 40% of undivided share in land and entitled to retain proportionate 40% of built up area. land owners received non-refundable security deposit of Rs.10,00,000/- each, during previous year relevant to assessment year 1996-97. According to assessees, from assessment year 1999-2000, developer commenced selling built up area and directed land owners to execute sale deeds in respect of undivided share of land to nominees/purchasers of flats from builder. land owners offered capital gains in each of their hands in respect of land transferred by them during each of assessment years starting from 1999-2000, 2000-01, 2001-02, 2002-03 and 2003-04. 4. assessees would admit that developer handed over possession of 60% of built up area to land owners during assessment year 2000-01. 4/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 assessment for year 1996-97 was completed and same was re- opened and re-assessment proceedings were completed vide order dated 23.03.2004 including entire capital gains in that year on ground that possession of land was handed over by owners to developer in that year. For assessment year 2001-02, Assessing Officer had completed assessment protectively on capital gains offered by assessees in respect of undivided share of land sold during that year. 5. appellants/assessees preferred appeals against both orders, namely, re-assessment orders dated 23.03.2004 and protective assessment dated 23.03.2004. These appeals were taken on file by Commissioner of Income Tax (Appeals)-XII [hereinafter referred to as CIT(A) ] in I.T.A.Nos. 35 & 36/04-05 and appeals were disposed of by common order dated 27.08.2004 setting aside re-assessment for year 1996-97 on technical ground of non-compliance of Section 151 of Act. In very same order, CIT(A) directed Assessing Officer to treat protective assessment order dated 23.03.2004 for assessment year 2001-02 as substantive one and assess capital gains accordingly. 5/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 6. For assessment year under consideration, namely, 2000-01, assessees filed their returns of income on 29.12.2000 admitting income of Rs.13,83,085/-, which included capital gains in respect of undivided share of land that was sold during previous year relevant to assessment year 2000-01. intimation under Section 143(1) of Act was issued on 13.03.2002 and subsequently, by notice dated 25.03.2004, assessment was re-opened under Section 147 of Act. reason assigned was that entire capital gains in respect of 40% of undivided share in land was to be brought to tax. objection filed by assessees were not accepted and order was passed on 11.03.2005 by treating Rs.95,44,610/- as long term capital gains. Aggrieved by same, assesses preferred appeals before CIT(A) in ITA Nos.3 and 6/2005-06. By common order dated 30.11.2005, CIT(A) upheld decision of Assessing Officer in respect of bringing to tax entire capital gains during year 2000-01. 7. Aggrieved by same, assessees preferred appeals before Income Tax Appellate Tribunal, Chennai, which were dismissed by common order dated 13.06.2008, which is impugned before us in both these appeals. 6/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 8. In preceding paragraphs, we have referred to six substantial questions of law, on which, appeals were entertained. It is agreed by learned counsel for parties and more particularly, learned counsel appearing for appellants/assessees that answer to substantial question Nos.1 and 6 would cover entire case as other substantial questions of law viz., questions 2 to 5 are interlinked. In view of said submission, we take up for consideration substantial question Nos.1 and 6. 9. sheet anchor of argument of Mr.M.P.Senthil Kumar, learned counsel appearing for appellants/assessees is by contending that Assessing Officer cannot travel beyond reasons, for which, assessment was re-opened since it would amount to contradicting view of Assessing Officer himself for two assessment years namely 1996-97 and 2000-01. Further, it is submitted that Assessing Officer himself had taken view that entire capital gains were taxable in assessment year 1996-97 rejecting objections raised by assessees that it should be taxable for assessment year 1999-2000 and now he had taken contrary view to that of earlier one on same transaction and same set of facts. Therefore, it is submitted that Assessing Officer was bound by rules of consistency and having accepted that act 7/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 of transfer falls in assessment year 2000-01, he cannot now take different stand and in doing so, it is clear case of change of opinion. 10. Further, it is contended that Tribunal was wrong in holding that re-assessment for year 1996-97 was cancelled only on technical ground, that therefore, there was no error in order passed by Assessing Officer and CIT(A) and that finding of Tribunal is erroneous because order of CIT(A) while setting aside re-assessment proceedings, though on technical ground, directed protective assessment for year 2001-02 to be substantive assessment and therefore, Tribunal committed error in rejecting assessee's appeal. 11. In order to substantiate stand taken by assessee as accepted by CIT(A) while treating assessment for year 2001-02 as substantive, learned counsel for assessees referred to various clauses in General Development Agreement between assessees and developer and submitted that effect of substantive assessment cannot be changed or altered and that this came to be done based on mere change of opinion which is unsustainable in law. 8/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 12. In this regard, learned counsel for assessees placed reliance on decisions of Honourable Supreme Court in case of CIT Vs. Kelvinator India Ltd. [reported in (2010) 320 ITR 561] and ITO v. Techspan India P. Ltd. [reported in (2018) 404 ITR 10], which were referred to in W.P.No.7416 of 2017 dated 04.10.2018 [MBI Kits International Vs. ITO] as confirmed by us in W.A.No.200 of 2019 vide judgment dated 24.06.2019. With regard to aspect i.e. what is effective date of transfer, reliance was placed on decision in Shrip. P.Madhusudhan Vs. ACIT in TCA.No.1986 of 2008 dated 11.06.2019. Thus, in light of above submission, learned counsel prays for setting aside of common order passed by Tribunal. 13. Ms.V.Pushpa, learned Junior Standing counsel for respondent - Revenue pointed out that Tribunal elaborately considered factual position and confirmed detailed order passed by CIT(A) and that Tribunal recorded clear finding that assessees had been taking inconsistent stand before Assessing Officer and CIT(A) at different points of time. It is submitted by learned counsel that assessees had admitted cost of land at Rs.80/- per sq.ft., whereas it was ascertained that 9/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 actual cost was only Rs.41/- per sq.ft and in this regard, learned Junior Standing counsel for respondent/Revenue invited our attention to relevant documents wherein reasons have been recorded. Further, it is submitted that assessees have not questioned reopening in appeals filed before CIT(A), which is evident from order passed by CIT(A) dated 30.11.2005 in Paragraphs 6.3 and 6.4. 14. Further, it is contended by learned Junior Standing Counsel appearing for Revenue that once assessments have been reopened, it becomes open on all issues and even items, which are not mentioned in reasons can also be considered during said re-assessment proceedings as held by Supreme Court in CIT Vs. Sun Engineering Works Ltd. [reported in (1992) 198 ITR 297]. 15. learned Junior Standing Counsel has drawn our attention to orders passed by CIT(A) and submitted that it has been specifically noted that re-assessment for assessment year 1996-97 was annulled for not obtaining statutory permission of higher authorities before issuance of notice under Section 148 of Act and that Assessing Officer had made 10/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 assessment for year 1996-97 as substantive and assessment for year 2001-02 as protective. It is submitted that there was no decision on merits and that issues, which were considered by CIT(A), were not at all discussed in earlier round of appeal proceedings and stand taken in present proceedings as confirmed by Tribunal is perfectly legal and valid and prayed for confirmation of common order passed by Tribunal. 16. We have heard learned counsel for parties and carefully perused materials placed on record. 17. As held earlier, sheet anchor of argument of Mr.M.P.Senthil Kumar is by attaching finality to protective assessment order dated 23.03.2004 for assessment year 2001-02. It is submitted that in said order, Assessing Officer held that notwithstanding stand taken on issue of liability to capital gains, which were brought to tax in assessment year 1996-97, capital gains admitted by assessee in assessment year 2001-02 were assessed on protective basis. It is submitted that when assessees challenged re-assessment order for year 1996-97 dated 23.03.2004 and protective assessment for year 2001-02 dated 11/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 23.03.2004 by way of appeal, CIT(A), by common order dated 27.08.2004 allowed appeals and set aside re-assessment proceedings dated 23.03.2004. CIT(A), while concluding that re-assessment proceedings dated 23.03.2004 for assessment year 1996-97, were bad in law on account of technical non-compliance, confirmed protective assessment for year 2001-02 as regular assessment and therefore, re-opening cannot be done. 18. Though submission of learned counsel for assessees appears to be convincing at first instance, on closer scrutiny, result to be arrived at is otherwise. In fact, CIT(A), in orders dated 30.11.2005, has elaborately considered these aspects while dealing with ground No.8 raised, in paragraph No.5 of orders dated 30.11.2005. At this juncture, it will be worthwhile to take note of following decision rendered by CIT(A): 8.1........In this connection, it has to be mentioned that during course of appeal proceedings in ITA Nos. 37 & 38/04-05 for assessment years 1996-1997 and 2001-2009, vide orders dated 27.08.2004, assessment for assessment year 1996-1997 was annulled while holding that assessment made for assessment year 2001-2002 was substantive one. In these orders, year of taxability of capital gains was not dealt with in detail because, 12/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 main contention raised by appellant for assessment year 1996-1997 was that Assessing Officer had no jurisdiction to initiate proceedings u/s. 147 by issue of notice u/s. 148. On this ground of jurisdiction itself, assessment made for assessment year 1996-1997 was annulled and in that context, assessment made by Assessing Officer based on return of income filed by appellant HUF itself was held to be substantive because, Assessing Officer considered assessment made for assessment year 2001-2002 as protective one. issue regarding chargeability fo capital gains was not discussed in that appellate proceedings. relevant portion of appellate order dated 27.08.2004 is reproduced as under: 'In view of foregoing discussions, it has to be held that issue of notice u/s. 148 is not according to law and further assessment proceedings based on that notice is ab initio void and appellant's stand has to be upheld. Therefore, impugned re-assessment order for assessment year 1996-97 is liable to be quashed.' 'Since assessment order itself is quashed for assessment year 1996-97, other issues raised by appellant in grounds of appeal for that year are not dealt with'. Now coming to assessment year 2001-2002, it is main plea of appellant that assessment 13/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 for year should be made as substantive one and not on protective basis. By virtue of fact that re- assessment which according to Assessing Officer was substantive for assessment year 1996-97 had been annulled, assessment for assessment year 2001- 2002 has to be held as substantive one'. 19. After taking note of common order passed by CIT(A) dated 27.08.2004, it was held by CIT(A) in orders dated 30.11.2005 that assessment for year 2001-02, which was directed to be treated as substantive, was not on merits and it was only in present appeals before CIT(A), what was sought to be decided was as to effective date of transfer. We have also gone through order dated 23.03.2004 for assessment year 2001-02 and we find absolutely no discussion on merits of matter. Therefore, there was no effective adjudication as to what would be effective date of transfer while deciding correctness of re- assessment for year 1996-97 while making protective assessment for year 2001-02. Therefore, we fully agree with view taken by CIT(A) that there was no discussion on merits on effective date of transfer. Further, CIT(A), after elaborately considering terms of agreement, was right in concluding that transfer came to be actually completed during 14/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 financial year 1999-2000 and consequently, CIT(A) was right in holding that entire capital gains relating to 40% of undivided share of land were subjected to tax for assessment year 2000-01. Tribunal re-examined factual position and pointed out that assessees had never admitted capital gains on sale of 40% of undivided portion of land, against which, consideration was held to be 60% of constructed area. After noting that assessees had shown capital gains on basis of individual sale deeds executed in favour of nominees of developer, it was held that it cannot be stated that assessment order stood merged with appellate order because said issue was never raised by assessees in order to be decided by appellate authority. We are not required to adjudicate this issue as no substantial question of law has been entertained with regard to Doctrine of Merger of orders. 20. Further, as rightly pointed out by Ms.V.Pushpa, learned Junior Standing Counsel, on facts, assessees had been taking inconsistent stand and this has been clearly noted and highlighted by Tribunal in paragraph No.22 of its order. Tribunal, after referring to decision of this Court in case of R.Vijayalakshmi Vs. Appu Hotels Ltd [reported in (2002) 257 15/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 ITR 4] and decision of Division Bench of Bombay High Court in case of Chaturbhuj Dwarkadas Kapadia Vs. CIT [reported in (2003) 260 ITR 491], held that assessees had also taken similar stand and resisted effort by department to levy capital gains on said transaction in assessment year 1996-97. Thereafter, now assessees have taken U turn. Further, Tribunal noted that assessees avoided query from Tribunal when they were asked to specifically explain as to when transaction took place, i.e., whether in assessment year 1996-97 or in later years. Further, Tribunal noticed inconsistent stand that there is submission that capital gains should have been assessed for assessment year 1996-97 because transfer took place on 04.10.1995 itself, i.e. date of execution of Development Agreement. Subsequently, assessees took stand that transfer took place when assessees actually executed sale deeds in various years in favour of nominees of developer. Thus, we fully agree with finding of Tribunal that assessees did not come out clearly as to when actual transaction took place. 21. Further, learned counsel for Revenue pointed out that assessees, in their letter dated 01.02.2006 to Assistant Commissioner of 16/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 Income Tax, Circle -XIV, Chennai, has taken yet another contrary stand by filing application under Section 154 of Act for assessment year 2001- 02 stating that such assessment should be rectified in line with decision taken for assessment year 2000-01. 22. As already held by us, assessees cannot plead case that there has been change of opinion and that rules of consistency had been violated. CIT (A) has elaborately dealt with this aspect and we concur with view taken by CIT(A), which was confirmed by Tribunal. Thus, for all above reasons, we find that Assessing Officer has not traveled beyond reasons, for which, assessment was re-opened and there is no contra view of Assessing Officer for two assessment years i.e., 1996-97 and 2000-01 as it is reiterated that at no point of time, there was discussion on merits of matter as to what is actual date of transfer. Furthermore, we have also brought out factual position to show that assessees were inconsistent in their stand at different point of time. Thus, for above reasons, we are of view that decisions relied on learned counsel for appelant can be of no assistance to case of assessees. 17/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 23. In result, both appeals filed by assessees are dismissed and substantial questions of law No.1 and 6 are answered against assessees. Consequently, substantial questions of law Nos.2 to 5 are also answered against assessees. No costs. 24. After we dictated judgment, Mr.M.P.Senthil Kumar, learned counsel appearing for appellants/assessees pointed out that in paragraph 30 of common order passed by Tribunal, issue regarding double taxation was taken note of by Tribunal by referring to paragraph 8.4 of orders passed by CIT(A) dated 30.11.2005 wherein direction was issued to Assessing Officer to modify assessment orders for years 1999-2000 and 2002-03 by deleting sums added by way of long term capital gains and recompute taxes payable for those years. After noting said finding, Tribunal held that CIT(A) has already given directions to modify orders for assessment years 1999-2000 and 2002-03. 25. learned counsel for appellant/assessee would further submit that Assessing Officer has not given effect to order by interpreting order of CIT(A) which says 1999-2000 and 2002-03 instead of 1999-2000 to 2002-03 as held by Tribunal. 18/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 26. It cannot be disputed by Revenue that for all years, assessee has offered capital gains for taxation, which is from assessment year 1999-2000 upto 2003-04 and in fact, these particulars are noted in orders passed by CIT(A) dated 30.11.2005. From paragraph 7.1 of orders passed by CIT(A), we find that assessees offered capital gains for taxation upto 2003-04. Therefore, Tribunal, while granting relief, should have granted relief to assessee for assessment years 1999-2000 upto 2003-04. Accordingly, Assessing Officer is directed to give effect to orders passed by Tribunal by modifying orders for assessment years 1999-2000 upto 2003-04. [T.S.S., J] [V.B.S., J] 30.07.2019 Index: Yes/No Internet: Yes mp 19/20 http://www.judis.nic.in T.C.A Nos.1940 and 1941 of 2008 T.S.SIVAGNANAM, J. and V.BHAVANI SUBBAROYAN, J. mp Tax Case Appeal Nos.1940 and 1941 of 2008 30.07.2019 20/20 C. Venkatachalam [HUF] v. Assistant Commissioner of Income-tax, Business CircleXIV, Chennai