PRAFUL CHUNILAL PATEL Vs. M J MAKWANA

JUDGEMENT

(1.) The petitioners in these two petitions seek to challenge the notices dated 29th March, 1996 at Annexure "A" to the petitions, issued by the respondent Assistant Commissioner of Income Tax, proposing to reopen the completed assessment of the petitioners for the Assessment Year 1991-92. The facts of both these petitions are almost identical and the parties have filed their complete papers in Special Civil Application No. 4201/96 and argued that case as a main matter. The asscssee of Special Civil Application No. 4203/96 has challenged identical notice issued under Sec. 148 of the Act on identical grounds and the learned Advocates appearing lor both the sides have raised common contentions in both these petitions. The facts of Special Civil Application No. 4201/96 are being set out and the facts of the other petition admittedly being almost identical, are not repeated.

(2.) The petitioner had filed his return of income for the Assessment Year 1991-92 on 21st October, 1992, declaring his total income at Rs. 27,118/- alongwith the statement of income, notes appended thereto and other enclosures which are at Anncxure "C" to the petition. The case of the petitioner is that his return of income was duly scrutinised during the course of a regular assessment and the assessment order was made under Sec. 143 (3) of the Income Tax Act, 1961, on 31st January, 1994, determining his total income at Rs. 27.120/-. According to the petitioner, he had submitted a written explanations in his letter dated 29th December, 1993, which was handed over to the Assessing Officer on 5th January, 1994 in connection with the conversion of capital asset being his share in immovable property on 15.8.1990 into stock-in-trade and its consequential effect, in view of the query raised by the Assessing Officer. The 1TO passed the assessment order for the said Assessment Year 1990-91 on 31.1.1994, a copy of which is at Anncxure "B" to the petition.

(3.) The petitioner was thereafter assessed protectively by way of regular assessment under Sec. 143 (3) on 27.3.1996 for the Assessment year 1993-94 by the respondent, who held in that order that the introduction of the said converted properly as capital contribution in the firm of Messrs Krishnan Enterprises by the petitioner on 19th September, 1990, was a 'transfer' under Sec. 2 (47) (iv) and Sec. 45 of the said Act and the long term capital gain was chargeable in the hands of the petitioner on 19th September, 1990 i.e. in the relevant Assessment Year 1991-92. In the said order dated 27.3.1996 at annexure "E" to the petition, it was found by the Assessing Officer that the possession of the bungalow was taken over by the Partnership firm of Messrs Krishnan Enterprises on 19.9.1990 and thereafter, it was demolished. It was noted that the value of the bungalow was taken at Rs. 56,00,000/- on the basis of the valuation report dated 20.8.1990 and after becoming partners in the said firm, four brothers who were the co-owners, were given credit of Rs. 14,00,000/- each in their capital account with the firm. It was noticed that the long term capital gain was therefore chargeable on 19.9.1990, as stock-in-trade of the assessee and his brothers was sold to the said firm on 19.9.1990 and under Sec. 45 of the Act, it should have been taxed in the Assessment Year 1991-92. Therefore, while making protective assessment in respect of the Assessment Year 1993-94 under the said order dated 27.3.1996, the Assessing Officer observed that proceedings under Sec. 148 of the Act were separately required to be taken. Thereafter, the impugned notice dated 29.3.1996 under Sec. 148 was served on the petitioner, in which the petitioner was informed, by the Assistant Commissioner of Income Tax, that he had a reason to believe that the petitioner-assessee's income which was assessable/ chargeable to tax for the Assessment Year 1991-92 had escaped assessment within the meaning of Sec. 147 of the said Act, and therefore, the said Officer proposed to reassess the income for the said assessment year. The petitioner was, by this notice required to deliver within thirty days from the date of the service of the notice, a return in the prescribed form showing income in respect of which he was assessable for the said assessment year.