· Assessee was granted 350 acres of land on lease by the Government for a period of 10 years. Assessee applied for surrendering the said land as it no longer required it. The land was sold by Government to M/s Coastal Gujarat Pvt. Ltd. who made a payment of Rs.29.92 crores to the assessee. Assessee disclosed said amount in its return as long-term capital gain.
· During the course of assessment, assessee contended that said amount was not in the nature of capital gain but was a one-time receipt, which was not taxable. AO, however, treated said amount as capital gain and passed the assessment order. Assessee filed further appeal on this issue before CIT(A), which was dismissed.
· Thereafter, within the period of four years, AO issued a notice in order to reopen the assessment proceedings, alleging that income of assessee has escaped assessment as the receipt of Rs.29.92 crores was not in the nature of capital gain, but was to be taxed as income from other sources.
· Assessee raised objections to the reasons recorded, which were disposed off by the AO, and thus, this application was filed before Hon’ble High Court.
· The contentions of assessee before Hon’ble High Court were as under:
(a) The issue was thoroughly scrutinized by AO in the original assessment proceedings.
(b) Notice for reopening was issued by AO upon insistence from audit party.
(c) The ground on which AO has sought to reopen assessment is a subject matter of appeal, and thus, on the ground of merger, reopening should not be permissible.
· The Hon’ble Court took note of the fact that assessee had filed an appeal on this issue before the CIT(A), which was dismissed by the CIT(A). Court further took note of the fact that the appeal of assessee before ITAT was still pending.
· Hon’ble Court observed that third proviso to section 147 provides that the AO may assess or reassess such income other than the income involving matters which are subject matter of any appeal, reference or revision. If that be so, when the receipt from transfer of rights in land was the subject matter of appeal and thereafter second appeal, the principle of merger would apply.
· Therefore, the Court concluded that there cannot be two separate considerations to the same subject matter, i.e. one by the appellate authority and another by the AO in fresh assessment, and thus, the notice for reopening the assessment was set aside by the Court.
For further reading, refer the attachment.
Further Reading