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Emphasizing the importance of “tangible” material in reassessment proceedings and protecting taxpayers’ rights: Bombay High Court

The High Court of Bombay passed a judgement on 04 May 2023, addressing the validity of a reassessment notice issued by the Income Tax Department. The petitioner sought to challenge the notice, which proposed to reopen the assessment for the Assessment Year 2014-15. The case of CHANCHAL BHAGWATILAL GOKHRU VS. UNION OF INDIA & ANR.  IN WRIT PETITION NO. 2014 OF 2022 which was passed by the division bench comprising of HONOURABLE SHRI JUSTICE DHIRAJ SINGH THAKUR & HONOURABLE JUSTICE G. S. KULKARNI, KAMAL KHATA.

Facts

The petitioner had filed her income tax return for AY 2014-15 on 28th July 2014. The Assessing Officer (AO) subsequently passed an order under section 143(3) of the Income Tax Act, 1961, on 18th November 2016. This order added a specific amount to the petitioner’s total income based on the withdrawal of exemption claimed under section 10(38) of the Act. The petitioner paid the tax on the additional amount as directed by the AO. Furthermore, the petitioner was granted a waiver of penalty for AY 2014-15 on 31st January 2018, based on an application made under section 273A of the Act.

However, to the petitioner’s surprise, a notice under section 148 of the Act was issued on 26th March 2021, proposing to reopen the assessment for AY 2014-15. This notice was issued after a significant gap of four years. In response, the petitioner filed a return of income on 14th April 2021, followed by notices under sections 143(2) and 142(1) on 10th November 2021 and 15th November 2021, respectively. The petitioner provided the requested details and expressed objections to the reassessment through a communication dated 28th January 2022. The objections were disposed of on 11th February 2022. Another notice was issued on 25th February 2022, leading to the filing of the present petition.

Judgment

The court meticulously examined the reasons recorded by the AO for reopening the assessment. The AO primarily relied on the claim made by the petitioner regarding the purchase and sale of shares of penny stock scrips. The AO concluded that the long-term capital gain should be considered as unexplained investment/income from other sources rather than a capital gain, suggesting that the transactions were merely an accommodation entry designed to generate unexplained investment and bogus profits.

However, the court found no indication of the petitioner’s failure to disclose any material facts. It noted that the AO had already considered these transactions during the original assessment proceedings and had added the corresponding amount to the petitioner’s total income. The petitioner had duly paid the tax on this additional income. The court, therefore, found no substance in the AO’s claim that income chargeable to tax had escaped assessment. It emphasized that the mere change of opinion regarding the calculation of tax payable did not provide a valid basis for reopening the assessment. The court reiterated the well-established principle that reassessment proceedings require fresh “tangible material” to justify their validity.

Considering the settled legal position and the facts of the case, the court delivered the following order:

The impugned notice dated 26th March 2021, issued by Respondent No. 2 for AY 2014-15, was quashed, and set aside. All actions taken in furtherance of the notice were prohibited.

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JUDGEMENT REVIEWED BY VETHIKA D PORWAL, BMS COLLEGE OF LAW

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Land Reservation for Public Parking Lapsed Due to the Authorities’ failure to take necessary steps for acquisition: Bombay High Court

INTRODUCTION:

The High Court of Bombay passed a judgement on 04 May 2023 stating that that a land reservation for public parking, which had been in place for years, has lapsed due to the authorities’ failure to take necessary steps for acquisition. The case of SADASHIV TRYAMBAK RAJEBAHADUR & ORS. VS. STATE OF MAHARASHTRA & ORS IN WRIT PETITION NO. 1093 OF 2017 which was passed by the single bench comprising of HONOURABLE JUSTICE G. S. KULKARNI, KAMAL KHATA. The case sheds light on the importance of timely action by government bodies and the rights of landowners.

FACTS:

This petition is filed under Article 226 of the Constitution, seeking a Writ of Mandamus to declare Reservation No. 485 on Final Plot No. 131/1 and 131/2 in City Survey No. 352 & 352A as lapsed. The petitioner contends that the concerned authorities have neglected to take any steps for over two decades, either for purchasing or acquiring the land under the Maharashtra Regional and Town Planning Act, 1966 (“the MRTP Act”). Additionally, the petitioner highlights that the land should have been released from the reservation within a specific period of 12 months from the date of the Purchase notice issued on 8th July 2015, as stipulated by the Act. Considering these circumstances, the petitioner seeks the court’s declaration that the reservation has lapsed, effectively freeing the land from its reserved status.

In response to the purchase notice, the municipal corporation stated that the notice period would only commence upon submission of the petitioners’ documents. The parties engaged in correspondence regarding the production of title documents, while the petitioners argued that the reservation had lapsed due to the authorities’ failure to take necessary steps within the prescribed time frame. It was revealed through an application under the Right to Information Act that a land acquisition proposal for the plot had been pending before the Deputy Collector (Land Acquisition).

THE HIGH COURT’S JUDGMENT:

After hearing arguments from both sides, the Bombay High Court rendered a crucial judgment. The court held that the respondents’ contentions, which sought to continue the reservation on the petitioners’ plot, were contrary to established legal principles. Referring to previous rulings, the court emphasized that a draft development plan or revised development plan does not attain legal sanctity until it is sanctioned in accordance with the prescribed procedure under the MRTP Act.

The court further highlighted that the purchase notice issued by the petitioners was valid since it was served before the notification implementing the draft revised development plan. It rejected the contention that an amendment to the MRTP Act, extending the notice period to 24 months, should apply retrospectively. The court emphasized that the amendment did not have retrospective effect and, therefore, the lapse of the reservation occurred after twelve months from the date of the purchase notice.

Considering the above, the court allowed the writ petition, declared the reservation as lapsed, and directed the state government to notify the lapsing of the reservation in the Official Gazette. Additionally, the court instructed the authorities to consider any fresh plans for building permission submitted by the petitioners in an expedited manner.

IMPLICATIONS:

The Bombay High Court’s judgment has significant implications for landowners and highlights the importance of adhering to legal procedures and timelines in land acquisition and development plans. The ruling reinforces the principle that a draft development plan or revised development plan cannot be considered final until it is sanctioned according to the prescribed process.

Furthermore, the judgment emphasizes that the officers of the planning authority are not authorized to investigate land titles and that the running of time for land acquisition is not contingent upon submission of title documents along with the purchase notice. These clarifications provide valuable guidance for future cases involving land acquisition and reservation issues.

CONCLUSION:

The Bombay High Court’s judgment brings clarity to the lapse of land reservations due to inaction by authorities and the significance of adherence to legal procedures. The ruling ensures that landowners’ rights are protected and underscores the importance of timely and transparent decision-making by government bodies. This judgment serves as a precedent for similar cases and reinforces the principles of fairness and justice in land acquisition and development processes.

“PRIME LEGAL is a full-service law firm that has won a National Award and has more than 20 years of experience in an array of sectors and practice areas. Prime legal fall into a category of best law firm, best lawyer, best family lawyer, best divorce lawyer, best divorce law firm, best criminal lawyer, best criminal law firm, best consumer lawyer, best civil lawyer.”

JUDGEMENT REVIEWED BY VETHIKA D PORWAL, BMS COLLEGE OF LAW

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