Poonam Bhalla, Faridabad V. Assistant Commissioner of Income-tax, Faridabad

ITA 1125/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4761 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2006-2007
• Appeal Filed On: 25-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVIKANT GUPTA
• Keywords: Reopening of assessment; Capital asset; Tangible material; Reason to believe
• Section: 143(3); 2(14); 147; 148; 15; 139; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SH. N. K. BILLAIYA , ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 1125/DEL/2015 (ASSESSMENT YEAR: 2006-07) SMT. POONAM BHALLA HOUSE NO. 1221 SECTOR 15 FARIDABAD PAN : ADFPB2080D VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-II FARIDABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NEERAJ JAIN, CA RESPONDENT BY : SH. RAVI KANT GUPTA, SR. DR DATE OF HEARING : 07.08.2018 DATE OF PRONOUNCEMENT : 09.08.2018 O R D E R PER BEENA A. PILLAI, J.M : PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 17/12/14 PASSED BY LD.CIT(A), FARIDABAD FOR ASSESSM ENT YEAR 2006-07 ON THE FOLLOWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF LEARNED COMMISSIONER OF INCO ME TAX (APPEALS) IS BAD IN LAW AND ON THE FACTS OF THE CAS E. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS) HAS ERRED IN SUSTAINING THE REOPENING OF ASSESSMENT U/S 147 OF THE INCOME TAX ACT, 1961. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN SUSTAINING THE ADDITION OF R S. 2 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) 65,86,835/- MADE ON ACCOUNT OF SHORT TERM CAPITAL G AIN ON SALE OF AGRICULTURAL LAND HOLDING THAT THE LAND WAS NOT AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2(1 4) OF INCOME TAX ACT, 1961. 4. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO EACH OTHER. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE FILED ITS RETURN OF INCOME DECLARING INCOM E OF RS.43,364/- ON 19/03/07, WHICH WAS PROCESSED UNDER SECTION 143 (1 ) OF THE ACT. SUBSEQUENTLY FROM ASSESSMENT ORDER PASSED IN CASE O F SMT.CHAYA SINHA WIFE OF SH. PRAVEEN KUMAR, HAVING ADDRESS AT 5 61, SECTOR 20 1A, FARIDABAD, IT WAS NOTICED THAT SMT.CHAYA SINHA A ND SMT.POONAM BHALLA WERE CO-OWNERS OF AN AGRICULTURAL LAND, HOLDING HALF EQUAL SHARES, SITUATED AT VILLAGE DUDHOLA, PAL WAL. FROM ASSESSMENT ORDER PASSED IN CASE OF SMT.CHAYA SINHA, CLAIM OF EXEMPTION OF CAPITAL GAINS TAX WAS DENIED AS ASSESSI NG OFFICER THEREIN WAS OF THE OPINION THAT ALLEGED AGRICULTURAL LAND SOLD DURING THE YEAR WAS NOT CAPITAL ASSET, UNDER THE DEFINITION IN SECTION 2 (14) OF THE ACT. 3. ACCORDINGLY NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON 22/03/13 TO ASSESSEE, IN RESPONSE TO WHICH IT WAS SUB MITTED BY ASSESSEE TO CONSIDER RETURN FILED ON 19/03/07 U/S.1 39(9) OF THE ACT, AS RETURN FILED IN RESPONSE TO NOTICE. FROM THE RET URN SO FILED, LD. AO OBSERVED THAT ASSESSEE SOLD ALLEGED AGRICULTURA L LAND AND CLAIMED THAT IT IS NOT A CAPITAL ASSET UNDER SECTIO N 2 (14) OF THE ACT AND THEREFORE PROFIT ARISING THEREON AMOUNTING TO R S.62,18,410/- IS 3 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) NOT CHARGEABLE TO TAX AS CAPITAL GAIN. IT WAS ALSO S UBMITTED THAT THE LAND IS SITUATED OUTSIDE MUNICIPAL AREA. 4. LD.AO THUS RECORDED REASONS FOR REOPENING ASSESSME NT IN THE CASE OF ASSESSEE IS AS UNDER: THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLA RING OF RS. 43,364/-. DURING THE COURSE OF ASSESSMENT PROCEEDIN GS IN THE CASE OF SMT. CHHAYA SINGH W/O. SH. PRAVIN KUMAR , 561, SECTOR-21A, FARIDABAD, IT WAS NOTICED THAT SMT. CHH AYA SINHA & SMT. POONAM BHALLA HAD SOLD LAND AT VILLAGE DUDHOLA, PALWAL FOR A CONSIDERATION OF RS. 1,34,47, 500/- VIDE SALE DEED 31.10.2005. ASSESSMENT HAS BEEN COMP LETED IN THE CASE OF SMT. CHHAYA SINHA BY DENYING EXEMPTI ON U/S 2(14) AND SHORT TERM CAPITAL GAIN HAS BEEN ADDED BA CK TO THE TOTAL INCOME OF SMT. CHHAYA SINHA (SHE HAS 50% SHAR E IN THE SAID LAW). IT IS FURTHER NOTICED THAT THE ASSESSEE HAS CLA IMED DEDUCTION AMOUNTING TO RS. 82,83,292/-. THE ASSESSEE IS NOT E NTITLED TO CLAIM EXEMPTION AS THE LAND SOLD DURING THE YEAR WA S CAPITAL ASSETS FALLING WITHIN THE MEANING OF SECTION 2(14)( III)(B) OF THE I.T.ACT, AS THE LAND IN QUESTION IS SITUATED IN THE ADJOINING AREA OF TEHSIL PALWAL, AND CAPITAL GAINS TAX IS LIA BLE ON THE CAPITAL GAIN ARISING OUT OF THIS TRANSACTION. KEEPING IN VIEW OF THE FACTS DATED ABOVE, I HAV E REASON TO BELIEVE THAT INCOME AMOUNTING TO RS. 82,83,292/- HA S ESCAPED ASSESSMENT FOR THE A.Y. 2006-07. 4 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) 5. ASSESSEE MADE VARIOUS SUBMISSIONS BEFORE LD.AO DUR ING ASSESSMENT PROCEEDINGS, LD.AO PLACED RELIANCE UPON REPORT OF INSPECTOR WHICH WAS OBTAINED IN CASE OF SMT.CHAYA SIN HA DATED 11/11/11. IN THE REPORT INSPECTOR REPORTED THAT THE ENTIRE AREA IS AN INDUSTRIAL HUB AND THEREFORE WAS NOT USED FOR AGR ICULTURAL PURPOSES ON THE DATE WHEN IT WAS SOLD BY ASSESSEE PRI OR TO 3 TO 4 YEARS. 6. LD.AO PASSED ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT, TAXING 50% OF THE CAPITAL G AIN ON SALE OF LAND AS SHORT TERM CAPITAL GAIN, FOLLOWING ASSESSMENT OR DER PASSED IN CASE OF SMT.CHAYA SINHA. 7. AGGRIEVED BY ORDER OF LD.AO, ASSESSEE PREFERRED AP PEAL BEFORE LD.CIT (A) CHALLENGING ISSUE OF REOPENING, AS WELL A S MERIT OF ADDITION. LD.CIT(A) UPHELD ACTION OF REOPENING OF A SSESSMENT AND DISMISSED GROUNDS OF ASSESSEE BY HOLDING THAT NO AG RICULTURAL INCOME HAS BEEN SHOWN DURING THE PERIOD OF HOLDING A ND THEREFORE NO AGRICULTURAL ACTIVITIES WERE CARRIED OUT BY ASSE SSEE AS PER ENQUIRY REPORT SUBMITTED BY INSPECTOR AND SALE OF L AND WAS IN A DEVELOPED INDUSTRIAL HUB AND THEREFORE COULD NOT BE CONSIDERED TO BE AN AGRICULTURAL LAND. HE UPHELD ACTION OF LD.AO IN CONSIDERING LAND TO BE CAPITAL ASSET. 8. AGGRIEVED BY ORDER OF LD.CIT (A), ASSESSEE IS IN A PPEAL BEFORE US NOW. 9. GROUND NO.1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. 5 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) 10. GROUND NO.2 HAS BEEN RAISED BY ASSESSEE CHALLENGING VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. 11. LD.AR SUBMITTED THAT THERE IS NO MATERIAL THAT HAS COME TO THE POSSESSION OF LD.AO AND REOPENING IS BASED ON RETUR NS FILED BY ASSESSEE. HE SUBMITTED THAT ASSESSEE HAD FILED ITS ORIGINAL RETURN UNDER SECTION 139 (1) OF THE ACT ON 19/03/07, WHICH IS THE BASIS FOR REOPENING OF ASSESSMENT IN PRESENT CASE. LD.AR FURT HER SUBMITTED THAT REASONS RECORDED FOR REOPENING DOES NOT SPEAK OF ANY INDEPENDENT MATERIAL WHICH HAD COME TO THE NOTICE OF LD.AO, AND THEREFORE REASSESSMENT NOTICE IS WITHOUT ANY FOUNDAT ION WHICH CANNOT BE CONSIDERED TO BE VALID. HE SUBMITTED THAT REASONS RECORDED FOR REOPENING IS BASED UPON ASSESSMENT PRO CEEDINGS IN CASE OF SMT.CHAYA SINHA, WHO WAS CO-OWNER ALONG WITH A SSESSEE OF ALLEGED PLOT THAT WAS SOLD. FURTHER HE SUBMITTED THA T THIS HONBLE TRIBUNAL IN CASE OF SMT.CHAYA SINHA HAS HELD REOPEN ING TO BE BAD IN LAW, BY HOLDING THAT THERE WAS NO REASONS TO BELIEVE OF ESCAPEMENT OF ANY INCOME. 12. ON THE CONTRARY LD. SR.DR SUBMITTED THAT REOPENING IS BASED ON INFORMATION COLLECTED BY INSPECTOR DURING ASSESS MENT PROCEEDINGS OF SMT.CHAYA SINHA. HE SUBMITTED THAT I NSPECTORS REPORT CLEARLY SHOWS, THAT THERE WAS NO AGRICULTURAL INCOME, WHICH IS SUBSTANTIATED BY RETURN OF INCOME, WHEREIN NO AGR ICULTURAL INCOME HAS BEEN DECLARED BY ASSESSEE. FURTHER LD.SR .DR SUBMITTED THAT LAND WAS PURCHASED AND SOLD WITHIN A SHORT PERIO D OF 10 MONTHS TIME, WHICH FURTHER SUBSTANTIATES REVENUE ST AND THAT ASSESSEE COULD NOT HAVE STARTED CULTIVATING ON ALLE GED AGRICULTURAL 6 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) LAND IN THIS SHORT PERIOD. PLACING RELIANCE UPON ST ATEMENT OF SH.PRAVEEN KUMAR, HUSBAND OF SMT. CHAYA SINHA, LD.S R.DR SUBMITTED THAT, ADMITTEDLY THERE HAS BEEN NO CULTIV ATION ON ALLEGED AGRICULTURAL LAND AND, THEREFORE LD.AO WAS CORRECT I N HOLDING IT TO BE CAPITAL ASSET IN THE HANDS OF ASSESSEE. HE SUBMI TTED THAT BASED UPON AFORESTATED MATERIALS GATHERED DURING ASSESSME NT PROCEEDINGS OF SMT. CHAYA SINHA, REOPENING IN CASE OF ASSESSEE IS BASED UPON A REASON TO BELIEVE , OF INCOME HAVING ESCAPED ASSESSMENT. 13. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH T HE SIDES AND THE LIGHT OF THE RECORDS PLACED BEFORE US. ASSESSEE BEFORE US IS AN INDIVIDUAL AND HAD FILED H ER RETURN OF INCOME ON 19/03/07, WHEREIN SHE HAD DISCLOSED PROFIT FROM SALE OF AGRICULTURAL LAND AMOUNTING TO RS.62,18,410/-. THE SAME IS EVIDENT FROM COMPUTATION OF INCOME PLACED AT PAGE 3-4 OF PA PER BOOK. THE ASSESSMENT WAS REOPENED, AND AS PER REASONS RECORDED , A SIMILAR CLAIM IN CASE OF CO-OWNER WAS DENIED BY ASSESSING OFF ICER AND FURTHER THAT THE LAND IN QUESTION, IS SITUATED IN A DJOINING AREA OF THASIL, PALWAL, AND CAPITAL GAIN TAX IS PAYABLE ON CAPITAL GAINS ARISING OUT OF THIS TRANSACTION. HOWEVER IT IS FURTH ER OBSERVED THAT INSPECTORS REPORT RELIED UPON BY LD.AO SHOW LAND IS ABOUT 11 KM FROM THASIL PALWAL. LD.AR WHILE ARGUING HIS CASE, PL ACED RELIANCE UPON DECISION OF THIS TRIBUNAL DATED 11/03/16, PASS ED IN CASE OF CO-OWNER, IN ITA NO. 2462/DEL/2014 FOR ASSESSMENT YE AR 2006-07 PLACED AT PAGE 38-41A OF PAPER BOOK. UPON PERUSAL OF THIS ORDER, PASSED BY THE COORDINAT E BENCH OF THIS TRIBUNAL IN THE CASE OF CO-OWNER, IT IS OBSERVED THA T ON SIMILAR FACTS, 7 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) REOPENING HAS BEEN QUASHED BY OBSERVING THERE WAS N O REASON TO BELIEVE FOR REOPENING THE ASSESSMENT. THIS TRIBUNAL THEREI N OBSERVED THAT: 18. IN THE PRESENT CASE, THE REASONS DISCLOSE THAT THE ASSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INCOME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER THE ACCEPTED THE RETURN UNDER SECTION 143 (1) WITHOUT SCRUTINY, AND NOTHING MORE. THERE IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AND ABUSE OF POWER BY THE ASSESSING OFFICER BOTH STRONG LY DEPRECATED BY THE SUPREME COURT IN CIT VERSUS KELVI NATOR (SUPRA). THE REASONS RECORDED BY THE ASSESSING OFFI CER IN THE PRESENT CASE TO NOT CONFIRM OUR APPREHENSION ABOUT THE HARM THAT ARE LESS STRICT INTERPRETATION OF THE WOR DS REASON TO BELIEVE VIZ-A-VIZ AN INTIMATION ISSUED UNDER SE CTION 143 (1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPE R IN THE REASONS RECORDED OF ANY TANGIBLE MATERIAL WHICH CAM E TO THE POSSESSION OF ASSESSING OFFICER SUBSEQUENT TO T HE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY EXERCIS E OF THE POWER CONFERRED UNDER SECTION 147. 14. IN THE FACTS OF THE PRESENT CASE ASSESSING OFFICER IS REOPENING ASSESSMENT ON 2 COUNTS: ASSESSMENT IN THE CASE OF SMT. CHAYA SINHA HAS BEEN PASSED BY DENYING EXEMPTION UNDER SECTION 2 (14) AND 50% O F SHORT TERM CAPITAL GAIN HAS BEEN ADDED BACK TO THE TOTAL INCOME OF SMT.CHAYA SINHA. AND 8 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) THE EXEMPTION CLAIMED BY ASSESSEE IS TO BE DENIED A S IT WAS A CAPITAL ASSET FALLING WITHIN THE MEANING OF SECTION 2 (14) (III) (B) OF THE I T ACT, AS THE LAND IN QUESTION IS SITUATED IN THE ADJOINING AREA OF THASIL PALWAL AND CAPITAL GAIN TAX IS LIABLE ON THE CAPITAL GAIN ARISING OUT OF THIS TRANSACTION. 15. IN OUR VIEW THE ABOVE 2 REASONS CANNOT BE THE BASI S FOR REOPENING ASSESSMENT IN CASE OF ASSESSEE BEFORE US. MERELY BECAUSE ADDITION HAS BEEN MADE IN HANDS OF CO-OWNER, NO PRES UMPTION COULD BE DRAWN THAT INCOME HAS ESCAPED ASSESSMENT IN THE HANDS OF ASSESSEE, WITHOUT THERE BEING INDEPENDENT REASONS TO BELIEVE , BASED UPON COGENT MATERIALS. SECONDLY, INSPECTORS REPORT BASED UPON WHICH ASSESSMENT WAS COMPLETED IN THE HANDS OF SMT.CHAYA SINHA, SPECIFICALLY STATES THAT ALLEGED AGRICULTURA L LAND IS SITUATED 11 KM AWAY FROM THASIL PALWAL, AND THEREFORE 2 ND REASON FOR REOPENING OF ASSESSMENT IS AGAIN BASED UPON A CONTR ARY VIEW. 16. IN THE CONTEXT OF STATEMENT RECORDED OF SH. PAWAN K UMAR, HUSBAND OF SMT.CHAYA SINHA REGARDING NO CULTIVATION HAS TAKEN PLACE ON ALLEGED AGRICULTURAL LAND DURING HOLDING P ERIOD AND SUBSEQUENTLY HAVING BEING SOLD IN A SHORT SPAN OF 1 0 MONTHS, WE OBSERVE THAT INTENTION TO USE A PARTICULAR PIECE OF LAND FOR NON AGRICULTURAL PURPOSES CANNOT BY ITSELF ALTER CHARAC TER OF THE LAND IN QUESTION. WHAT IS TO BE SEEN IS NATURE OF LAND AS O N THE DATE IT WAS ACQUIRED. IT IS OBSERVED FROM LETTER DATED 13/03/06 ISSUED BY THESILDAR, PALWAL, THAT ALLEGED AGRICULTURAL LAND I S SITUATED 12 KM AWAY FROM THE CITY OF PALWAL. THIS FACT HAS NOT BEEN DISPUTED BY LD.AO, IN PRESENT FACTS OF THE CASE OR BY ASSESSING OFFICER WHO 9 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) PASSED ASSESSMENT ORDER IN CASE OF SMT.CHAYA SINHA. FURTHER AUTHORITIES BELOW HAS NOT BEEN ABLE TO DISPUTE THAT DURING FINANCIAL YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N, AS PER REVENUE RECORDS LAND IN QUESTION HAS BEEN SHOWN AS KHUD KHAST AND WITHOUT ANY BASIS OR MATERIAL EVIDENCE RE JECTS THESE GOVERNMENT RECORDS BY HOLDING IT TO BE AN MECHANICA L ENTRY. 17. ON THE BASIS OF THE ABOVE, WE DO NOT FIND ANY MATE RIALS, BASED UPON WHICH ASSESSING OFFICER HAD REASON TO BELIEVE, THAT INCOME HAS ESCAPED ASSESSMENT. ACCORDINGLY WE ALLOW LEGAL CLAIM RAISED BY ASSESSEE IN GROUND NO. 2. 18. GROUND NO. 3 IS IN RESPECT OF ADDITION MADE ON ACCOUNT OF SHORT TERM CAPITAL GAIN ON SALE OF AGRICULTURAL LAN D HOLDING THAT THE LAND WAS NOT AGRICULTURAL LAND WITHIN THE MEANING OF SECTION 2 (14) OF THE ACT. AS WE HAVE ALREADY QUASHED AND SET-ASIDE THE REOPEN ING OF ASSESSMENT, THIS GROUND BECOMES INFRUCTUOUS. 19. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS ALLO WED ON LEGAL ISSUE. ORDER PRONOUNCED IN THE OPEN COURT ON 09/08/2018. SD/- SD/- (N. K. BILLAIYA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 09.08.2018 BINITA 10 ITA NO. 1125/DEL/2015 (SMT. POONAM BHALLA) COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI