The Bombay High Court quashed re assessment notice on the ground that no satisfaction of jurisdictional conditions by the Assessing Officer (AO).
The petitioner, Standard Industries Limited, is engaged in the business of trading in the textile goods as also in real estate development. The petitioner owned a free-hold land at Sewree on which it was entitled to transferable development rights (TDR) as per the Development Control Regulations for Greater Mumbai, 1991.
The case of the petitioner is that the revenue from the sale of the TDR was treated as business income and were accordingly offered to tax in the return of income for the assessment year 2012-13, which was selected for scrutiny under order of assessment under section 143(3) of the Act.
It was further stated that in the return of income from the assessment year 2014-15, the loss resulting from the reversal of the sale of TDR was treated as the business loss and the deduction thereof was claimed under section 28 of the Act. The return was selected for scrutiny for the assessment year 2014-15, during the course of which the respondent made enquiries into cancellation of TDR sale.
The Counsel for the petitioner referred to the auditor’s report with a view to emphasize that the entry with regard to reversal of sale of TDR was very much referred to and explained in detailed in the notes attached to the Auditor’s report. The petitioner also submitted copies of the audited financial statements to the AO along with tax audit report issued under section 44AB of the Act in response to the notice was issued under section 143 of the Act.
The Counsel for the petitioner was that there was no basis for the reason to believe and that in fact this was a case of ‘change of opinion’ as there was no tangible material with the AO for his reason to believe that income had escaped assessment for the said assessment year.
The Coram consisting of Justices Dhiraj Singh Thakur and Valmiki Sa Menezes observed that “We have no hesitation in holding that both the jurisdictional conditions had not been satisfied by the AO in the reasons recorded on the touchstone of section 147 of the Act.”
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