Shri Jitendra Narottamdas Dhabalia, Ahmedabad V. The ITO, Ward-5(1)(4), Ahmedabad

ITA 1487/AHD/2019

AI Insights

The case revolves around the reassessment of Shri Jitendra Narottamdas Dhabalia for the Assessment Year 2008-09, where the Income Tax Officer (ITO) reopened the assessment citing income from the sale of immovable property that was not reported in the original return. The assessee contested the reassessment, arguing that the original return did declare a capital loss from the same transaction, which was overlooked by the ITO. The Commissioner of Income Tax (Appeals) upheld the reopening, but the Tribunal found the reopening to be based on incorrect facts and thus invalidated the reassessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114250 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-10-2023
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2019
• Other Referred Cases: Sagar Enterprise Vs. ACIT [2002] 257 ITR 335 (Guj.), Vijay Harichandra Patel Vs. ITO reported in 400 ITR 167 (Guj.), Pravinbilai Amaratlal Kiri Vs. DCIT in TC No. 12513 of 2017
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Salary income; Cost of acquisition; Fair market value; Corroborative evidences; Valuation report; Reassessment proceedings
• Section: 147; 148; 144; 50C; 143(1); 55A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member Shri Jitendra Narottamdas Dhabalia, C-5, 151, Orchid Harmoney, Applewood Township, S.P. Ring Road, Ahmedabad-380058 PAN: ADHPD4778J (Appellant) Vs The Income Tax Officer, Ward-5(1)(4), Ahmedabad (Respondent) Assessee Represented: Shri Aseem L Thakkar, A.R Revenue Represented: Shri Ashok Kumar Suthar, Sr.D.R. Date of hearing : 17-10-2023 Date of pronouncement : 18-10-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Assessee as against the appellate order dated 15.07.2019 passed by the Commissioner of Income Tax (Appeals)-5, Ahmedabad arising out of the assessment order passed under section 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2008-09. ITA No. 1487/Ahd/2019 Assessment Year 2008-09 I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 2 2. The brief facts of the case is that the assessee is an individual who is deriving salary income and Long Term Capital Gain. For the Assessment Year 2008-09, the assessee field its original Return of Income on 19-06-2009 declaring total income of Rs. 1,92,640/-. The return was processed u/s. 143(1) of the Act on 25-03-2011. It is thereafter the case was reopened u/s. 147 of the Act by issuing a notice u/s. 148 dated 31.03.2015 recording the reasons as follows: "As per AIR information, the assessee has sold immovable property for a total sale consideration of Rs. 1,80,00,000/- during F.Y. 2007-08. The assessee was requested to furnish necessary details and documents related to the aforesaid transactions vide non-statutory letter dated 23.03.2015. The assessee has not furnished any documentary evidence till date. The assessee not shown any income from Capital Gain from the said transaction in his Return of Income filed for A.Y. 2008-09 which is treated as income escaped from assessment." 2.1. In response to the notice, the assessee filed vide letter dated 16-12-2015 copy of the original return, details of sale of immovable property, computation of capital gain and details of family members. The Ld. A.O issued a show cause notice dated 17-03- 2016 that the assessee claimed Fair Market Value as on 01-04- 1981 at Rs. 32,37,000/- and worked out the capital loss at Rs. 4,87,245/- (50% being assessee’s share). Whereas District Valuation Officer adopted Rs. 800/- to 900/- per Sq. Mtr. for the land and Rs. 750/- per Sq. Mtr. for building construction. Further the Jantri rate adopted by the Sub-Registrar is Rs. 1,95,56,200/-, whereas the assessee has registered sale deed only for Rs. 1,80,00,000/-. Thus there is under-valuation of the property of Rs. 15,56,200/- which requires to be added u/s. 50C of the Act. As the assessee has not filed any reply to the show cause notice, the I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 3 Assessing Officer recomputed the Long Term Capital Gain at Rs. 50,90,340/- and demanded tax thereon. 3. Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals) and submitted that the reasons recorded carry incorrect facts. Therefore the reassessment order is to be held as null and void. Further in the reasons recorded, the AO Stated that the assessee has not filed details and documents relating to the sale of immovable property and also not disclosed income from capital gain in his Return of Income filed for the Assessment Year 2008-09. But however on perusal of the original Return of Income filed by the assessee, he declared the Long Term Capital loss of Rs. 4,87,235/- reflecting under Schedule C G of the Return. Therefore the formation belief of the Assessing Officer that the income has escaped assessment is factually incorrect. Thus the very foundation of reopening itself is bad in law and relied upon Gujarat High Court Judgments in the case of (a) Sagar Enterprise Vs. ACIT [2002] 257 ITR 335 (Guj.) (b) Vijay Harichandra Patel Vs. ITO reported in 400 ITR 167 (Guj.) (c) Pravinbilai Amaratlal Kiri Vs. DCIT in TC No. 12513 of 2017 3.1. Even on merits of the case, the assessee filed its submission before Ld. CIT(A). After considering the same, the Ld. CIT(A) upheld that the reopening of assessment is good in law, following Ahmedabad Bench Tribunal’s decision in the case of M/s. Navratna Organisers & Dev. (P) Ltd. in ITA No. 2143/Ahd/2009 dated 27-08- 2014. However on merits, the Ld. CIT(A) held that the A.O. has no power to refer the matter to District Valuation Officer u/s. 55A to determine the Fair Market Value of the immovable property for the I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 4 present A.Y. 2008-09. Therefore the A.O. was directed to adopt the cost of acquisition as disclosed by the assessee and recalculate the capital gains accordingly and thus partly allowed the assessee appeal. 4. Aggrieved against the same, the Assessee is in appeal before us raising the following Grounds of Appeal: 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the A.O. in issuing Notice u/s. 148 of the Act without proper service of the same hence the assessment so made is null and void. 2. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing Officer in completing the reassessment on the basis of reasons containing incorrect facts, hence the same being illegal and bad in law requires to be cancelled. 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing officer in passing an Ex-Parte order u/s.144 of the Act hence the same being against the principles of natural justice and law requires to be quashed. 4. The learned Commissioner of Income Tax (Appeals) has erred in not adjudicating the grounds of appeal raised before him with respect to the action of the assessing officer in not granting the exemption claimed by the appellant u/s.54 of the I.T. Act, 1961 for the purchase of new residential house out of long term capital gain on sale of old residential house. 5. Ld. Counsel Shri Aseem L. Thakkar appearing for the assessee submitted before us a Paper Book consisting of the original Return of Income, Valuation Report by DVO, Remand Report, Rejoinder to Remand Report and other details. Ld. Counsel further submitted that the reasons recorded by the Assessing Officer itself is invalid in law. Since the Ld. A.O. recorded that the assessee has not disclosed any income from capital gain on sale of the immovable property in the Return of Income filed for the Assessment Year 2008-09. Therefore treated the income has escaped from I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 5 assessment. Whereas in Para 3 of the assessment order, the Ld. A.O. admits the original Return of Income filed by the assessee, wherein computation of capital loss is reflected. Thus the very basic recording of reason itself is incorrect, therefore the Ld. Counsel pleaded that the reopening itself is bad in law. Ld. CIT(A) relied upon the decision of Ahmedabad Tribunal in the case of M/s. Navratna Organisers & Dev. (P) Ltd which is a case of reopening of assessment beyond four years period without having any tangible material, therefore the Hon’ble Tribunal held that the reopening of assessment is valid in law. Whereas in present assessee’s case the reason recorded itself is an incorrect facts as well as in law. Therefore the above decision is not applicable to the facts of the present case. Thus the Ld. A.R. relied upon various case laws in support of his arguments. 6. Per contra, the Ld. Sr. D.R. Shri Ashok Kumar Suthar appearing for the Revenue supported the order passed by the Lower Authorities and requested to uphold the same. 7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book and case laws filed by the assessee. It is seen from the reasons recorded by the Assessing Officer for reopening of assessment that the assessee has not shown any capital gain from the sale of immovable property in his Return of Income filed for the Assessment Year 2008-09. Therefore the assessment is reopened for escapement of income. Whereas it can be seen from the original Return of Income filed by the assessee on 16-09-2009, the assessee declared his salary I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 6 income and computation of capital loss of Rs. 4,87,235/- and working of cost inflation index as on 01-04-1981. So without verifying the original Return of Income, the Ld. A.O. has recorded the reasons that the assessee has not shown any income from capital gain which is an incorrect statement and non-application of mind by the Assessing Officer while recording the reasons for reopening the assessment for the Assessment Year 2008-09. Further it is seen from Para 3 of the assessment order, the Ld. A.O. himself admits that the Return of Income filed by the assessee wherein the computation of capital loss offered by the assessee. This is self-contradictory to the reasons recorded by the A.O. It is thereafter, the Ld. A.O. referred the matter to DVO to ascertain the Fair Market Value of the immovable property as on 01-04-1981. Further the case laws relied by the Ld. CIT(A) of Co-ordinate Bench of this Tribunal in the case of M/s. Navratna Organisers & Dev. (P) Ltd. is clearly distinguishable, since there is no infirmity in the reasons recorded by the Assessing Officer for reopening of assessment. 8. Thus when the reasons recorded itself is found to be incorrect and there is no failure on the part of the assessee in disclosing the capital gain. Therefore invocation of section 147 and issuance of notice u/s. 148 of the Act by the A.O. are without authority of law and cannot be sustained. The above view of ours is supported by the following Judgments of the Jurisdictional High Court: a) Sagar Enterprise vs. Asst. Commissioner, (2002) 257 ITR 335,337-38 (Guj) "Where the initiation of reassessment proceedings has been made on the ground that return had not been filed and that a certain I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 7 income had not been disclosed and the I material on record had showed that return had in fact been filed and the Revenue was not sure whether such income pertained to the year concerned or any other year, initiation has not been upheld" b) Vijay Harishchandra Patel v/s ITO, Ward-(3)(5), SCA No. 16171 of 2017(Guj HC) "As is apparent on a plain reading of the reasons recorded, the very basis for reopening the assessment is that the petitioner had not filed any return of income disclosing such sale of the immovable property valued at Rs. 40,00,000/-. The record of the case shows that earlier, pursuant to notice under section 148 of the Act, the petitioner had, in fact, filed return on income disclosing the sale of such immovable property, and the Assessing Officer after duly applying his mind to the issue had accepted the return of income. Considering the fact that a return of income had been filed disclosing sale of the immovable property, the very foundation on which the reopening is based in the reasons recorded by the Assessing Officer for reopening the assessment, collapses. In the light of the fact that very basis of reopening no longer survives, the assumption of jurisdiction under section 147 of the Act by the Assessing Officer by issuing notice under section 148 of the Act is without authority of law and cannot be sustained" c) Pravinbiiai Amratlal Kiri vs. DCIT. SCA No. 12513 of 2017 (Guj HC) Where it is held as under:- "......A perusal of the reasons would reveal that according to the Assessing Officer during the period relevant to the assessment year, the assessee had received a sum of Rs. 1.51 crores but had not filed the return of tax. This is the sole ground on which the Assessing Officer issued the impugned notice. The petitioner has pointed out that the very basis for issuing the notice is invalid since the petitioner had in fact filed the return whereas the reasons proceed on the basis that no return was filed. The petitioner has produced the necessary documents in addition to making such averments on oath. These averments and supporting evidence the respondent is unable to refute. That being the position, the sole ground for issuing the notice for reopening namely of the petitioner not having filed the return of income is proved to be incorrect. Under the circumstances the reasons lack validity. We are, therefore, inclined to quash the notice even though the return filed by the Assessing Officer was processed under section 143(1) of the Act and no scrutiny assessment was framed.” I.T.A No. 1487/Ahd/2019 A.Y. 2008-09 Page No Shri Jitendra Narottamdas Dhabalia Vs. ITO 8 9. Respectfully following the Jurisdictional High Court Judgments, we hold that the reasons recorded by the Assessing Officer for reopening of assessment itself is incorrect, thereby the assumption of jurisdiction u/s. 147 of the act is without authority of law and the same is not sustainable. Therefore the entire reassessment itself is quashed. Thus we are not adjudicating Ground Nos. 3 & 4 raised by the assessee on merits of the case. 10. In the result, the appeal filed by the Assessee is allowed. Order pronounced in the open court on 18-10-2023 Sd/- Sd/- (WASEEM AHMED) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 18/10/2023 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद