Kailesh Narain Gupta, Jhansi V. DCIT,Circle-6, Jhansi

ITA 118/AGR/2012

• Counselvise Citation: 11820314 RSA 2012
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-08-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 22-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S D SHARMA
• Assessee Lawyers: NAVIN GARGH
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Transfer pricing; International transaction; Reason to believe; Reassessment proceedings
• Section: 40A(3); 133A; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 118/AGRA/2012 ASSTT. YEAR : 2002-03 KAILASH NARAIN GUPTA, VS. D.C.I.T., CIRCLE 6, OPP. MEDICAL COLLEGE, JHANSI. GATE NO.1, KANPUR ROAD, JHANSI (U.P.) (PAN : AASPG 9316 K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI NAVIN GARGH, ADVOCATE RESPONDENT BY : SHRI S.D. SHARMA, JR. DR DATE OF HEARING : 06.08.2013 DATE OF PRONOUNCEMENT OF ORDER : 08.08.2013 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-II, AGRA DATED 25.11.2011 FOR THE ASSESSMENT YEAR 2002- 03, CHALLENGING THE INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE IT ACT AND ADDITION OF RS.6,82,757/- U/S. 40A(3) OF THE IT ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT SURVEY U /S. 133A WAS CONDUCTED ON 15.10.2008 ON THE BUSINESS PREMISES OF THE ASSESSEE . DURING THE COURSE OF SURVEY AS PER AO CERTAIN PAPERS WERE IMPOUNDED AND ON PERU SAL OF THESE PAPERS, IT CAME ITA NO. 118/AGRA/2012 2 TO LIGHT THAT DURING THE F.Y. 2001-02 PERTAINING TO ASSESSMENT YEAR 2002-03 UNDER APPEAL, THE ASSESSEE HAD PURCHASED LANDS IN CASH FO R RS.32,13,785/- IN VIOLATION OF SECTION 40A(3) OF THE IT ACT. THE AO INITIATED REAS SESSMENT PROCEEDINGS U/S. 147 OF THE IT ACT AND MADE THE ADDITION OF RS.6,82,757/ - U/S. 40A(3) OF THE IT ACT. THE ASSESSEE CHALLENGED THE INITIATION OF RE-ASSESSMENT PROCEEDINGS AND ABOVE ADDITION BEFORE THE LD. CIT(A) AND IT WAS SUBMITTED THAT THE AO FORMED AN OPINION ON THE BASIS OF THE IMPOUNDED PAPERS THAT THE ASSESSEE WAS A COLONIZER DURING THE YEAR UNDER CONSIDERATION AND THE PURCHASES WERE FOR BUSI NESS. HOWEVER, NO EFFORTS WERE MADE TO FIND OUT BY THE AO WHETHER THE PURCHASE OF LAND CONSIDERED HAVE BEEN CLAIMED AS EXPENDITURE IN ORDER TO INVOKE THE PROVI SIONS OF SECTION 40A(3) OF THE IT ACT. THE BUNCH MARKED AS X-6 IMPOUNDED DURING TH E COURSE OF SURVEY CONTAINED THE DETAILS OF ALL LAND HOLDINGS OF THE A SSESSEE AND OTHER ASSOCIATES, WHICH ARE RECORDED IN THE BOOKS OF ACCOUNT AND LAND S WERE PURCHASED FROM VARIOUS OWNERS/SELLERS (DETAILS OF SAME ARE FILED AT PAGE 4 4 OF THE PAPER BOOK). IT WAS SUBMITTED THAT LANDS WERE PURCHASED INITIALLY FOR C ONSTRUCTION OF MALL COMPLEX FOR LETTING AND WAS HELD AS INVESTMENT, HOWEVER, THE SA ME WAS NOT ADVISED TO BE ECONOMICALLY FEASIBLE AND AS SUCH, LATER ON, SAME W ERE CONVERTED INTO STOCK IN TRADE IN THE NAME OF M/S. KAILASH ENCLAVE IN THE SU BSEQUENT YEAR. THE LAND WAS PURCHASED FOR EXPANSION OF KAILASH STONE INDUSTRIES . LANDS WERE NOT PURCHASED AS STOCK IN TRADE AND NO EXPENDITURE HAVE BEEN CLAIMED . THEREFORE, SECTION 40A(3) IS NOT ATTRACTED. IT WAS, THEREFORE, SUBMITTED THAT IN ITIATION OF RE-ASSESSMENT ITA NO. 118/AGRA/2012 3 PROCEEDINGS AND ADDITION ON MERIT ARE UNJUSTIFIED. THE LD. CIT(A) CONFIRMED THE INITIATION OF PROCEEDINGS U/S. 147/148 OF THE IT AC T BECAUSE THE AO HAS FORMED GENUINE BELIEF THAT THE INCOME CHARGEABLE TO TAX HA S ESCAPED ASSESSMENT ON VIOLATION OF SECTION 40A(3) OF THE IT ACT. THE LD. CIT(A) ALSO ON MERITS CONFIRMED THE ADDITION IN PRINCIPLE, BUT ALLOWED PART RELIEF FOR STAMP DUTY, REGISTRATION CHARGES ETC. THE APPEAL OF THE ASSESSEE WAS THUS, PARTLY AL LOWED. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND FILED COPY OF THE REASONS REC ORDED FOR REOPENING OF THE ASSESSMENT AT PAGE 16 OF THE PAPER BOOK. HE HAS REF ERRED TO RETURN OF INCOME AND COMPUTATION OF INCOME FILED WITH THE SAME (PB-18) A ND SUBMITTED THAT THE ASSESSEE HAS BUSINESS / PROFESSIONAL INCOME FROM M/S. JAI MA HAKALI MEDICAL STORE, M/S. KAILASH STONE INDUSTRIES, INTEREST ON CAPITAL FROM RATNA MEDICAL STORE AND SALARY FROM JAI MAHAKALI X-RAY AND PATHOLOGY CENTRE. IN M/ S. JAI MAHAKALI MEDICAL STORE, THE BUSINESS IS OF RETAIL TRADE OF MEDICINES . IN M/S. KAILASH STONE INDUSTRIES, THE NATURE OF BUSINESS IS STONE CRUSHING AND PROFIT THEREON HAVE BEEN SHOWN IN THE PROFIT AND LOSS ACCOUNT. HE HAS THEREFORE, SUBMITTE D THAT THE ASSESSEE WAS NOT COLONIZER OR DEALER IN REAL ESTATE IN THE ASSESSMEN T YEAR UNDER APPEAL. THE DETAILS OF LANDS PURCHASED ARE FILED AT PAGE 44 OF THE PAPER B OOK SUPPORTED BY ALL THE SALE DEEDS. HE HAS SUBMITTED THAT IN THESE BUSINESS CONC ERNS OF THE ASSESSEE, THE LAND PURCHASED HAVE BEEN SHOWN AS CAPITAL ASSETS/INVESTM ENT AND SAME HAVE NOT BEEN ITA NO. 118/AGRA/2012 4 SHOWN AS STOCK IN TRADE. THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUNT, THEREFORE, SECTION 40A(3) WOULD N OT APPLY. HE HAS SUBMITTED THAT DUE TO THE ABOVE REASONS, THE REASONS RECORDED BY T HE AO FOR REOPENING OF ASSESSMENT ARE FACTUALLY INCORRECT AND WITHOUT BASI S AND EVIDENCE. THEREFORE, RE- ASSESSMENT PROCEEDINGS SHOULD HAVE BEEN QUASHED IN THIS CASE. HE HAS RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF GA NGA SARAN & SONS PVT. LTD. VS. ITO, 130 ITR 1 IN WHICH IT WAS HELD THAT THE WORDS REASON TO BELIEVE ARE STRONGER THAN THE WORDS IS SATISFIED. THE BELIEF MAINTAINE D BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR I N OTHER WORDS IT MUST BE BASED ON THE REASONS WHICH ARE RELEVANT OR MATERIAL. HE HAS SUBMITTED THAT THERE WAS NO MATERIAL BEFORE THE AO TO PROVE THAT THE ASSESSEE W AS COLONIZER OR THE DEALER IN REAL ESTATE IN THE ASSESSMENT YEAR UNDER APPEAL. THEREFO RE, THE REASSESSMENT PROCEEDINGS ARE WITHOUT JURISDICTION AND ADDITION O N MERITS SHOULD ALSO BE DELETED. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDER S OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE AO HAS REASON TO BELIEVE THAT IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF VIOLATION OF THE P ROVISIONS OF SECTION 40A(3) OF THE IT ACT. THEREFORE, RE-ASSESSMENT PROCEEDINGS AR E VALID AND ADDITION ON MERITS HAS BEEN CORRECTLY MADE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL AVAILABLE ON RECORD. SECTION 147 OF THE IT ACT PROVIDES AS UNDER : ITA NO. 118/AGRA/2012 5 147 . IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME C HARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT Y EAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 1 53 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE I NDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR : PROVIDED ALSO THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHI CH ARE THE SUBJECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFF ICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : ITA NO. 118/AGRA/2012 6 (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED B Y THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REP ORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSE D ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RA TE ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXC ESSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR A NY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED; (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INC LUDING FINANCIAL INTEREST IN ANY ENTITY LOCATED OUTSIDE INDIA. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REA SSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR R EASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSME NT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF T HE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASON S FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RECORDED UNDE R SUB-SECTION (2) OF SECTION 148. EXPLANATION 4.FOR THE REMOVAL OF DOUBTS, IT IS HER EBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION, AS AMENDED BY THE F INANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BE GINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012. ITA NO. 118/AGRA/2012 7 THE ASSESSEE HAS FILED COPY OF REASONS FOR REOPENIN G OF ASSESSMENT AT PAGE 16 OF THE PAPER BOOK, WHICH READS AS UNDER : REASONS UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961 26.3.2009. ASSESSEE IS A COLONIZER AND DEALER IN RE AL ESTATE. A SURVEY WAS CONDUCTED IN THE PREMISES OF ASSESSEE AN D ON PERUSAL OF IMPOUNDED PAPERS, IT HAS BEEN FOUND THAT ASSESSEE H AS MADE CASH PURCHASES OF LAND WORTH RS.31,36,375/- DURING FINAN CIAL YEAR 2001-02 CORRESPONDING TO AY 2002-03. A 20% OF IT I.E., RS.6 ,27,275/- WAS DISALLOWABLE U/S. 40A(3). IT IS APPARENT THAT INCOM E OF RS.6,27,275/- ESCAPED ASSESSMENT. CONSIDERING IT, I HAVE REASON T O BELIEVE THAT AN INCOME OF RS.6,27,275/- ESCAPED ASSESSMENT FOR WHIC H, NOTICE U/S. 148 IS TO BE ISSUED FOR AY 2002-03. THE HONBLE ADDL. CIT, RANGE-6, JHANSI HAS GRANTED APPROVAL TO ISSUE NOTICE U/S. 148 WHICH HAS BEEN RECEIVED IN THIS OFFICE ON 26.3.2009. 4.1 HONBLE SUPREME COURT IN THE CASE OF SHEO NATH SINGH VS. APPELLATE ASST. COMMISSIONER OF INCOME-TAX, 82, ITR 147 HELD AS UND ER : THE WORDS REASON TO BELIEVE SUGGEST THAT THE BEL IEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONAB LE GROUNDS AND THAT THE INCOME-TAX OFFICER MAY ACT ON DIRECT OR CI RCUMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOU R. THE INCOME-TAX OFFICER WOULD BE ACTING WITHOUT JURISDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS ASPECT THOUGH THE DECLARATION OR SUFFI CIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY TH E COURT. 4.2 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF CIT VS. ATLAS CYCLE INDUSTRIES, 180 ITR 319 (P&H) HAS HELD AS UNDER : ITA NO. 118/AGRA/2012 8 HELD, (I) THAT THE TRIBUNAL WAS RIGHT IN CANCELING THE REASSESSMENT AS BOTH THE GROUNDS ON WHICH THE REASS ESSMENT NOTICE WAS ISSUED WERE NOT FOUND TO EXIST, AND, THEREFORE, THE INCOME-TAX OFFICER DID NOT GET JURISDICTION TO MAKE A REASSESS MENT. 4.3 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. ATUL JAIN, 299 ITR 383, HAS HELD AS UNDER : THERE MUST BE REASON TO BELIEVE WARRANTING THE I SSUANCE OF A NOTICE OF REASSESSMENT BY THE ASSESSING OFFICER. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING THE PROCEEDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE Q UASHED. MERE SATISFACTION OF THE ASSESSING OFFICER FOR THE ISSUA NCE OF A NOTICE IS NOT ENOUGH, THERE MUST BE REASONS ON RECORD WHICH LED H IM TO BELIEVE THAT A NOTICE SHOULD BE ISSUED. AFTER A FOUNDATION BASED ON INFORMATION IS SET UP, THERE MUST STILL BE SOME REASONS WHICH WARR ANT THE HOLDING OF A BELIEF SO AS TO NECESSITATE THE ISSUANCE OF A NOT ICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961. THE ASSESSEE PURCHASED SHARES AND SUBSEQUENTLY SOL D THESE SHARES AT A MUCH HIGHER VALUE. FOR THE ASSESSMENT Y EAR 1997-98, THE ASSESSEES DISCLOSED LONG-TERM CAPITAL GAINS ARISING FROM THE TRANSACTION. ON THE BASIS OF THE INFORMATION RECEIV ED BY THE DEPUTY DIRECTOR (INVESTIGATION), THE ASSESSING OFFICER ISS UED NOTICE UNDER SECTION 148. THE FILES WERE THEN PUT UP BEFORE THE COMMISSIONER AND IN RESPONSE TO THE QUESTION WHETHER THE COMMISSIONE R WAS SATISFIED THAT INCOME HAD ESCAPED ASSESSMENT, HE WROTE YES. THEREAFTER, THE ASSESSING OFFICER REASSESSED THE INCOME AND CHARGED INTEREST AND LEVIED PENALTY. THE COMMISSIONER (APPEALS) ALLOWED RELIEF PARTLY BUT THE TRIBUNAL CONCLUDED THE ISSUE IN FAVOUR OF THE A SSESSEES. ON APPEAL: HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMATION W AS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAI NS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THA T AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPI TAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHI CH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION ITA NO. 118/AGRA/2012 9 RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF TH E VAGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING O FFICER HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNES S OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE UNDER SECTION 148. WHAT HAD BEEN RECORDED BY THE ASSESSING OFFICER AS HIS REASONS T O BELIEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMM ISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORD ING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE ASSESSING OFFICER HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE. 4.4 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CAS E OF CIT VS. SMT. PARAMJIT KAUR, 311 ITR 38 HELD THE ASSESSEE FILED HER ORIGINAL RETURN DECLARING NIL INCOME. THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEE DINGS ON THE BASIS OF INFORMATION RECEIVED FROM THE SURVEY CIRCLE THAT THE ASSESSEE HAD GOT PREPARED A DEMAND DRAFT FOR A SUM OF RS.83,040 WHICH WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ON APPEAL BY THE ASSESSEE THE FIRST APPELLATE AUTHORITY UPHELD THE V ALIDITY OF THE NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, BUT SET ASIDE THE ASSESSMENT ON THE ADDITION MADE BY THE ASSESSING OF FICER AND REMITTED THE MATTER TO HIM TO FRAME A FRESH ASSESSM ENT. ON SECOND APPEAL, THE TRIBUNAL HELD THAT SINCE THE ASSESSING OFFICER FAILED TO INCORPORATE THE MATERIAL AND ITS SATISFACTION FOR R EOPENING THE ASSESSMENT, THE SAME WAS INVALID. ON A REFERENCE : HELD, THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASS ESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED O NLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASE D ON BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE AS SESSING OFFICER HAD TO ACT ON THE BASIS OF REASONS TO BELIEVE AND NOT ON REASONS TO SUSPECT. THE TRIBUNAL RIGHTLY CONCLUDED THAT THE A SSESSING OFFICER HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SATI SFACTION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID. ITA NO. 118/AGRA/2012 10 4.5 HONBLE ALLAHABAD HIGH COURT IN THE CASE OF TIN MANUFACTURING CO. OF INDIA VS. CIT, 222 ITR 323 HELD THAT IN RE-ASSESSMENT PRO CEEDINGS, THE BURDEN WAS ON THE REVENUE TO ESTABLISH THAT THERE WAS INCOME WHIC H ESCAPED ASSESSMENT. 5. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F ABOVE DECISIONS, WE ARE OF THE VIEW THAT INITIATION OF RE-ASSESSMENT PROCEEDIN GS IN THE FACTS AND CIRCUMSTANCES OF THE CASE ARE BAD IN LAW AND THE AO HAS WITHOUT J URISDICTION WRONGLY PROCEEDED AGAINST THE ASSESSEE U/S. 147 OF THE IT ACT. THE AS SESSEE FILED RETURN OF INCOME DECLARING TOTAL INCOME OF RS.11,35,776/- WHICH WAS ACCEPTED BY THE AO WHILE COMPUTING INCOME OF THE ASSESSEE. COPY OF RETURN IS FILED AT PAGE 17 OF THE PAPER BOOK, IN WHICH ABOVE INCOME WAS DECLARED BY THE ASS ESSEE FROM FOUR SOURCES AS NOTED ABOVE. THE ASSESSEE HAS PROFIT FROM M/S. JAI MAHAKALI MEDICAL STORE, IN WHICH THE ASSESSEE IS HAVING RETAIL TRADE OF MEDICI NES. IN M/S. KAILASH STONE INDUSTRIES, THE ASSESSEE HAS BUSINESS OF STONE CRUS HING. OTHER INCOME EARNED BY THE ASSESSEE IS INTEREST ON CAPITAL FROM RATNA MEDICAL STORE AND SALARY FROM JAI MAHAKALI X-RAY AND PATHOLOGY CENTRE. THE PROFIT AND LOSS ACCOUNT AND BALANCE SHEET ARE FILED IN THE PAPER BOOK OF THESE CONCERNS TO SHOW THAT THE ASSESSEE DID NOT DEAL IN REAL ESTATE AND WAS ALSO NOT COLONIZER IN A SSESSMENT YEAR UNDER APPEAL. NATURE OF BUSINESS OF THESE CONCERNS HELD BY THE AS SESSEE WOULD ALSO SUPPORT THE SUBMISSIONS OF THE ASSESSEE THAT IN THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS NOT COLONIZER AND DEALER IN REAL ESTATE. THE ASSESS EE FILED DETAILS OF LAND PURCHASED ITA NO. 118/AGRA/2012 11 AT PAGE 44 OF THE PAPER BOOK WHICH ARE ENTERED IN T HE BOOKS OF ACCOUNT OF THE ASSESSEE AND WERE HELD AS CAPITAL ASSETS/INVESTMENT . THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE ON ACCOUNT OF PURCHASE OF LAND IN THE P ROFIT AND LOSS ACCOUNT. THE ABOVE FACTS WOULD CLEARLY PROVE THAT DURING THE SUR VEY THE IMPOUNDED PAPERS WERE ONLY SALE DEEDS WHICH PROVE THAT THE ASSESSEE PURCH ASED THE LAND. THE AO HAD NOT EXAMINED THIS INFORMATION BEFORE RECORDING HIS SATI SFACTION OF ESCAPED INCOME AND INITIATED THE RE-ASSESSMENT PROCEEDINGS. THE AO HAD ACTED ONLY ON THE BASIS OF SUSPICION THAT THE ASSESSEE WAS A COLONIZER AND DEA LER IN REAL ESTATE. THE AO WAS HAVING NO MATERIAL OR EVIDENCE WITH HIM TO SUPPORT HIS BELIEF THAT THE ASSESSEE ACTED AS COLONIZER OR DEALER IN REAL ESTATE IN THE ASSESSMENT YEAR UNDER APPEAL. THE REASONS RECORDED BY THE AO FOR REOPENING OF THE ASS ESSMENT ARE FACTUALLY INCORRECT AND NON-EXISTENT. SECTION 40A(3) APPLIES IN THE CAS E OF EXPENDITURE CLAIMED BY THE ASSESSEE WHILE COMPUTING BUSINESS INCOME, BUT IN TH IS CASE, THE ASSESSEE DID NOT CLAIM ANY EXPENDITURE IN THE PROFIT AND LOSS ACCOUN T OF ALL THE CONCERNS HELD BY HIM. THE AO HAD TO ACT ON THE BASIS OF REASON TO BE LIEVE AND NOT ON REASON TO SUSPECT. THE AO HAD FAILED TO INCORPORATE ANY MATER IAL FOR HIS SATISFACTION FOR RE- OPENING OF ASSESSMENT. THERE WAS NO FOUNDATION TO H IS REASONS TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME IN THE ASSESSMENT YEAR UND ER APPEAL. THEREFORE, THE ISSUANCE OF NOTICE U/S. 148 OF THE IT ACT FOR RE-AS SESSMENT PROCEEDINGS WAS NOT VALID. WE ACCORDINGLY DO NOT JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW IN INITIATING THE REASSESSMENT PROCEEDINGS OR CONFIRMING THE SAME ORDER. THUS, THE AO ACTED ITA NO. 118/AGRA/2012 12 WITHOUT JURISDICTION TO PROCEED AGAINST THE ASSESSE E U/S. 147 OF THE IT ACT. WE, ACCORDINGLY, SET ASIDE AND QUASH THE INITIATION OF RE-ASSESSMENT PROCEEDINGS U/S. 147 OF THE IT ACT. RESULTANTLY, THE ADDITION MADE O N MERIT STANDS DELETED. THE SAME IS NOT DISCUSSED SEPARATELY AS THE SAME IS LEF T FOR ACADEMIC PURPOSE ONLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY