Shri Samubhai F. Patel, Surat V. The Income Tax Officer, Ward-6(4), Surat

ITA 1509/AHD/2015

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1787 (ITAT-SURAT)
• Duration Of Justice: 7 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-06-2022
• Assessment Year: 2006-2007
• Appeal Filed On: 26-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUPAMA SINGLA
• Assessee Lawyers: RASESH SHAH
• Keywords: Reopening of assessment; Capital asset; Application of stay; Additional evidence; Cost of acquisition; Fair market value; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Capital Gains
• Section: 131; 144; 143(3); 2(14); 142(1); 139(1); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकरअपीलसं./ITA Nos.1509 & 1510/AHD/2015 (Ǔनधा[रणवष[ / Assessment Year: (2006-07) (Physical Court Hearing) Shri Samubhai Fakirbhai Patel, At Village Umber, Via Sachin, Taluka: Choryasi, District: Surat, Gujarat. Vs. The ITO, Ward-6(4), Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AFLPP4941D (Assessee) (Respondent) Shri Yogesh Samubhai Patel, At Village Umber, Via Sachin, Taluka: Choryasi, District: Surat, Gujarat. Vs. The ACIT, Central Circle-4, Surat. èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AYTPP7669P (Assessee) (Respondent) Assessee by : Shri Rasesh Shah, CA Revenue by : Ms Anupama Singla, Sr. DR स ु नवाईकȧतारȣख/ Date of Hearing : 03/06/2022 घोषणाकȧतारȣख/Date of Pronouncement : 04/08/2022 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned two appeals filed by different assessees, pertaining to Assessment Year (AY) 2006-07, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-1, Surat [in short “the ld. CIT(A)”] in Appeal No. CAS-I/328/2013-14, CAS-I/329/2013-14, both dated 23.03.2015, which in turn arise out of separate assessment orders passed by the Assessing Officer under section 144 r.w.s 147 of the Income Tax Act, 1961, (hereinafter referred to as “the Act”). Page | 2 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel 2. Since, the issues involved in both the appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.1510/AHD/2015, for assessment year 2006-07, in the case of Yogesh Samubhai Patel, have been taken into consideration for deciding the above appeals en masse. 3. Grounds of appeals raised by the assessee in lead case in ITA No.1510/AHD/2015, are as follows: “1. On the facts and merits of the case, the learned CIT(A) has erred in confirming the assessment passed u/s 144 r.w.s 147 without appreciating the fact that no income had escaped assessment and that the assesse had tendered his explanations vide written submissions in response to show cause notices issued by the assessing officer. 2. On the facts and merits of the case, the learned CIT(A) has erred in confirming total value of sale as Rs 1,08,24,000/- without appreciating the fact that the assesse had not received any amount towards sale of land as mentioned in the Satakhat. 3. On the facts and merits of the case, the learned CIT(A) has erred in confirming the transfer as long term capital gain when the land in question is not capital asset at all, and the profit arising from sale of land is exempt u/s 2(14) of the Act. 4. Without prejudice to above, the learned CIT(A) has erred in not admitting additional evidence at appellate stage. 5. On the facts and merits of the case, the learned CIT(A) has erred in confirming in allowing the indexed cost of acquisition of Rs 3,85,933/ only by adopting the fair market value as on 1-4-1981, as Rs.5/per square meter purely on estimated basis and without appreciating the facts of the case in right perspective. 6. Appellant craves for stay of demand. 7. Appellant craves leave to add, alter, delete and modify any ground of appeal, All the aforesaid grounds of appeal are independent and without prejudice to each other.” 4. Grounds of appeal raised by the assessee in ITA No.1509/Ahd/2015, are as follows: “1. On the facts and merits of the case, the learned CIT(A) has erred in confirming the assessment passed u/s 144 r.w.s 147 without appreciating the fact that no income had escaped assessment and that the assesse had tendered his Page | 3 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel explanations vide written submissions in response to show cause notices issued by the assessing officer. 2. On the facts and merits of the case, the learned CIT(A) has erred in confirming total value of sale as Rs 1,08,24,000/- without appreciating the fact that the assesse had not received any amount towards sale of land as mentioned in the Satakhat. 3. On the facts and merits of the case, the learned CIT(A) has erred in confirming the transfer as long term capital gain when the land in question is not capital asset at all, and the profit arising from sale of land is exempt u/s 2(14) of the Act. 4. Without prejudice to above, the learned CIT(A) has erred in not admitting additional evidence at appellate stage. 5. On the facts and merits of the case, the learned CIT(A) has erred in confirming in allowing the indexed cost of acquisition of Rs 3,85,933/- only by adopting the fair market value as on 1-4-1981 as Rs.5/per square meter purely on estimated basis and without appreciating the facts of the case in right perspective. 6. On the facts and merits of the case, the learned CIT(A) has erred in confirming of addition of Rs.1,95,008/- on account of business profit on sale of plots without appreciating the facts of the case in right perspective. 7. Appellant craves for stay of demand. 8. Appellant craves leave to add, alter, delete and modify any ground of appeal, All the aforesaid grounds of appeal are independent and without prejudice to each other.” 5. Brief facts, as discernable from the orders of lower authorities are that during the assessment proceedings, the assessing officer noticed that assessee did not file any return of income for the year under consideration as per the provisions of section 139(1) of the Income Tax Act, 1961. In assessee`s case, information was received from the Assistant Director of Income Tax (Investigation), Unit-II, Surat, that assessee and his father, Shri Samubhai Fakirbhai Patel were owners of non-agricultural land situated at Pali, near Sachin GIDC, Tal: Choryasi, Dist: Surat, bearing revenue survey no. 67, 68, 69,70, 71 & 75 and admeasuring 31,061 sq. mts. and that they had executed an unregistered 'Sathakath’ on 03.04.2005 to sell the above land to Shri Jitubhai Atulbhai Ladumor and others for a consideration of Rs.1,08,24,000/-. In the said 'Sathakath', this land is shown as non-agricultural land. Shri Samubhai Page | 4 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel Fakirbhai Patel has also stated on oath that he had received Rs.30,00,000/- in cash on this account during the year from Shri Jitubhai Atulbhai Ladumor and others. The assessee holds 50% share in the said property and hence his share out of the above proceeds was Rs.15,00,000/-. As such, action u/s 147 of the Act was taken in the case after recording reasons and after taking necessary sanction u/s 151(1) from the Jt. Commissioner of Income Tax, Range-6, Surat. Accordingly, notice u/s 148 of the Act was issued 30.03.2013, which was duly served upon the assessee on 31.03.2013 by way of personal service. The assessee did not furnish any return of income in response to the said notice issued u/s 148 of the Act. As such, a letter no. 07/2012-l3, was issued on 24.05.2013, requesting the assessee to furnish his return of income as required in the notice issued u/s 148 of the Act. The said letter was duly served upon the assessee by speed post on 28.05.2013. However, the assessee did not care to comply with this letter also. In the circumstances, notice u/s 142(1) of the Act was issued on 21.10.2013, requiring the assessee to furnish certain details required in connection with the assessment proceedings. The said notice u/s142(1) of the Act was served upon the assessee on 24.10.2013. However, the assessee did not care to respond to this notice also. Therefore, assessing officer observed that assessee was not interested in pursuing his own case. In response to the said show cause notice, the assessee filed a written submission on 24.01.2014, which was duly considered by the assessing officer. 6. The reasons recorded by the assessing officer for issuance of the notice u/s 148 of the Act, is reproduced below: "A letter bearing no. SRT/ADIT(Inv)-II/TEP/2012-13 dtd. 26.03.2013 was received from the Asst. Director of Income Tax (Investigation), Unit-II, Surat, wherein, a copy of his report on the investigations made in the case of Shri Samubhai Fakirbhai Patel & others is furnished. 2. According to the above report, Shri Yogeshbhai Samubhai Patel is the son of Shri Samubhai Fakirbhai Patel and is holding PAN AYTPP7669P. Shri Samubhai Fakirbhai Patel and Shri Yogeshbhai Samubhai Patel were owners of land situated at Moje Pali, Near Sachin GIDC, Tal: Choryasi, Dist: Surat, bearing revenue survey no. 67, 68, 69, 70, 71 & 75 and admeasuring 3,41,067 sq. mts. Page | 5 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel 3.In the statement of Shri Samubhai Fakirbhai Patel recorded on oath u/s 131 of the Act by the ADIT (Inv.)-II, Surat 04.12.2012 and 15.12.2012, he has stated that an agreement to sell the above land to Shri Jitubhai Atulbhai Ladurnor and others was made through an unregistered 'Sathakath' dtd 03.04.2005 for a consideration of Rs.1,08,24,000/-. In the said 'Sathakath', this land is shown as non-agricultural land. Shri Samubhai Fakirbhai Patel has also stated on oath that he had received Rs.30,00,000/- on this account during the year from Shri Jitubhai Atulbhai Ladumor and others and this is duly mentioned in the 'Sathakhat'. The said amount was received in cash. The assessee holds 50% share in the property bearing, revenue survey no. 67, 68, 69, 70, 71 & 75 and hence his share out of the above proceeds comes to Rs. 15,00,000/-. 4. Thus, it is clear that the assessee has earned an income of Rs. 15 lakhs during the year which has not been disclosed to the department. 5.The assessee has not filed his return of income for the year under consideration. As such, I have a reason to believe that an income of at least Rs.15,00,000/- has escaped assessment in the hands of, the assessee for the year. I am satisfied that the case of the assessee is a fit case for issuance of notice u/s 148 of the Act. 7. However, assessing officer, then issued a final show cause notice on 07.01.2014, proposing to make addition on the issue involved. The contents of the said show cause notice are reproduced below: “2. In your case, notice u/s 148 of the Act was issued on 30.03.2013, after taking necessary sanction u/s 151(1) of the Act from the Jt.CIT, Range-6, Surat. The same was served upon you on 31.03.2013. However, you did not file any return of income in response to the said notice. As such, a letter bearing no. 2006- 07/2013-14 was issued on 24.05.2013, bringing these facts to your notice and requesting you to file return of income as required in the notice issued u/s 148 of the Act. The said letter was duly served upon you by speed post on 28.05.2013. However, till date, you have not filed any return of income in response to the said notice. As such, notice u/s 142(1) of the Act was issued on 21.10.2013, requiring you to furnish certain details required in connection with the assessment proceedings. The said notice u/s 142(1) of the Act was duly served upon you by speed post on 24.10.2013. However, you did not comply with this notice also. 3. It is a fact that you neither attended nor did you furnish any details called for. You have hence, failed to avail any of the ample opportunity granted to you. In the circumstances, the above non-compliance leads the undersigned to believe that you will neither file any return of income u/s 148 nor furnish any details called for. It is apparent from your continuous non-co-operation that you are not interested in pursuing your case. As such, the undersigned proposes to complete the assessment on ex-parte basis, based on the materials available on records. 4. Information was received in your case from the Asst. Director of Income Tax (Investigation), Unit-II, Surat that you and your father, Shri Samubhai Fakirbhai Page | 6 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel Patel, were owners of land situated at Moje Pali, Near Sachin GIDC, Tal: Choryasi, Dist: Surat, bearing revenue survey no. 67, 68, 69, 70, 71 & 75 and admeasuring 3,41,067 sq. mts. In the statement by your father, Shri Samubhai Fakirbhai Patel on oath u/s 131 of the Act before the ADIT (Inv.)-II, Surat 04.12.2012 and 15.12.2012, it was stated by him that an agreement to sell the above land to Shri Jitubhai Atulbhai Ladumor and others was made through an unregistered 'Sathakath' dtd. 03.04.2005 for a consideration of Rs.1,08,24,000/-. In the said 'Sathakath', this land is shown as non-agricultural land. Shri Samubhai Fakirbhai Patel has also stated on oath that he had received Rs. 30,00,000/- in cash on this account during the year from Shri Jitubhai Atulbhai Ladumor and others and this is duly mentioned in the 'Sathakhat'. The said land was finally registered for a sale consideration of Rs.5,30,000/-. You hold 50% share in the said property and hence, your share out of the above proceeds works out to Rs.15,00,000/-. 5. Thus, the fact remains that sale deed of the land was made for Rs.5,30,000/- only on 27.02.2007 and none of the payments is specified in the sale deed to have been made during the year under consideration. Thus, the said amount of Rs.15,00,000/- constitutes income of the assesses for the year under consideration, which is not disclosed to the department. You are hereby required to show cause as to why this income of Rs.15,00,000/- should not be added to your total income and taxed. 6. In case you have anything to say in respect of the proposed addition, you may attend either in person or through an authorized representative and furnish your arguments with necessary evidences. Alternatively, you may even file a written submission in this respect. In either case, your compliance should reach the office of the undersigned on or before 20.01.2014, failing which, it shall be presumed that you have nothing to say in the matter and the assessment shall be made accordingly u/s 144 of the Act." 8. In response to the show cause notice, the assessee filed a written submission dated. 23.01.2014, stating as follows; “- that 'Sathakhat' was made for the land at village: Pali. - that it was an agricultural land and that by mistake, it was written as non- agricultural land therein. - that the 'Sathakhat' was cancelled later on. - that the amount shown therein was received the assessee as an advance and that no sales was made at that time and hence the cannot result in income. - that it is rural agricultural land situated beyond 8 kms from the then Surat city limits and hence, the land is exempted from the definition of 'Capital asset' and hence it is not subject to Capital Gains Tax”. 9. However, the Assessing Officer rejected the contention of the assessee and held that arguments of the assessee are not accepted for the following reasons: Page | 7 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel (a) Firstly, the father of the assessee (a co-owner) has owned up the fact of having executed the 'Sathakhat' executed on 03.04.2005 for sale of land bearing revenue survey no. 67, 68, 69, 70, 71 & 75 at village: Pali, during the course of recording of his statement on oath u/s 131 of the Act by the Investigation wing on 04.12.2012 as also now, during the course of instant assessment proceedings. (b) The statement given by the father of the assessee on oath u/s 131 of the Act, before the Asst. Director of Income Tax (Inv.), Surat, on 04.12.2012 and the written submission filed by him before that authority on 15.12.2012, regarding application of funds received as 'on money', has not been retracted by him till date, though about 13 to 14 months has lapsed. (c) In the 'Sathakhat' executed by the assessee and his father, the land in question is stated to be non-agricultural land. Nothing is produced by the assessee to prove that the land in question is agricultural land. Further, on examination of the 7x12 extracts of the land prior to the date of sale, i.e. for F.Y.s 2004-05, 2005-06 and 2006-07, it is seen that no agricultural activity was carried out by the assessee on that land and the growth of the pieces of land in question is mentioned as 'Grass'. (d) The land in question is situated within 8 kms from the Sachin Notified Area (GIDC Sachin) and hence, otherwise also, the land in question is a capital asset, as defined in section 2(14)(iii) of the Income Tax Act. Hence, the land in question is not a rural agricultural land, as claimed by the assessee. (e) No evidence is produced before the undersigned to prove that the 'Sathakhat' was cancelled later on, as claimed by the assessee. In fact, the father of the assessee did not make any such claim in his statement recorded u/s 131 of the Act on 04.12.2012 by the Asst. Director of Income Tax (Inv.), Surat. In that statement also, the father of the assessee has clearly stated that 'Sathakhat' was made with Shri Jitubhai Ladumor & others and that the sale deed was made directly with Shri Navinbhai Bhikhabhai Patel & others. It was also stated by him on oath that Page | 8 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel part payment of about Rs. 25 to 30 lakhs was made by Shri Jitubhai Ladumor & others and the remaining payment out of the sale consideration of Rs.1,08,24,000/- was made by Shri Navinbhai Bhikhabhai Patel & others. This clearly means that the 'Sathakhat' was very much in existence and that the possession of the land was agreed to be transferred by Shri Jitubhai Ladumor & others to Shri Navinbhai Bhikhabhai Patel & others, with the condition that the amount of Rs. 25 to 30 lakhs paid by Shri Jitubhai Ladumor & others to the assessee and his father would be paid by Shri Navinbhai Bhikhabhai Patel & others to Shri Jitubhai Ladumor & others, along with the premium amount/ profit of Shri Jitubhai Ladximor and others. Thus, Shri Jitubhai Ladunor & others acted only as a middle person just to earn profits from the land by selling the same to Shri Navinbhai Bhikhabhai Patel & others at a higher rate. However, the fact remains that the sale consideration for the assessee and his father never changed from Rs.1,08,24,000/- and the same was received by the assessee and his father before execution of the sale deed, though the sale deed mentions the sale consideration as Rs.5,30,000/-. (f) Nothing is produced before the AO to prove that any of payment conditions of the 'Sathakhat' was violated. The "Sathakhat' provides for payment of sale consideration during the year under consideration itself. As such, it is held that the assessee and his father received the entire sale consideration of Rs.1,08,24,000/-during the year itself, the assessee's share being 50%, i.e. Rs. 54,12,000/-. 10. Based on the above facts, the assessing officer held that the land in question, i.e. land bearing revenue survey no. 67, 68, 69, 70, 71 & 75 and admeasuring 31,061 sq. mts. and situated at Pali, Near Sachin GIDC, Tal: Choryasi, Dist: Surat is a capital asset liable for capital gains tax on transfer.The assessee and his father has received the consideration of Rs.1,08,24,000/- during the year under consideration in respect of sale of land. As per para (2) of the conditions of sale agreement 'Sathakhat', possession of the land was given on 15.04.2005. Thus, the entire sale consideration is received by the assessee and his Page | 9 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel father during the year under consideration and there is no doubt of the fact that the land is transferred during the year under consideration.Since, the assessee holds 50% share in the land and hence, the proportionate sale consideration in the hands of the assessee is Rs. 54,12,000/- ( 50% of 1,08,24,000) . 11. Nothing was produced by the assessee to prove the cost of acquisition or market value of the land as on 01.04.1981. However, as per the 'Jantri' rates obtained by this office from the Stamp Duty Valuation authorities, the fair market value of the land falling under revenue survey nos. 67, 68, 69, 70, 71 & 75 of Pali village is Rs.11/- per sq. meter as on 01.04.1999. The Stamp Duty Valuation department was seen to be not having any records of fair market value of land as on 01.04.1981. In the circumstances, the fair market value of the land is adopted at Rs.5/- per sq. meter as on 01.04.1981 and accordingly, the fair market value of the land worked out to Rs.1,55,305/- (Rs. 5 x 31,061 sq. mts). The assessing officer also worked out indexed cost of acquisition for the year under consideration at Rs.7,71,866/- (1,55,305 x 4.97). Thus, the proportionate indexed cost of acquisition for the assessee is Rs.3,85,933/- (7,71,866 @ 50%). 12. From the above facts the assessing officer observed that since the assessee did not file any return of income for the year and never disclosed the said income. Therefore, assessing officer worked out a Long Term Capital Gains to the tune of Rs.50,26,067/-(Rs.54,12,000-Rs.3,85,933), and this amount of Rs.50,26,067/- was added to the total income of the assessee. 13. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has dismissed the appeal of the assessee. The observations of the ld. CIT(A), on technical issue (reassessment under section 147/148 of the Act) are as follows: “Discussion and Appellate Decision: 4.1 Submission furnished on behalf of the assessee is duly considered and assessment order is duly perused. The assessee has raised the contention that the AO was not having any material information to form "a reason to believe" that there was an escapement of income. This contention is not acceptable because the AO was having sufficient material to form the "reason to believe" at the time Page | 10 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel of re-opening of the assessment. The copy of "Satakhat" for sale of land clearly state the total consideration figure for sale of impunged land between assessee & his father and Jitubhai Ladumor & others. Not only that, the terms and conditions of payment have also been specified therein. This "Satakhat" was executed on Stamp Paper & duly signed by Shri Jitubhai Ladumor & Shri Bhavanbhai D. Katariya. The assessee has claimed that the "impugned Satakhat" was cancelled; however, no proof of cancellation or confirmation of other party to establish that Satakhat was actually cancelled was filed by the appellant. Thus, claim of cancellation of Satakhat remained unsubstantiated & hollow claim only. The facts mentioned in "Satakhat" were duly confirmed by father of the assessee himself in statement recorded on oath on 04.12.2012 which leaves no room for any speculation that alleged deal of land was for consideration of Rs.1,08,,24,000/-. Since the assessee is now claiming that facts stated in Satakhat & Statement are not true then it is incumbent upon him to produce the evidence to support his contention or to examine Shri Jitubhai Ladumor which is in effect his witness. Once by putting his signature on satakhat Shri Jitubhai Ladumor has accepted all these facts, it is upon the assessee to produce the evidence which can prove that facts stated in satakhat are not true. The onus is on the assessee to bring all the necessary evidence on the record to establish that said satakhat as document should not be believed. I am of the considered opinion that there was enough material with the AO to hold the "reason to believe" that there was escapement of income. The assessee also argued that the impugned land was "rural agricultural land" on which agricultural activities were going on and said land was situated in village Pali having less than 10,000 population. This argument has been considered by the AO in the assessment order (Para 3.2) and held that in form 7x12, no agricultural activity was shown in FY 2004-05, 2005- 06 & 2006-07 instead it is shown that "Grass" was grown. The AO also held that the land was situated within 8 kms of Sachin Notified Area (GIDC Sachin) and therefore considered as "capital assets" as defined in section 2(14)(iii) v. of the Act. Nonetheless, the copies of Form No.7xl2 (extract obtained on 13.10.2006) do not support the contention of the assessee that any sort of agricultural activity was carried out on the land in question. Besides this, certificate of Sarpanch dated 03.01.2015 regarding ciaim of population being less than 1,0,000 is a "fresh evidence" which could not admitted now because the appellant has failed to satisfied the conditions laid down in Rule 46A to show what prevented him in filing this evidence before AO and no formal application for admission of additional evidence has been filed by the assessee. 4.2 In view of the above discussion, I hold that the issue of notice u/s.148 and assumption of jurisdiction for assessment by the AO was perfectly in accordance with law and his formation of belief for concealment of income was correctly based on material available with him at the time of issue of notice u/s.148 of the Act. Consequently, the assessment passed u/s.144 r.w.s 147 has no illegality whatsoever and the same is in accordance with law. Hence, this ground of appeal is dismissed.” 14. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. Page | 11 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel 15. We have heard both the parties and perused the material available on record. We note that assessee has challenged the validity of reassessment proceedings, stating that reasons recorded by the Assessing Officer is defective, hence the reassessment proceedings are invalid, therefore, first of all, we have to examine the reasons recorded by the Assessing Officer. The reasons recorded for issuance of the notice u/s 148 of the Act is reproduced below: "A letter bearing no. SRT/ADIT(Inv)-II/TEP/2012-13 dtd. 26.03.2013 was received from the Asst. Director of Income Tax (Investigation), Unit-II, Surat, wherein, a copy of his report on the investigations made in the case of Shri Samubhai Fakirbhai Patel & others is furnished. 2. According to the above report, Shri Yogeshbhai Samubhai Patel is the son of Shri Samubhai Fakirbhai Patel and is holding PAN AYTPP7669P. Shri Samubhai Fakirbhai Patel and Shri Yogeshbhai Samubhai Patel were owners of land situated at Moje Pali, Near Sachin GIDC, Tal: Choryasi, Dist: Surat, bearing revenue survey no. 67, 68, 69, 70, 71 & 75 and admeasuring 3,41,067 sq. mts. 3.In the statement of Shri Samubhai Fakirbhai Patel recorded on oath u/s 131 of the Act by the ADIT (Inv.)-II, Surat 04.12.2012 and 15.12.2012, he has stated that an agreement to sell the above land to Shri Jitubhai Atulbhai Ladurnor and others was made through an unregistered 'Sathakath' dtd 03.04.2005 for a consideration of Rs.1,08,24,000/-. In the said 'Sathakath', this land is shown as non-agricultural land. Shri Samubhai Fakirbhai Patel has also stated on oath that he had received Rs.30,00,000/- on this account during the year from Shri Jitubhai Atulbhai Ladumor and others and this is duly mentioned in the 'Sathakhat'. The said amount was received in cash. The assessee holds 50% share in the property bearing, revenue survey no. 67, 68, 69, 70, 71 & 75 and hence his share out of the above proceeds comes to Rs. 15,00,000/-. 4. Thus, it is clear that the assessee has earned an income of Rs. 15 lakhs during the year which has not been disclosed to the department. 5. The assessee has not filed his return of income for the year under consideration. As such, I have a reason to believe that an income of at least Rs.15,00,000/- has escaped assessment in the hands of, the assessee for the year. I am satisfied that the case of the assessee is a fit case for issuance of notice u/s 148 of the Act.” 16. Learned Counsel for the assessee pleads that assessee and his father Shri Shambhubhai Fakirbhai Patel, were owners of land situated at Moje Pali, Near Sachin GIDC, Tal Choryasi, Dist. Surat, bearing revenue survey no 67, 68, 69, 70, 71 and 75 and admeasuring 341067 sq. Mts. In the statement, the assessee’s father, Shri Sambubhai Fakirbhai Patel on oath u/s 131 of the Act before the Page | 12 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel ADIT(Inv.)-II, Surat 04.12.2012 and 15.12.2012, it was stated by him that an agreement to sell the above land to Shri Jitubhai Atulbhai Ladumor and others was made through an unregistered “Satakhat” dated 03.04.2005 for a consideration of Rs. 1,08,24,000/-. In the said “Satakhat”, this land is shown as non- agricultural land. Shri Samubhai Fakirbhai Patel has also stated on oath that he had received Rs. 30,00,000/- in cash on this account during the year from Shri Jitubhai Atulbhai Ladumor and others and this is duly mentioned in the “Satakhat”. The assessee holds 50% share in the said property and the assessee’s share out of the above proceeds comes to Rs. 15,00,000/-. The assessing officer noted that assessee had earned an income of Rs. 15,00,000/- during the year which has not been disclosed to the department. The assessee had not filed his return of income for the year under consideration. As such, the AO had a reason to believe that an income of at least Rs. 15,00,000/- had escaped assessment in the hands of the assessee for the year. The AO was satisfied that the case of the assessee was a fit case for issuance of notice u/s 148 of the Act. 17. Based on these facts, Learned Counsel argued that there was no material information in the hands of the AO and there was no reason to believe that income chargeable to tax in the case of the assessee had escaped assessment. The Satakhat executed with Jitubhai Ladumor was cancelled and land was sold to some other party. There was no confirmation from Jitubhai Ladumor about the deal of land and the said party was never examined to ascertain the real facts of the case to arrive at the conclusion about the deal. The amount of Rs. 30,00,000/- (Rs. 15,00,000/- each) was received as advances against the Satakhat which was subsequently cancelled. The advances cannot be said to be income of the assessee particularly when the final Sale Deed was made in the next year. Even as per the Satakhat, the possession was also not given to the assessee. Moreover, the facts on revenue records were very clear and indicative of the fact that the land under acquisition was an agricultural land and there were agricultural activities going on and the assessee was cultivating crops on the said land and since the population of Village Pali was less than 10000, the said agricultural land was not at all a capital asset. Under such circumstances, the learned AO was not in possession of any Page | 13 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel tangible material that agricultural land sold was a capital asset and that the assessee was not carrying on any agricultural activities on the said land. Thus, there was no material information on record to form a reason to believe that any income had escaped assessment in the cases of the assessees and therefore, the reopening proceedings initiated u/s 147/148 of the Act are bad in law and void ab initio and accordingly the consequential assessment order passed u/s 143(3) of the Act is also bad in law and avoid ab initio. 18. On the other hand, learned DR for the Revenue submitted before the Bench that although assessing officer has reopened the assessment based on interim report without waiting final report, yet there was sufficient information available based on the interim report of tax evasion that chargeable income of Rs.15,00,000/- has escaped assessment, hence reopening of assessment is valid. 19. We have considered the arguments of both sides and noted that Interim Report only contains the report on tax evasion petition (TEP) which suggests that someone had filed the complaint against the assessee. However, Final Investigation Report is not available in assessee`s case, therefore, it is clear that there was “no reason to believe” but “reason to suspect”. Reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion. The Hon’ble Supreme Court in ITO vs Lakhmani Mewal Das [1976 ]103 ITR 437 has lucidly explained the power of assessing officer to bring to tax income escaping assessment u/s.147 of the Act. The Hon’ble Court first held that the section provides that there must exist “reasons to believe“ and not “reasons to suspect”. The following were the relevant observations: “The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the Page | 14 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed.” 20. We note that in the reasons recorded, the assessing officer sought to tax only Rs. 15,00,000/- that was received as advance as per the Agreement (Satakhat). However, we have noted that assessing officer worked out a Long Term Capital Gains to the tune of Rs.50,26,067/-(Rs.54,12,000-Rs.3,85,933), and this amount of Rs.50,26,067/- was added to the total income of the assessee and not Rs. 15,00,000/- which is mentioned in the reasons recorded. Therefore, assessing officer, as per the reasons recorded, ought to have made addition at Rs.15,00,000/- which is the advance received by the assessee. However, assessing officer made addition on different item, that is on account of long term capital gain at Rs.50,26,067/-, which is not tenable in law. If the assessing officer wants to make addition on different issue then in that circumstances the assessing officer ought to have recorded reasons separately and ought to have issued separate notice under section 147 of the Act, which is absent in the assessee`s case under consideration. Therefore, it is a case where reopening was made on say ‘X’ issue and final assessment under section 147 was made by assessing officer on ‘Y’ issue, which is altogether a different issue. This situation is not permitted under the law of reassessment under section 147 of the Act.Hence, we note that in assessment order, the assessing officer taxed the whole Capital Gain as per the Agreement, taking full consideration, although the final Sale Deed was executed in the next year. Accordingly, the assessing officer did not make the addition as per the Reasons Recorded and taxed altogether different item, as Long Term Capital Gain. 21. In that view of the matter, the other additions made in the said reassessment order which were not part of the reasons recorded for reopening the assessment are not sustainable in the eyes of law even after insertion of Explanation 3 to section 147 of the Act by Finance Act, 2009. We note that AO may assess or reassess the income in respect of any issue which comes to his Page | 15 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice; however, if after issuing a notice under section 148 of the Act, the AO accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income, for that we rely on the judgment of Hon`ble Bombay High Court in the case of Jet Airways (I) limited 331 ITR 236 (Bom), wherein it was held as follow: “21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.” 22. This view has also been ventilated by the Hon`ble Delhi High Court in the case of Ranbaxy Laboratories Ltd, 336 ITR 136 (Del), wherein it was held as follows: “18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra) [sic—Jet Airways (I) Ltd. (supra)]. We may also note that the heading of s. 147 is "Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s. 147. Sub-s. (2) of s. 148 mandates reasons for issuance of notice by the AO and sub-s. (1) thereof mandates service of notice to the assessee before the AO proceeds to assess, reassess or recompute escaped income. Sec. 147 mandates recording of Page | 16 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel reasons to believe by the AO that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction under s. 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before AO during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under s. 148.” 23. We note that in the assessee`s case under consideration, a notice under section 148 of the Act was issued to assessee to tax the escaped income of Rs.15,00,000/-, which was advance received by assessee. However, we note that addition was made by the assessing officer in reassessment proceedings, on account of long term capital gain at Rs.50,26,067/-, which is a different issue altogether and since assessing officer has not issued a fresh notice under section 148 of the Act to reassess the other income of Rs.50,26,067/-, therefore, the reassessment proceedings initiated by the assessing officer to reassess other income ( as noted by us above) is null and void in the eye of law, hence we quash the reassessment proceedings under section 147/148 of the Act. 24. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings, as the assessing officer did not issue fresh notice under section 148 of the Act to reassess other income (item), as noted by us above. We, therefore, quash the reassessment proceedings. As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous, therefore, we do not adjudicate them. Page | 17 ITA Nos.1509 & 1510/AHD/2015 Assessment Year.2006-07 Yogesh S Patel & Samubhai F Patel 25. Since, we have adjudicated the issue by taking lead case in ITA No.1510/SRT/2015, the similar facts and grounds of appeal are there in ITA No.1509/Ahd/2015, therefore our observation shall apply mutatis mutandis to the aforesaid other appeal of assessee in ITA No.1509/Ahd/2015. 26. In the result, both appeals of the assessees` in ITA No.1510/SRT/2015 and in ITA No.1509/Ahd/2015, are allowed. Registry is directed to place one copy of this order in all appeals folder / case files. Order is pronounced in the open court on 04/08/2022 by placing the result on the Notice Board as per Rule 34(5) of the Income Tax (Appellate Tribunal) Rule 1963. Sd/- Sd/ (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 04/08/2022 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat