Mahesh Pal Arora, Kolkata V. I.T.O Wd - 7(1),kolkata., Kolkata

ITA 206/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4911 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-03-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 30-01-2013
• Court: TRIBUNAL
• Department Lawyers: RAJAT KR KUREEL
• Assessee Lawyers: A K TIBREWALFCA
• Keywords: Capital asset; Tangible material; Difference of opinion; Deemed dividend; Benefit of exemption; Onus to prove; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 54F; 147; 148; 54; 6; 139

Judgement Text

ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 1 IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH, K OLKATA BEFORE : SHRI M. BALAGANESH, ACCOU NTANT MEMBER, AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 206/KOL/2013 A.Y 2005-06 MAHESH PAL ARORA VS. I.T.O WARD 7(1), KOLKATA PAN: AEGPA2052L (APPELLANT/ASSESSEE) (RESPONDENT/D EPARTMENT) FOR THE APPELLANT/ASSESSEE: SHRI A.K .TIBREWAL,FCA AR FOR THE RESPONDENT/DEPARTMENT: S HRI RAJAT KR. KUREEL, JCIT, LD.SR.DR DATE OF HEARING: 29-03-2016 DATE OF PRONOUNCEMENT: 29 -03 -2016 ORDER SHRI M.BALAGANESH, AM THIS APPEAL OF THE ASSESSEE ARISES OUT OF THE ORDE R OF THE LEARNED CIT(A), VIII, KOLKATA IN APPEAL NO. 169/CIT(A)-VIII/KOL/09-10 DA TED 19-09-2012 AGAINST THE ORDER OF ASSESSMENT FRAMED FOR THE ASST YEAR 2005-0 6 U/S 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL IS WITH REGARD TO THE VALIDITY OF RE- ASSESSMENT PROCEEDINGS INITIATED U/S. 147 OF THE AC T. IN THIS REGARD THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) ERRED IN DISMISSING THE FIRST GROUND OF APPEAL BEFO RE HIM RELATING TO VALIDITY OF THE ASSESSMENT ORDER PASSED BY THE ASSE SSING OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 PU RSUANT TO THE PROCEEDINGS INITIATED UNDER SECTION 147/148 OF THE ACT. 2. THAT THE REASSESSMENT PROCEEDINGS INITIATED UNDE R SECTION 147/148 OF THE ACT WAS WITHOUT JURISDICTION, ILLEGA L AND VOID AB INITIO AND THEREFORE THE IMPUGNED ASSESSMENT ORDER PASSED BY THE ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 2 INCOME TAX OFFICER ON 23.10.2009 UNDER SECTION 143( 3) OF THE ACT WAS ALSO NULL AND VOID. 3. THE BRIEF FACTS OF THIS CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 ON 22-7-2005 WITH A RET URNED TOTAL INCOME OF RS.3,65,670/-. THE CASE WAS PROCESSED U/S. 143(1) O N 31-7-2006 ON A TOTAL INCOME OF RS.3,65,670/-. THE LEARNED AO OBSERVED THAT THE A SSESSEE HAS CLAIMED EXEMPTION U/S. 54F ON PURCHASE OF LAND. SINCE THE EXEMPTION O F RS.8,41,360/- U/S. 54F IS GRANTED FOR BUYING OF HOUSE OR CONSTRUCTION OF HOUSE, THE C ASE OF ASSESSEE WAS REOPENED U/S. 147 ON 17-9-2008. THE REASONS WERE RECORDED AND STA TUTORY NOTICE U/S. 148 DATED 17-9- 2008 WAS ISSUED AND DULY SERVED UPON THE ASSESSEE O N 3-10-2008. IN RESPONSE THERETO THE LD.AR OF THE ASSESSEE SUBMITTED A LETTER AND RE QUESTED TO TREAT THE ORIGINAL RETURN AS RETURN FILED IN RESPONSE TO NOTICE U/S. 148. 3.1 THE LD.AO OBSERVED THAT ON GOING THROUGH THE RE CORD, IT IS SEEN THAT THE ASSESSEE INVESTED IN RESIDENTIAL PROPERTY A SUM OF RS. 9,04,760/- UPTO 7-6-2005 WHICH IS YET TO COMPLETE CONSTRUCTION AS ON 1-4-2009. WHE REAS LONG TERM CAPITAL GAIN ARISES ON SALE OF 8000 SHARES AS ON 14-6-2004 AS FOLLOWS:- IT IS ON RECORD THAT THE ASSESSEE HAS NOT CONSTRUCT ED THE HOUSE WITHIN THREE YEARS. THE ONLY INVESTMENT IS IN LAND WHICH REMAINED UNDER DEVELOPED DURING THESE THREE YEARS. NO EFFORT OR INVESTMENT IN CONSTRUCTING THE HOUSE I S PLACED ON THE RECORD. TILL 31/3/2009, THE CONSTRUCTION IS NOT COMPLETE WH ICH MEANS MORE THAN FIVE YEARS. 3.2. THEREFORE, THE LD.AO WAS OF THE OPINION THAT THE AS SESSEE HAS NOT FULFILLED THE MAIN CONDITION OF SECTION 54F AND IF THE ARGUMENT O F THE ASSESSEE IS BELIEVED THAT THE INVESTMENT IN LAND ITSELF IS REQUIRED FOR EXEMPTION U/S. 54F, THERE WAS ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 3 NO NEED FOR LAW MAKERS TO A PUT A CONDITION OF THRE E YEARS IN SECTION 54F. OBVIOUSLY, WHAT LAW MAKERS WANTED FROM TAXPAYER CLA IMING EXEMPTION U/S. 54F, NOT JUST INVESTMENT IN LAND TO SHOW THAT CONST RUCTION OF HOUSE WILL BE DONE, BUT A FIRM COMMITMENT THAT IN CASE A HOUSE IS CONST RUCTED WITHIN 3 YEARS, IN THAT EVENT, EXEMPTION U/S. 54F SHALL BE GRANTED. HENCE, THE LD.AO DENIED THE BENEFIT OF EXEMPTION U/S. 54F TO THE ASSESSEE TO THE TUNE O F RS. 8,41,360/-. APART FROM THIS, THE LD.AO ALSO MADE ADDITION TOWARDS DEEMED DIVIDEND U/S. 2(22)(E) OF THE ACT TO THE TUNE OF RS.3,40,049/-. 4. ON 1 ST APPEAL BEFORE THE LD.CIT(A) THE ASSESSEE SUBMITTE D THAT THE ASSESSEE IS AN INDIVIDUAL. DURING THE YEAR THE ASSESSEE HAD INC OME FROM SALARY, INCOME FROM LONG TERM CAPITAL GAIN ON SHARES AND INTEREST INCOME. PR IOR TO THE ASSESSMENT THE LEARNED INCOME TAX OFFICER MADE DETAILED INVESTIGATION AND ENQUIRIES WITH REGARD TO TRANSACTIONS IN SHARES ENTERED INTO BY THE ASSESSEE AND REQUIRED THE ASSESSEE TO SUBMIT. CONTRACT NOTES, D-MAT STATEMENTS SHOWING QUANTITATI VE INFORMATION OF SHARES IN AND OUT, DETAILS OF INVESTMENT IN LAND AND ALSO PAYMENT S MADE TO THE DEVELOPER FOR CONSTRUCTION OF A RESIDENTIAL HOUSE. THE ASSESSEE G AVE DETAILED EXPLANATION WITH COGENT EVIDENCE WITH REGARD TO THE SAME. THE ASSESSEE ALSO SUBMITTED AS FOLLOWS:- A) THAT THE ASSESSEE HAS PURCHASED SHARES, SOLD THE SH ARES, THAT THE SHARES WERE LONG TERM-CAPITAL ASSET AND THE PAYMENT S HAVE BEEN RECEIVED BY THE ASSESSEE HAS NOT BEEN DISPUTED BY THE LEARNE D INCOME-TAX OFFICER. B) THAT THE ASSESSEE SOLD 8000 SHARES OF SCINTILLA COMM. THROUGH M/S RAJENDRA PRASAD SHAH AND THE CONTRACT NOTE FOR THE SAME WAS SUBMITTED AT THE TIME OF HEARING. C) THAT THE NET CONSIDERATION OF RS. 8,81,520/- REC EIVED ON 14-06-2004 WAS FULLY INVESTED IN LAND (RS.2,87,760/-) AND TO T HE DEVELOPER FOR CONSTRUCTION OF HOUSE (RS.6,17,000/-) BY 07- 06-200 5 AND THAT THIS WAS WELL WITHIN THE TIME ALLOWED BY SECTION 54F. ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 4 D) THAT THE ASSESSEE NEVER CLAIMED EXEMPTION U/S 54 F ON PURCHASE OF LAND AS PURPORTED BY THE LEARNED INCOME TAX OFFICER. WHA T WAS CLAIMED WAS FOR THE AMOUNT INVESTED IN PURCHASE OF LAND COUPLED WITH INITIAL PAYMENT MADE TO DEVELOPERS, M/S SPRING VALLEY DEVELOPERS PV T LTD FOR CONSTRUCTION OF A RESIDENTIAL GARDEN HOME COMPRISIN G OF A 2-STORIED STRUCTURE HAVING A TOTAL BUILT-UP AREA OF ABOUT 380 0 SQUARE FEET. A LETTER DATED 21 ST JULY, 2009 ALONG WITH REQUISITE EVIDENCES WAS SUB MITTED. COPY OF THE LETTER WAS ENCLOSED AS ANNEXURE A. E) THAT THE CONTENTION OF THE LEARNED INCOME TAX OF FICER THAT THERE WAS NO FIRM COMMITMENT ON THE PART OF THE ASSESSEE TO CONS TRUCT A HOUSE ON THE PURCHASED LAND IS BASELESS AND IN CONTRADICTION TO THE RECORDS PLACED BEFORE HIM. THE ASSESSEE HAD ENTERED INTO AN AGREEM ENT WITH THE DEVELOPER AND MADE INITIAL PAYMENT OF RS.6,I7,000/- . COPY OF AGREEMENT WAS ENCLOSED AS ANNEXURE B AND COPY OF CHEQUES ISSU ED TO DEVELOPER AS ANNEXURE 'C'. 5. AFTER CONSIDERING THE ABOVE SUBMISSIONS OF THE A SSESSEE, THE LD. CIT(A) HAS HELD AS UNDER:- (III) IT IS NOT IN DISPUTE THAT THE CONSTRUCTION O F AFOREMENTIONED NEW RESIDENTIAL HOUSE WAS NOT COMPLETED WITHIN 3 YE ARS FROM THE DATE OF SALE OF SHARE AS PROVIDED BY SECTION 54F OF THE ACT . THE CONSTRUCTION WAS NOT COMPLETED EVEN TILL THE DATE OF HEARING OF THE APPEAL I.E MORE THAN 8 YEARS AFTER THE SALE OF SHARES. (IV) IN THE CASE OF SMT.V.A THARABAI V. DCIT(ITA 1 894(MDS) 2011 S.P NO. 86(MDS) 2011 HEAVILY RELIED BY THE LD .AR, THE CONSTRUCTION OF THE NEW RESIDENTIAL HOUSE COULD NOT BE COMPLETED DUE TO CIVIL LITIGATION. IN THAT CASE THE COMPETENT COURT HAS PASSED RESTRAINT ORDER DIRECTING THE ASSESSEE TO MAINTAIN STATUS QUO OF THE PROPERTY. SIMILARLY THE FACTUAL POSITION OF OTHER CASES RELIE D BY THE LD.AR DIFFERS FROM THE CASE OF THE APPELLANT. (V) IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT THE BURDEN TO PROVE THAT THE ASSESSEE IS ENTITLED TO EXEMPTION IS ON AS SESSEE (CIT VS. RAMAKRISHNA DEO (1959) 35 ITR 312(SC). (VI) IN THE PRESENT CASE THE APPELLANT HAS FAILED TO DISCHARGE HIS BURDEN HENCE I AM OF THE CONSIDERED VIEW THAT THE A PPELLANT IS NOT ENTITLED FOR EXEMPTION UNDER SECTION 54F OF THE ACT . AND THIS GROUND OF APPEAL IS, THUS, DECIDED AGAINST THE APPELLANT. 6. WITH REGARD TO THE ADDITION MADE TOWARDS DEEMED DIVIDEND THE LD. CIT(A) HELD AS UNDER:- ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 5 5.3 THE LD.AR HAS SUBMITTED THAT ALLAHABAD BANK AT ITS OWN HAS TRANSFERRED RS.15,93,000/- TO T HE SAVING BANK ACCOUNT OF THE APPELLANT FROM CASH CREDIT ACCOUNT O F HOLLYWOOD TEXTILES P.LTD AND HENCE THE TRANSACTION CANNOT BE TERMED AS LOAN OR ADVANCE. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF THE APPELLANT AND PERUSED THE FACTS OF THE CASE. THOUGH THE LD.AR HAS FILED THE LETTER OF THE APPELLANT AND THE COMPANY BEFORE THE AO IN SUPPORT OF THE ABOVE SUBMISSION BUT HAS NOT PRODUCED ANY LETTER FROM ALL AHABAD BANK WHO AS PER THE LD.AR HAS AT ITS OWN HAS TRANSFERRED THE AF OREMENTIONED FUNDS. SINCE THE APPELLANT HAS FAILED TO PRODUCE ANY DOCUM ENTARY EVIDENCE FROM ALLAHABAD BANK CONFIRMING THE SUBMISS ION OF THE LD.A/R, HENCE THIS GROUND OF THE APPEAL IS DECIDED AGAINST THE APPELLANT. 7. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE U S ON THE ISSUE OF VALIDITY OF RE- ASSESSMENT PROCEEDINGS INITIATED U/S. 147/148 OF TH E ACT AS WELL AS ON THE MERITS OF THE ADDITIONS MADE ON RE-ASSESSMENT PROCEEDINGS. 8. THE LD. AR FIRST ARGUED ON THE VALIDITY OF RE-A SSESSMENT PROCEEDINGS. HE STATED THAT FROM THE REASONS RECORDED BY THE LD.AO FOR RE-OPENING OF ASSESSMENT IT IS EVIDENT THAT THE LD.AO DID NOT POSSESS ANY FRESH TA NGIBLE MATERIAL OR INFORMATION THAT HAS BEEN RECEIVED BY HIM SUBSEQUENT TO THE DATE OF INTIMATION ISSUED U/S. 143(1) OF THE ACT DATED 31-07-2006. THE REASONS RECORDED BY THE L D.AO ARE VERY CATEGORICAL IN THE SENSE THAT ON SCRUTINY OF THE ASSESSMENT FOLDER, H OWEVER, IT REVEALED THAT . . HE PLACED RELIANCE ON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT LTD REPORTED IN 29 TAXMANN. COM 3 92(DEL) , WHICH IS DIRECTLY APPLICABLE ON THE POINT. WITHOUT PREJUDICE TO THE S AME, HE ALSO ARGUED THAT EVEN ASSUMING IF THE VERSION OF THE LD.AO THAT THE ASSE SSEE HAS NOT CONSTRUCTED THE RESIDENTIAL HOUSE WITHIN THE PERIOD OF 3 YEARS FROM THE DATE OF TRANSFER IS TO BE TREATED AS CORRECT, THEN IT DOES NOT RESULT IN WITHDRAWAL OF EXEMPTION U/S. 54F OF THE ACT FOR THE A.Y 2005-06 IN TERMS OF SPECIFIC PROVISIONS PRO VIDED IN SECTION 54F(4) R.W. PROVISO THERETO. ACCORDINGLY, CAPITAL GAINS COULD BE BROUGH T TO TAX ONLY IN A.Y 2009-10 AND NOT IN A.Y 2005-06 I.E YEAR UNDER APPEAL. HENCE, TH ERE CANNOT BE ANY REASON TO BELIEVE ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 6 ON THE PART OF THE LD.AO THAT INCOME OF THE A.Y 200 5-06 HAS ESCAPED ASSESSMENT.. IN THIS REGARD, HE ALSO PLACED HIS RELIANCE ON THE DEC ISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KULDIP SINGH REPORTED IN (2014) 49 TAXMANN.COM 167(DEL) . HE FURTHER ARGUED THAT ONCE THE REASON FOR WHICH THE ASSESSMENT WAS REOPENED ON A PARTICULAR ISSUE IS FOUND TO BE FAILE D, THEN THE ENTIRE RE-ASSESSMENT WOULD AUTOMATICALLY FAIL AS IT GOES TO THE ROOT OF THE ASSUMPTION OF JURISDICTION. IN THIS REGARD, HE PLACED HIS RELIANCE ON THE DECISION OF T HE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD REPORTED IN 331 ITR 236(BOM.) AND ALSO THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF RABI BISWAS VS. ITO IN ITA NOS. 1666-16667/KOL/2012 DATED 14-05-2015 . IN RESPONSE TO THIS, THE LD.DR ARGUED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED O NLY U/S. 143(1) OF THE ACT. HE FURTHER STATED THAT THE REASONS RECORDED INDICATE O N SCRUTINY OF THE ASSESSMENT FOLDER AND NOT SCRUTINY OF THE RETURN OF THE ASSESSEE. HEN CE, IT GOES TO PROVE THAT SOME OTHER MATERIAL MIGHT HAVE BEEN THERE IN THE ASSESSMENT FO LDER, WHICH TRIGGERED THE RE- ASSESSMENT PROCEEDINGS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, WE FIND THAT THE REASONS REC ORDED BY THE LD.AO ARE AS BELOW:- MAHESH PAL ARORA A.Y.2005-06 17-9-2008 THE ASSESSEE FILED RETURN OF INCOME FOR THE A.Y. 2005-06 ON 20- 07-2005 DECLARING TOTAL INCOME OF RS. 3.65.670/-. I T WAS PROCESSED U/S. 143(1) ON 31.7.2006 ON THE SAME RETURN INCOME. IT IS NOTICED THAT THE ASSESSEE HAD A LONG TERM CAP ITAL GAIN OF RS. 8,41 360/- AND AVAILED EXEMPTION OF THAT U/S. 54F OF I.T. ACT, 1961. SCRUTINY OF THE ASSESSMENT FOLDER HOWEVER REVEALED THAT THE ASSESSEE PURCHASED A SALI LAND AT A CONSIDERATION OF RS. 5.2 8.000/- AND ALSO MADE AN ADVANCE OF RS. 6.17.000/- TO A DEVELOPER FOR CON STRUCTION TO THE SAID PLOT OF LAND. BUT EXEMPTION U/S. 54F IS. AVAILABLE FOR CONSTRUCTI ON OF RESIDENTIAL HOUSE ONLY. MOREOVER, CONSTRUCTION .OF RESIDENTIAL HOUSE IS NOT PERMISSIBLE ON A SALI LAND. ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 7 SO, THE AMOUNT OF RS. 8,41.360/- HAS ESCAPED .ASSES SMENT WITHIN THE MEANING OF SECTION 147. ISSUE NOTICE U/S. 148. SD /- CHANDAN DATTA INCOME-TAX OFFICER WARD-7(1), KOLKATA 7.1 FROM THE REASONS RECORDED BY THE LD.AO WE FIND THAT THE LD.AO MERELY REVIEWED THE ASSESSMENT FOLDER AND TRIED TO ARRIVE AT DIFFERENT CONCLUSION THAT INCOME HAS BEEN ESCAPED ASSESSMENT, WITHOUT BRINGING ANY T ANGIBLE MATERIAL ON RECORD, WHICH HAS ADMITTEDLY COME TO HIS POSSESSION SUBSEQUENT T O THE DATE OF INTIMATION ISSUED U/S. 143(1) OF THE ACT. THIS ACTION OF THE LD.AO HAS BEE N HELD IMPERMISSIBLE AS PER LAW BY THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ORIENT CRAFT INDIA LTD(SUPRA), WHEREIN IT HAS BEEN HELD AS UNDER:- FINALITY OF INTIMATION UNDER SECTION 143(1) CAN BE DISTURBED ONLY IF ASSESSING OFFICER HAS 'REASON TO BELIEVE' . THE ASSESSEE'S CONTENTION THAT EVEN AN ASSESSMENT M ADE UNDER SECTION 143(1) OF THE ACT CAN BE REOPENED UNDER SECTION 147 IF THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' THAT INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT, IS SOUND. IT IS TRUE THAT NO ASSESSMENT ORDER IS PASSED WHEN THE RETURN IS MERELY PROCESSED UNDER SECTION 143(1) AND AN INTIMATION TO THAT EFFECT IS SENT TO THE ASSESSEE. HOWEVER, IT HA S BEEN RECOGNIZED BY THE SUPREME COURT ITSELF IN ASSTT. CIT V. RAJESH JHAVER I STOCK BROKERS (P.) LTD. [2007] 291 ITR 500 / 161 TAXMAN 316 (SC), THAT EVEN WHERE PROCEEDINGS UNDER SECTION 147 ARE SOUGHT TO BE TAKE N WITH REFERENCE TO AN INTIMATION FRAMED EARLIER UNDER SECTION 143(1), THE INGREDIENTS OF SECTION 147 HAVE TO BE FULFILLED; THE INGREDIENT IS THAT TH ERE SHOULD EXIST 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS JUDGMENT, DOES NOT GIVE A CARTE BLANCHE TO THE ASSE SSING OFFICER TO DISTURB THE FINALITY OF THE INTIMATION UNDER SECTION 143(1) AT HIS WHIMS AND CAPRICE; HE MUST HAVE REASON TO BELIEVE WITHIN THE MEANING OF THE SECTION. [PARA 8] ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 8 IN ABSENCE OF ANY TANGIBLE MATERIAL, THERE WILL BE A REVIEW IN GUISE OF REOPENING IN CIT V. KELVINATOR OF INDIA LTD. [2010] 187 TAXMA N 312 / 320 ITR 561 (SC), IT WAS OBSERVED THAT AFTER 1-4-1989 THE ASSESSING OFFICER HAS POWER TO REOPEN PROVIDED THERE IS 'TANGIBLE MAT ERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME. THE JUDGMENT HAS LAID EMPHASIS ON TWO MORE ASPECTS: THAT THERE CAN BE NO REVIEW OF AN ASSESSMENT IN THE GUISE OF REOPENING AND THAT A BAR E REVIEW WITHOUT ANY TANGIBLE MATERIAL WOULD AMOUNT TO ABUSE OF THE POWE R. [PARA 12] THE ASSUMPTION OF THE REVENUE THAT SOMEHOW THE WORD S 'REASON TO BELIEVE' HAVE TO BE UNDERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DIS TURBED IS ERRONEOUS AND MISCONCEIVED. THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DISTI NCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATIO N ISSUED UNDER SECTION 143(1). THEREFORE, IT IS NOT PERMISSIBLE TO ADOPT D IFFERENT STANDARDS WHILE INTERPRETING THE WORDS 'REASON TO BELIEVE' VIS-A-VI S SECTION 143(1) AND SECTION 143(3). [PAR 13] AN ASSESSEE IN WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) CANNOT BE PLACED IN A MORE VULNERABLE POSITI ON THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESS MENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTI NY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL O F ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVE D IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SE CTION 143(1) AND THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION 'REASON TO BELIEVE ' IN CASES WHERE ASSESSMENTS WER E FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WE RE ISSUED EARLIER UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINT ENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISCHIEF IS TO BE ESCHEWED. [PARA 13] THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS ( P.) LTD.'S CASE (SUPRA) HAS HELD THAT THE STRICT REQUIREMENTS OF SE CTION 147 CAN BE COMPROMISED. ON THE CONTRARY, FROM THE OBSERVATIONS IT WOULD APPEAR CLEAR THAT THE COURT REITERATED THAT 'SO LONG AS T HE INGREDIENTS OF SECTION ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 9 147 ARE FULFILLED AN INTIMATION ISSUED UNDER SECTI ON 143(1) CAN BE SUBJECTED TO PROCEEDINGS FOR REOPENING. THE COURT A LSO EMPHASIZED THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALITY OF AN INTIMATION IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVETH AT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE EXPRESSION REA SON TO BELIEVEHAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APP LICABLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AN D ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED UNDER SECTIO N 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOT WITHSTANDING THAT THE ARGUMENT OF CHANGE OF OPINION IS NOT AVAILABLE T O HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE OR THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOME CHARGEA BLE TO TAX HAD ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRON OUNCEMENTS [PARA 14] IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE A SSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INC OME ON GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AFTER H E ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, AND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUS E OF POWER BY THE ASSESSING OFFICER. THE REASONS RECORDED BY THE ASSE SSING OFFICER IN THE PRESENT CASE DO CONFIRM OUR APPREHENSION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS REASON TO BELIEVEVIS- -VIS AN INTIMATION ISSUED UNDER SECTION 143(1) CAN CAUSE TO THE TAX RE GIME. THERE IS NO WHISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE ASSESSING OFFICER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY EXERCISE OF TH E POWER CONFERRED UNDER SECTION.147.[PARA 15] 7.2 WE ALSO FIND FROM THE PROVISIONS OF SECTION 54F (4) OF THE ACT THAT IN ANY CASE THE CLAIM OF EXEMPTION U/S. 54F COULD NOT BE DISTU RBED IN A.Y 2005-06 EVEN IF THE CONSTRUCTION OF RESIDENTIAL HOUSE HAS NOT BEEN COMP LETED BY THE ASSESSEE WITHIN 3 YEARS FROM THE DATE OF TRANSFER. FOR THE SAKE OF CO NVENIENCE, THE PROVISIONS OF SECTION 54F(4) OF THE ACT IS REPRODUCED HEREIN BELOW:- CAPITAL GAIN ON TRANSFER OF CERTAIN CAPITAL ASSETS NOT TO BE CHARGED IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE. ) 54F (1) *** *** *** *** *** *** ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 10 (A) *** *** *** *** *** *** (B) *** *** *** *** *** *** (2) TO (3) *** *** *** *** *** *** (4) THE AMOUNT OF THE NET CONSIDERATION WHICH IS NOT APPROPRIATED BY THE ASSESSEE TOWARDS THE PURCHASE OF THE NEW ASS ET MADE WITHIN ONE YEAR BEFORE THE DATE ON WHICH TRANSFER OF THE ORIGI NAL ASSET TOOK PLACE, OR WHICH IS NOT UTILISED BY HIM FOR THE PURCHASE OR CO NSTRUCTION OF THE NEW ASSET BEFORE THE DATE OF FURNISHING THE RETURN OF I NCOME UNDER SECTION 139 , SHALL BE DEPOSITED BY HIM BEFORE FURNISHING SUCH R ETURN [SUCH DEPOSIT BEING MADE IN ANY CASE NOT LATER THAN THE DUE DATE APPLICABLE IN THE CASE OF ASSESSEE FOR FURNISHING THE RETURN OF INCOME UND ER SUB-SECTION(1) OF SECTION 139] IN AN ACCOUNT IN ANY SUCH BANK OR INSTITUTION AS M AY BE SPECIFIED IN, AND UTILIZED IN ACCORDANCE WITH, ANY SCHEME WHICH THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFI CIAL GAZETTE, FRAME IN THIS BEHALF AND SUCH RETURN SHALL BE ACCOMPANIED BY PROOF OF SUCH DEPOSIT; AND FOR THE PURPOSES OF SUB-SECTION (1), THE AMOUNT , IF ANY, ALREADY UTILIZED BY THE ASSESSEE FOR THE PURCHASE OR CONST RUCTION OF THE NEW ASSET TOGETHER WITH THE AMOUNT SO DEPOSITED SHALL BE DEEM ED TO BE THE COST OF THE NEW ASSET: PROVIDED THAT IF THE AMOUNT DEPOSITED UNDER THIS SU B-SECTION IS NOT UTILIZED WHOLLY OR PARTLY FOR THE PURCHASE OR CONSTRUCTION O F THE NEW ASSET WITHIN THE PERIOD SPECIFIED IN SUB-SECTION (1), THEN,- (I) THE AMOUNT BY WHICH- (A) THE AMOUNT OF CAPITAL GAIN ARISING FROM THE TRANSFE R OF THE ORIGINAL ASSET NOT CHARGED UNDER SECTION 45 ON THE BASIS OF THE COST OF THE NEW ASSET AS PROVIDED IN CLAUSE (A) OR, AS THE CASE MAY BE, CLAUSE (B) OF SUB-SECTION (1), EXCEEDS (B) THE AMOUNT THAT WOULD NOT HAVE BEEN SO CHARGED HAD THE AMOUNT ACTUALLY UTILIZED BY THE ASSESSEE FOR THE PU RCHASE OR CONSTRUCTION OF THE NEW ASSET WITHIN THE PERIOD SPE CIFIED IN SUB- SECTION (1) BEEN THE COST OF THE NEW ASSET, SHALL B E CHARGED UNDER SECTION 45 AS INCOME OF THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF THE TRANSFE R OF THE ORIGINAL ASSET EXPIRES; AND (II) THE ASSESSEE SHALL BE ENTITLED TO WITHDRAW THE UNUT ILIZED AMOUNT IN ACCORDANCE WITH THE SCHEME AFORESAID. ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 11 7.3 WE ALSO FIND THAT THE DECISION OF THE HONBL E DELHI HIGH COURT AS RELIED UPON BY THE ASSESSEE IN THE CASE OF CIT VS. KULDIP SINGH (SUPRA) IS WELL PLACED, WHEREIN IT HAS BEEN HELD AS UNDER:- THE BASIC PURPOSE BEHIND SECTION 54 IS TO ENSURE TH AT THE ASSESSEE IS NOT TAXED ON THE CAPITAL GAINS, IF HE REPLACES HIS HOUSE WITH ANOTHER HOUSE AND SPENDS MONEY EARNED ON THE CAPITAL GAINS WITHIN THE STIPULATED PERIOD[PARA 12] THE VIEW TAKEN GETS SUPPORT FROM SUB-SECTION (2) TO SECTION 54. THE AFORESAID SUB-SECTION REQUIRES THE ASSESSEE TO DEPO SIT UNSPENT AMOUNT NOT UTILIZED BY THE ASSESSEE FOR PURCHASE OR CONSTR UCTION OF A NEW ASSET BEFORE THE DATE OF FURNISHING OF RETURN, IN A SPECI FIED ACCOUNT. IT FURTHER STATES THAT THE AMOUNT, IF ALREADY UTILIZED FOR PUR CHASE OR CONSTRUCTION OF THE NEW ASSET, THE AMOUNT SO DEPOSITED WILL BE D EEMED TO BE COST OF A NEW ASSET SUBJECT TO THE PROVISO. THE WORD PURCHAS E IS USED IN SUB- SECTION (2) AND INDICATES THAT THE SAID WORD IS NOT RESTRICTED OR CONFINED TO REGISTERED SALE DEED OR EVEN POSSESSION BUT HAS A WIDER CONNONATION. THE PROVISO SUPPORTS THE AFORESAID INTERPRETATION A ND STIPULATES THAT THE AMOUNT DEPOSITED BUT NOT UTILIZED WHOLLY OR PAR TLY FOR PURCHASE OR CONSTRUCTION OF NEW ASSET WITHIN THE SPECIFIED PERI OD WILL BE CHARGED TO TAX UNDER SECTION 45 IN THE PREVIOUS YEAR IN WHICH THE PERIOD OF THREE YEARS FROM THE DATE OF TRANSFER OF ORIGINAL ASSET E XPIRED. THE PERIOD OF THREE YEARS IS STIPULATED AS THIS IS LONGER PERIOD SPECIFIED IN THE SUB- SECTION (1) TO SECTION 54. IT IS ONLY THE BALANCE AMOUNT WHICH IS NOT UTILIZED WHICH IS TO BE BROUGHT AND CHARGED TO TAX . THE ENTIRE AMOUNT OF SALE CONSIDERATION OR THE CAPITAL GAINS IS NOT T O BE BROUGHT TO TAX, BUT THE UNSPENT AMOUNT/FIGURE IS TAXED. [PARA 13] IN VIEW OF THE AFORESAID POSITION, NO SUBSTANTIAL Q UESTION OF LAW ARISES AND THUS THE PRESENT APPEAL IS DISMISSED. [ PARA 14] 7.4 HENCE, WE ARE CONVINCED THAT THERE IS NO CASE F OR THE LD.AO TO DISTURB THE CLAIM OF EXEMPTION U/S. 54F OF THE ACT IN A.Y 2005-06. AC CORDINGLY, THE BASIC REASON ON AN ISSUE FOR WHICH THE ASSESSMENT WAS RE-OPENED FAILS. HENCE, ANY ADDITION MADE OTHER THAN THE REASON FOR WHICH THE ASSESSMENT WAS REOPEN ED WOULD ALSO AUTOMATICALLY FAIL AS THE ASSUMPTION OF JURISDICTION ITSELF FAILS ON T HE PART OF THE LD.AO. THIS ISSUE IS NOW ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 12 WELL SETTLED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. JET AIRWAYS (I) LTD REPORTED IN 331 ITR 236 BOM.) 8. RESPECTFULLY FOLLOWING THE AFORESAID JUDICIAL P RECEDENTS, WE HAVE NO HESITATION TO QUASH THE RE-ASSESSMENT PROCEEDINGS ON THE GROU ND THAT THERE WAS NO TANGIBLE MATERIAL WITH THE LD.AO FOR INITIATION OF RE-ASSESS MENT PROCEEDINGS. WE ALSO FIND THAT IN VIEW OF PROVISIONS OF SECTION 54F(4) R.W. PROVIS O THEREON, THERE IS NO SCOPE FOR MAKING ANY ADDITION IN A.Y 2005-06. HENCE, THERE CO ULD NOT BE ANY REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT FOR THE A.Y 2005 -06. ACCORDINGLY, GROUND NOS. 1 & 2 RAISED BY THE ASSESSEE ARE ALLOWED. 9. AS THE ISSUE OF VALIDITY OF RE-ASSESSMENT HAS BE EN HELD IN FAVOUR OF THE ASSESSEE, OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS NEED NOT BE ADJUDICATED UPON AS THEY WOULD BECOME INFRUCTUOUS 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER IS PRONOUNCED IN OPEN COURT ON 29 - 0 3 - 2016 1.. THE APPELLANT/ASSESSEE: MAHESH PAL ARORA.13C B LOCK-I 5 JBS HALDEN AV.KOL-105 2 THE RESPONDENT/DEPARTMENT: THE INCOME TAX OFFICER WARD 7(1), P-7 CHOWRINGHEE SQUARE, KOLKATA. 3 /THE CIT, 4.THE CIT(A ) SD/- ( S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ) SD/- (M. BALAGANESH, ACCOUNTANT MEMBER) DATE: DATE 29 -03-2016 COPY OF THE ORDER FORWARDED TO:- ITA NO.206/KOL/2013 -B-AM MAHESH PAL ARORA 13 5. DR, KOLKATA BENCH 6. GUARD FILE. TRUE COPY, BY ORDER, ASSTT REGISTRAR **PRADIP SPS