ITO Ward 4 (2), V. Rashmi Chawla,

ITA 2709/DEL/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1018 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 22-10-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 29-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Keywords: Income from undisclosed sources; Salary income; Cost of acquisition; Fair market value; Reason to believe; Reassessment proceedings; Capital Gains
• Section: 54F; 143(1); 143(2); 147; 131; 69; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G : NEW DELHI BEFORE SHRI RAJPAL YADAV, JM AND SHRI R.C.SHARMA, A M ITA NO.2709/DEL/2007 ASSESSMENT YEAR : 2003-04 INCOME TAX OFFICER, WARD-46(2), NEW DELHI. VS. SMT.RASHMI CHAUHAN, 10, UNDERHILL ROAD, CIVIL LINES, DELHI. PAN NO.AADPC8794D. (APPELLANT) (RESPONDENT) CROSS-OBJECTION NO.173/DEL/2008 ASSESSMENT YEAR : 2003-04 SMT.RASHMI CHAUHAN, 10, UNDERHILL ROAD, CIVIL LINES, DELHI. PAN NO.AADPC8794D. VS. INCOME TAX OFFICER, WARD-46(2), NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI N.K.CHAND, SR.DR. ASSESSEE BY : SHRI M.P.RASTOGI AND SHRI DEEPAK MALI K, ADVOCATES. ORDER PER R.C.SHARMA, AM : THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS-O BJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) DATED 12.4.2007 FOR THE AY 2003-04, IN THE MATTER OF ORDER PASSED U/S 143(3)/147 OF THE IT ACT. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PER USED. FACTS IN BRIEF ARE THAT DURING THE YEAR, THE ASSESSEE HAS PURCHASED A RESIDENTIAL HOUSE WHEREIN CAPITAL GAIN ARISING OUT OF SALE OF SHARES WAS CLAIMED U/S 54F. THE ASSESSING OFFICER ITA-2709/D/2007 & CO-173/D/2008 2 FOUND THAT ASSESSEE HAS PURCHASED SHARES THROUGH CO NTRACT NOTE VIDE SETTLEMENT NO.0113 DATED 28.3.2001. SINCE THE SHARES WERE SEN T FOR DEMAT IN MARCH 2002, THE ASSESSING OFFICER HAS TAKEN THE DATE OF PURCHAS E OF SHARES AS MARCH 2002 AND SINCE THE SAME WERE SOLD BY THE ASSESSEE VIDE SETTL EMENT NO.2085 AND 2216 DATED 6.5.2002 AND 14.11.2002, THE AO TREATED THE CAPITAL GAIN ARISING OUT OF THE SALE AS SHORT TERM. AS PER AO, THE DATE OF PURCHASE OF SHA RES ON 28.3.2001 IS NOT RELEVANT WHEREAS DATE ON WHICH SHARES WERE SENT FOR DEMAT IN MARCH 2002 IS THE RELEVANT DATE AND THE HOLDING PERIOD OF THE SHARES IS TO BE COMPUTED WITH REFERENCE TO THE DATE ON WHICH THE SHARES WERE DEMATERIALIZED AND NO T THE DATE ON WHICH ACTUAL PURCHASE THROUGH SETTLEMENT DEED TOOK PLACE ON 28.3 .2001. ACCORDINGLY, CAPITAL GAIN ARISING WAS NOT HELD TO BE EXEMPT U/S 54F. TH E AO ALSO REFERRED THE MATTER TO THE VALUATION CELL FOR DETERMINING THE COST OF HOUS E PROPERTY PURCHASED BY THE ASSESSEE AND ON THE BASIS OF THE ESTIMATED VALUATIO N ARRIVED AT BY THE DVO, AN ADDITION WAS MADE WITH REFERENCE TO THE DIFFERENCE BETWEEN THE PURCHASE PRICE AND THE ESTIMATED VALUE ARRIVED AT BY THE DVO. THE AO HAS ALSO TREATED THE SALARY INCOME OF THE ASSESSEE AS INCOME FROM OTHER SOURCES . AGGRIEVED BY THE SAME, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A), WHEREIN BY GIVING DETAILED FINDING WITH REGARD TO DATE OF ACQUISITION OF SHARES THROUG H CONTRACT NOTE GIVING DISTINCTIVE NUMBER OF SHARES SO PURCHASED, THE CIT(A) HELD THAT AS PER MATERIAL PLACED ON RECORD AND THE DOCUMENTARY EVIDENCE, THE PURCHASE O F SHARES WAS EFFECTED ON 28.3.2001, ACCORDING TO WHICH THE PERIOD OF HOLDING IS MORE THAN ONE YEAR AND THEREFORE PROFIT ARISING ON SALE OF SUCH SHARES IS ELIGIBLE FOR EXEMPTION U/S 54F. HE ALSO HELD THAT IT IS NOT A CASE OF CONSTRUCTION OF PROPERTY BUT THE PURCHASE OF PROPERTY, THEREFORE THE ESTIMATED VALUE ARRIVED AT BY THE DVO CANNOT BE TAKEN INTO ACCOUNT FOR MAKING ANY ADDITION, INSOFAR AS AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT ANY PAYMENT IN EXCESS OF T HE PURCHASE CONSIDERATION SHOWN IN THE REGISTERED SALE DEED HAS BEEN PAID BY THE ASSESSEE. ACCORDINGLY, ADDITION MADE ON ACCOUNT OF DVOS REPORT WAS DELETE D BY CIT(A). AFTER RECORDING A DETAILED FINDING, THE CIT(A) HELD THAT ASSESSEE WAS A QUALIFIED LADY AND HAVING DEGREE IN POLITICAL SCIENCE AND WORKING WITH M/S DURGA ASSOCIATES ON ITA-2709/D/2007 & CO-173/D/2008 3 A MONTHLY SALARY OF RS.6,000/- PER MONTH. SALARY S O RECEIVED WAS ACCORDINGLY HELD TO BE LIABLE TO TAX AS INCOME FROM SALARY AND NOT AS INCOME FROM OTHER SOURCES. AGGRIEVED BY THE ORDER OF CIT(A), THE REV ENUE IS IN FURTHER APPEAL BEFORE US. 3. RIVAL CONTENTIONS HAVE BEEN CONSIDERED AND RECOR D PERUSED. FROM THE RECORD, WE FOUND THAT IN THIS CASE, ASSESSEE HAD FI LED RETURN OF INCOME ON 28.11.2003 ADMITTING TOTAL INCOME AT RS.2,22,223/-. RETURN WAS PROCESSED U/S 143(1), THEREAFTER REASONS WERE RECORDED U/S 147 AN D A NOTICE U/S 148 WAS ISSUED ON 1.6.2005. IN RESPONSE TO THIS, THE ASSESSEE SUB MITTED VIDE LETTER DATED 14.7.2007 THAT THE RETURN FILED ON 28.11.2003 MAY B E TREATED AS A RETURN FILED U/S 148 OF THE IT ACT. IN THE COURSE OF REASSESSMENT P ROCEEDINGS, THE AO OBSERVED THAT DURING THE PREVIOUS YEAR THE ASSESSEE HAS PURC HASED A PROPERTY AT 10, UNDERHILL LANE, CIVIL LINES, DELHI THROUGH A SALE D EED EXECUTED ON 23.7.2002 FOR A SUM OF RS.45,00,000/-. THE ASSESSEE WAS ASKED TO E XPLAIN THE SOURCE OF INVESTMENT IN THIS PROPERTY. IT WAS SUBMITTED ON B EHALF OF THE ASSESSEE THAT SHARES WERE SOLD BY THE ASSESSEE WORTH RS.52,74,760/- ON W HICH LONG TERM CAPITAL GAIN ACCRUED TO HER, WHICH HAD BEEN INVESTED IN THE PURC HASE OF PROPERTY IN QUESTION. IN SUPPORT OF THE SALE OF THESE SHARES THE RESPECTI VE CONTRACT NOTE/BILLS ISSUED BY M/S CMS SECURITIES LTD. WERE FILED. THESE SHARES W ERE PURCHASED BY THE ASSESSEE I.E. IN APRIL/MAY 2001. THE PAYMENTS FOR PURCHASE OF THESE SHARES WERE MADE IN CASH. AS PER THE STATEMENT OF ACCOUNT FILED WITH T HE RETURN OF INCOME 80,000 SHARES OF M/S SUMA FINANCE AND INVESTMENT LTD., WER E PURCHASED BY ASSESSEE FROM M/S CMS SECURITY LTD. THESE SHARES WERE SOLD I N TWO LOTS I.E. 55,000 SHARES @ RS.92.59 PER SHARES ON 8.5.2002 AND FURTHER 25,00 0 SHARES ON 18.11.2002 @ RS.7.45 PER SHARE. THESE SHARES HAVE ALSO BEEN SOL D TO M/S CMS SECURITIES LTD. ENQUIRIES WERE MADE FROM M/S CMS SECURITIES LTD., A SKING THEM TO PRODUCE THE SETTLEMENT SHEET ETC. SHOWING THE SALE AND PURCHASE OF SHARES FROM RASHMI CHAUHAN, THE ASSESSEE. THE AO FURTHER OBSERVED THA T M/S NATIONAL STOCK EXCHANGE INFORMED THAT M/S CMS SECURITIES LTD. WERE SUSPENDED AS A MEMBER OF ITA-2709/D/2007 & CO-173/D/2008 4 NATIONAL STOCK EXCHANGE SOMETIME WITH EFFECT FROM S EPTEMBER, 1997 AND WAS NOT ALLOWED TO WORK AS A BROKER GIVING SERVICES FOR THE PURCHASE AND SALE OF ANY SHARES/SECURITY OF ITS CLIENT. WHEN THIS FACT WAS PUT TO M/S CMS SECURITIES LTD., IT WAS SUBMITTED THAT THE PURCHASE AND SALES OF SHARES TOOK PLACE OUTSIDE THE STOCK EXCHANGE WHICH IS KNOWN AS OFF MARKET TRANSACTION . AS PER AO, THE ONUS IS ON THE ASSESSEE TO PROVE THE DATE OF TRANSACTION AS AL SO TO PROVE THE RATE AT WHICH THE TRANSACTION TOOK PLACE. THE ASSESSEE WAS ASKED TO SUBMIT A COPY OF THE DEMAT ACCOUNT MAINTAINED BY HER. IN RESPONSE TO THIS THE ASSESSEE HAS SUBMITTED A DEMAT ACCOUNT NO.10022068 MAINTAINED BY HER WITH M/S INDI A BULLS. M/S INDIA BULLS INFORMED THAT REQUEST FOR DEMATERIALIZATION OF 80,0 00 SHARES OF M/S SUMA FINANCE AND INVESTMENT LTD. WAS RECEIVED BY THEM FROM THEIR CLIENT SMT.RASHMI CHAUHAN ON 26.03.2002 WHICH WAS FORWARDED BY THEM TO THE RE GISTRAR LOOKING AFTER THE TRANSFER OF SHARES OF M/S SUMA FINANCE & INVESTMENT LTD. THE AO STATED THAT ASSESSEE HAD FILED RETURN OF INCOME IN SALARY WARD, DECLARING INCOME UNDER THE HEAD SALARY AT RS.72,000/- BESIDES OTHER INCOME. A CERTIFICATE OF SALARY WAS FILED FROM M/S DURGA ASSOCIATES, 4025, PAHARI DHIRA J, SADAR BAZAR, DELHI ACCORDING TO WHICH A PAYMENT OF RS.72,000/- AS SALA RY WAS MADE TO THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE AO ALSO R ECORDED STATEMENT OF THE ASSESSEE U/S 131 OF THE IT ACT WHEREIN IT WAS TRANS PIRED THAT ASSESSEE IS MA IN POLITICAL SCIENCE. THE AO STATED THAT IT IS HARDLY BELIEVABLE THAT ASSESSEE WOULD BE WORKING AS A RECEPTIONIST/CLERK. THE AO ALSO DOUBT ED THE EMPLOYMENT OF ASSESSEE, HE THEREFORE TREATED THE SALARY INCOME OF RS.72,000/- AS INCOME FROM OTHER SOURCES. 4. IN VIEW OF THE REQUEST FOR DEMATERIALIZATION OF SHARES RECEIVED ON 26.3.2002, THE AO STATED THAT SHARES OF M/S SUMA FI NANCE & INVESTMENT LTD. WERE PURCHASED BY THE ASSESSEE ONLY IN THE MONTH OF MARC H, 2002 WHEN THESE SHARES WERE SENT FOR DEMATERIALIZATION AND SINCE THE SALE THEREOF WAS EFFECTED IN MARCH 2002 AND NOVEMBER 2002, THE PROFIT DERIVED THEREFRO M WAS TREATED BY THE AO AS SHORT TERM CAPITAL GAINS. ACCORDINGLY, HE HELD THA T INVESTMENT MADE IN THE ITA-2709/D/2007 & CO-173/D/2008 5 PROPERTY WAS NOT ELIGIBLE FOR EXEMPTION U/S 54F OF THE IT ACT. THE AO ALSO MADE A REFERENCE TO THE DVO TO ESTIMATE THE VALUE OF THE PROPERTY ON THE DATE OF PURCHASES. IN THE REPORT, THE DVO ESTIMATED THE VA LUE OF THE PROPERTY AT RS.1,06,99,000/-. OBJECTION WAS FILED BY THE ASSES SEE AGAINST THE DVOS REPORT WHEREIN IT WAS STATED THAT THE VALUATION OFFICER WA S NOT JUSTIFIED IN TAKING THE SALE INSTANCE OF THE PROPERTY WHICH IS MEASURING 13098.6 8 SQ. MTRS. AND SITUATED AT 7, COURT ROAD, CIVIL LINES, DELHI. AS PER THE VALUATI ON REPORT, THE AREA OF THE PLOT IS 13098.68 SQ. MTRS., IT IS ONLY 1/20 TH SHARE OF THIS PLOT WHICH HAS BEEN CONSIDERED FOR TRANSFER AT RS.1,09,62,269/-. THE DVO HAS FURT HER INCREASED THE VALUE OF THE PROPERTY BY 10% ON THE BASIS OF BETTER LOCATION. C ONTENTION OF THE ASSESSEE BEFORE THE AO WAS THAT LOCATION OF THE PROPERTY BELONGING TO HER CANNOT BE SAID TO BE BETTER THAN THE SITUATION OF THE PROPERTY IN THE SA LE INSTANCE. THE VALUE OF THE PROPERTY SO PURCHASED WAS FINALLY DETERMINED BY THE AO AT RS.96,65,650/-. AFTER REDUCING THE COST OF ACQUISITION OF RS.45 LAKHS AT WHICH THE ASSESSEE ENTERED INTO THE TRANSACTION AN ADDITION OF RS.51,65,650/- WAS M ADE AS INCOME FROM UNDISCLOSED SOURCES U/S 69 OF THE IT ACT. AGAINST THIS ORDER OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). BY THE IM PUGNED ORDER, THE CIT(A) DELETED THE ADDITION MADE BY THE AO. IN RESPECT OF SALARY INCOME, THE CIT(A) OBSERVED THAT ASSESSEE WAS EMPLOYED DURING THE PERI OD 1.4.2002 TO 31.3.2003 BY M/S DURGA ASSOCIATES AT A SALARY OF RS.6,000/- PER MONTH. AFTER VERIFYING THE SALARY CERTIFICATE AND THE STATEMENT OF THE ASSESSE E RECORDED U/S 131, THE CIT(A) OBSERVED THAT ASSESSEE WAS WORKING AS A RECEPTIONIS T. THE CIT(A) OBSERVED THAT AO HAS DISALLOWED THE CLAIM OF SALARY INCOME WITHOU T PLACING ANY EVIDENCE ON RECORD TO JUSTIFY ANY OTHER INFERENCE DRAWN BY HIM. ACCORDINGLY, HE HELD THAT ASSESSEE WAS IN RECEIPT OF SALARY AMOUNTING TO RS.7 2,000/- DURING THE YEAR, THE SAME WAS CORRECTLY OFFERED TO TAX UNDER THE HEAD S ALARY. IT WAS ALSO OBSERVED THAT IN EARLIER AND SUBSEQUENT YEARS ALSO, THE CLAI M OF SALARY INCOME OFFERED TO TAX HAS BEEN ALLOWED IN APPEAL. ITA-2709/D/2007 & CO-173/D/2008 6 5. WITH REGARD TO DISALLOWANCE OF CLAIM OF EXEMPTIO N U/S 54F, THE CIT(A) OBSERVED THAT THESE SHARES WERE PURCHASED THROUGH T WO CONTRACT NOTES DATED 28.3.2001 AND 9.4.2001. THE ADDITION FOR PURCHASE OF SHARES WAS MADE IN THE PRECEDING YEAR AND THE SAME WERE ALLOWED IN APPEAL. THUS, THERE WAS NO DISPUTE TO THE ACQUISITION OF THE SHARES OF THE ASSESSEE. WITH REGARD TO CLAIM OF EXEMPTION ON ACCOUNT OF LONG TERM CAPITAL GAIN DURING THE YEA R ON ACCOUNT OF SALE OF SHARES THROUGH M/S CMS SECURITIES, THE CIT(A) OBSERVED THA T THE AO HAS WRONGLY TAKEN THE DATE OF PURCHASE OF SHARES AS MARCH 2002 WHEN T HE SHARES WERE SENT FOR DEMAT THROUGH INDIA BULLS. IN VIEW OF THE FACT THAT AS P ER THE CONTRACT NOTES PURCHASES WERE EFFECTED ON 28.3.2001 AND 9.4.2001 THE CIT(A) RECORDED A CATEGORICAL FINDING THAT SHARES WERE HELD BY ASSESSEE FOR MORE THAN 12 MONTHS, THEREFORE ASSESSEE WAS ELIGIBLE TO CLAIM EXEMPTION U/S 54F ON ITS INVESTMENT IN RESIDENTIAL HOUSE. THE ADDITION MADE ON ACCOUNT OF DVOS REPORT WAS DELETED BY THE CIT(A) AFTER HAVING THE FOLLOWING OBSERVATION:- AS REGARDS THESE GROUNDS I FIND THAT THE ASSESSEE HAS PURCHASED PROPERTY AT 10 UNDER HILL, CIVIL LINES, NEW DELHI T HROUGH SALE DEED EXECUTED ON 23-07-02 FOR A TOTAL CONSIDERATION OF R S.45 LAKHS, IN ADDITION TO NORMAL STAMP DUTY ETC. PAID. THE AO RE FERRED THE ISSUE OF THE ADEQUACY OF THE SALE CONSIDERATION TO THE VA LUATION OFFICER WHO DETERMINED THE VALUE AT RS.1,06,99,000/-. THIS VALUE WAS DETERMINED BY WORKING OUT THE FAIR MARKET VALUE OF THE LAND, AND THE COST OF CONSTRUCTION SEPARATELY. WHILE DOING SO TH E PRIMARY FACT THAT THE PROPERTY WHICH WAS PURCHASED CONSISTED OF LAND AND BUILDING WAS LOST SIGHT OF BY THE DVO. THE AO HOWEVER WATER ED DOWN THE ESTIMATE OF RS.1,06,99,000/- TO RS.96,65,650/-, AND ADDED IT WHILE COMPUTING THE TOTAL INCOME. AS REGARDS THIS ISSUE I AM OF THE OPINION THAT THE ASSESSEE HAD PURCHASED PROPERTY BEING 10 UNDERHILL AS CONSTRUCTE D PROPERTY AND THERE IS NO LOGIC IN ESTIMATING THE FAIR MARKET VAL UE BY SPLITTING THE COST OF CONSTRUCTION PRICE AND LAND SEPARATELY. TH IS IS NO PERMITTED IN LAW. IT IS ALSO AN ADMITTED FACT THAT NO ACTION HAS BEEN TAKEN IN THE HANDS OF THE PERSON WHO HAD SOLD THE PROPERTY AND IN HIS HANDS THE SALE CONSIDERATION OF RS.45 LAKHS HAS BEEN ACCEPTED. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE OPINION THAT THE AO WAS NOT WITHIN HIS POWERS TO ENHANCE THE VALUE OF THE SAID PROPERTY. MORE ITA-2709/D/2007 & CO-173/D/2008 7 SO, BECAUSE THE SALE DEED HAS BEEN EXECUTED AND REG ISTERED AND NO EVIDENCE AT ALL HAS BEEN BROUGHT ON RECORD BY THE A O TO JUSTIFY HIS CONTENTION THAT THE ASSESSEE HAS PAID MONEY IN EXCE SS OF WHAT HAS BEEN STATED IN THE SALE DEED. IN SUCH FACTS AND CIRCUMSTANCES OF THE CASE THE AO IS DIRECTED TO ACCEPT THE PURCHASE CONSIDERATION IN RESPECT OF PRO PERTY NO.10 UNDERHILL, CIVIL LINES, DELHI AT RS.45 LAKHS. 6. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTION WHEREIN ASS UMPTION OF JURISDICTION U/S 147 OF THE ACT WAS ALLEGED TO BE BAD IN LAW. FOLLOWING GROUNDS HAVE BEEN TAKEN IN CROSS-OBJECTION:- 1. THAT THE ASSUMPTION OF JURISDICTION U/S 147 OF THE IT ACT IS BAD IN LAW. 2. THAT THERE WAS NO VALID MATERIAL WITH THE ASSESS ING OFFICER TO FORM REASON TO BELIEVE AND CONSEQUENTLY THE REASS ESSMENT SO FRAMED BASED ON SUCH INVALID ASSUMPTION OF JURISDIC TION IS BAD IN LAW. 3. THAT THE ASSESSING OFFICER FAILED TO COMPLY WITH THE PRE- REQUISITE CONDITIONS AS CONTEMPLATED U/S 147/148 OF THE IT ACT AND HENCE THE REASSESSMENT SO FRAMED IN FURTHERANCE OF SUCH INVALID ASSUMPTION OF JURISDICTION IS NOT SUSTAINABLE UNDER THE LAW. 7. IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF NTPC, THE LEGAL GROUND WAS PRESSED BEFORE US FOR THE FIRST TI ME BY SUBMITTING THAT ALL THE RELEVANT FACTS ARE ON RECORD. AS PER LEARNED AR, T HERE WAS NO VALID MATERIAL WITH THE AO TO FORM REASONS TO BELIEVE AND CONSEQUENTL Y, THE REASSESSMENT SO FRAMED BASED ON SUCH INVALID ASSUMPTION OF JURISDICTION, I S BAD IN LAW. HE FURTHER CONTENDED THAT AO FAILED TO COMPLY WITH THE PRE-REQ UISITE CONDITIONS AS CONTEMPLATED U/S 147/148 OF THE ACT, HENCE THE REAS SESSMENT SO FRAMED IN FURTHERANCE OF SUCH INVALID ASSUMPTION OF JURISDICT ION IS NOT SUSTAINABLE IN LAW. ITA-2709/D/2007 & CO-173/D/2008 8 8. LEARNED AR DRAWN OUR ATTENTION TO THE REASONS RE CORDED FOR REOPENING WHICH READ AS UNDER:- REASONS FOR REOPENING THE ASSTT. FOR YEAR 2003-04 1-06-2005 RETURN IN THE ABOVE CASE WAS FILED ON 20-06-2003. IT HAS BEEN PROCESSED U/S 143(1) OF THE I.T.ACT, 1961. A PERUSAL OF THE RETURN REVEALS THAT THE ASSESSEE HAS SOLD SHARES OF M/S SUMA FINANCE LTD. FOR A SUM OF RS.52,74,760/-. THE LONG-TERM CA PITAL GAIN ACCRUING TO THE ASSESSEE HAS BEEN CLAIMED AS EXEMPT U/S 54-F SINCE A PROPERTY IN CIVIL LINES, DELHI HAS BEEN PURCHASED F OR A SUM OF RS.45 LACS. NO NOTICE U/S 143(2) HAS BEEN ISSUED TO THE ASSESSEE. THE PURCHASE OF SHARES OF M/S SUMA FINANCE IS IN C ASH AMOUNTING TO RS.3,24,200/- IN APRIL, 2001 AND HENCE EVEN THE ACQUISITION OF SHARES OF THE COMPANY APPEARS TO BE A FISHY TRANSACTION. THE ENTIRE SALE PROCEEDS OF SHARES AP PEARS TO BE A TRANSACTION, PURPORTED TO CONVERT UNDISCLOSED INCOM E INTO CAMOUFLAGING IT TO BE THE SALE OF SHARES. I HAVE, THEREFORE REASONS TO BELIEVE THAT INCOME T O THE TUNE OF RS.52,74,760/- HAS ESCAPED ASSESSMENT FOR THIS ASSE SSMENT YEAR. ISSUE NOTICE U/S 148 OF THE I.T.ACT. 9. BY REFERRING TO THE DECISION OF HON'BLE DELHI HI GH COURT IN THE CASE OF BATRA BHATTA CO. 220 CTR 531, HE CONTENDED THAT R EASONS RECORDED FOR REOPENING THE ASSESSMENT ONLY INDICATE THAT THE AO IN FACT HAD REASON TO BELIEVE THAT ANY INCOME HAD ESCAPED ASSESSMENT. THERE IS N O INFORMATION AS TO ON WHAT INFORMATION OR ON WHAT MATERIAL THE AO HARBORED THE BELIEF THAT THE CLAIM OF THE ASSESSEE REQUIRED DEEPER SCRUTINY. THERE MUST BE S OME BASIS UPON WHICH THE BELIEF CAN BE BUILT AND IT DOES NOT MATTER WHETHER THE BELIEF IS ULTIMATELY PROVED TO BE RIGHT OR WRONG. IT WAS HELD BY THE HONBLE HIGH COURT THAT EXPRESSION REQUIRES MUCH DEEPER SCRUTINY INDICATES THAT THE AO WAS EMBARKING ON MERE EXPLORATION WITHOUT ANY BELIEF, MUCH LESS A BELIEF BASED ON REASONS AND MATERIALS. 10. AS PER LEARNED AR, IN THE INSTANT CASE MERE BEL IEF OF THE AO THAT CERTAIN ISSUE REQUIRES MUCH DEEPER SCRUTINY, IN THE ABSEN CE OF ANY MATERIAL OR REASONS ITA-2709/D/2007 & CO-173/D/2008 9 FOR SUCH BELIEF, IS NOT ENOUGH FOR INVOKING SECTION 197. RELIANCE WAS ALSO PLACED ON THE DECISION OF HON'BLE DELHI HIGH COURT IN THE CASE OF ATUL JAIN 299 ITR 383 WHEREIN IT WAS HELD THAT MERELY ON THE INFORMAT ION THAT ASSESSEE MADE BOGUS ENTRY OF CAPITAL GAINS BY PAYING CASH WITH PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT SCANTY AND VAGUE, CORRECTNESS OF THE INFORMA TION NOT VERIFIED, SATISFACTION OF AO FOR ISSUING NOTICE NOT RECORDED ACCORDINGLY T HERE WAS NO REASON TO BELIEVE WARRANTING ISSUE OF NOTICE U/S 148. 11. WE HAVE DULY CONSIDERED THE DOCUMENTARY EVIDENC E FILED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES AND FOUND THAT CONTRAC T NOTE/SETTLEMENT NO.0113 FOR PURCHASE OF SHARES OF SUMA FINANCE LTD. WERE EXECUT ED ON 28.3.2001. BILL NUMBER S2-0904 DULY INDICATED THE DISTINCTIVE NUMBE R OF SHARES SO PURCHASED ON 9.4.2001. THE ASSESSEE HAS ALSO FILED CONFIRMATION LETTER IN SUPPORT OF TRANSFER OF SHARES IN THE NAME OF ASSESSEE BY SUMA FINANCE LTD. TO WHICH THESE SHARE BELONG. WE HAVE ALSO VERIFIED THE STATEMENT OF ACCOUNT OF T HE ASSESSEE IN THE BOOKS OF CMS SECURITIES LTD., THROUGH WHICH TRANSACTIONS OF PURCHASE ARE EXECUTED. COPY OF CASH BOOK IN SUPPORT OF THE PAYMENT GIVEN TO CMS SECURITIES LTD. AS A PURCHASE CONSIDERATION HAS ALSO BEEN VERIFIED. MERELY BECAU SE REQUEST FOR DEMATERIALIZATION OF SHARES WAS MADE IN MARCH 2002 WILL NOT DEFER THE DATE OF PURCHASE OF SHARES FROM 9.4.2001 TO MARCH, 2002. ASSESSEE MAY KEEP TH E SHARES IN PHYSICAL FORM AND THERE IS NO LEGAL REQUIREMENT TO CONVERT THE PH YSICAL FORM OF SHARES IN DEMAT FORM. ONLY AT THE TIME OF SALE, AS PER REQUIREMENT OF SEBI IN RESPECT OF CERTAIN CLASS OF SHARES, THE SAME IS TO BE CONVERTED INTO D EMAT FORM. AS ON THE DATE THE ASSESSEE HAS PURCHASED THE SHARES THROUGH A VALID C ONTRACT NOTE GIVING DISTINCTIVE NUMBER OF SHARES SO PURCHASED AND THE COMPANY WHOSE SHARES WERE PURCHASED BY THE ASSESSEE HAS ALSO CONFIRMED THE TRANSFER OF ALL THESE SHARES IN THE NAME OF THE ASSESSEE, THE ASSESSEE HAS BECOME ABSOLUTE OWNER OF THE SHARES AND THE PERIOD OF HOLDING IS TO BE COUNTED WITH REFERENCE TO THE DATE OF PURCHASE AND NOT THE DATE OF DEMATERIALIZATION. AS PER THE DATE OF PURCHASE I.E . 28.3.2001, WHEN THE ASSESSEE BECAME OWNER OF THE SHARE, WHICH WERE SOLD BY THE A SSESSEE ON 6.5.2002 AND ITA-2709/D/2007 & CO-173/D/2008 10 14.11.2002, THE HOLDING PERIOD WORKS OUT TO BE MORE THAN 12 MONTHS WHICH ENABLED THE ASSESSEE TO CLAIM DEDUCTION OF PROFIT A RISING ON ITS SALE AS A LONG TERM CAPITAL GAIN WHICH IS ELIGIBLE FOR EXEMPTION U/S 54 F. 12. WITH REGARD TO AOS ACTION OF MAKING A REFERENC E TO THE DVO IN RESPECT OF THE HOUSE PROPERTY PURCHASED, THIS IS NOT A CASE OF CONSTRUCTION OF HOUSE PROPERTY BUT THE PURCHASE OF READYMADE HOUSE AND THE AO HAS NOT BROUGHT ON RECORD ANY MATERIAL TO SUGGEST THAT ASSESSEE HAS PURCHASED THE PROPERTY AT A VALUE HIGHER THAN WHAT HAS BEEN STATED IN THE REGISTERED SALE DEED. WE ALSO FOUND THAT DVO HAS WRONGLY COMPARED THE PROPERTY WITH A PROPERTY OF DI FFERENT LOCATION FOR ARRIVING AT THE MARKET VALUE OF THE PROPERTY SO PURCHASED. THE INSTANCE OF COMPARABLE LOCATION NO.7, MAIN COURT ROAD, CIVIL LINES, FOR WO RKING OUT LAND RATE OF THE SUBJECT PLOT APPLIED BY THE DVO IS QUITE INCORRECT AND EXORBITANT. WE ALSO FOUND THAT DATE OF SALE INSTANCE GIVEN BY THE DVO IS 2.11 .2001 AS AGAINST 23.7.2002, OF THE ASSESSEE HAVING TIME GAP FACTOR OF NINE MONTHS. THE COMPARABLE INSTANCE SELECTED BY THE DVO WAS IN RESPECT OF THE LAND RATE OF MAIN CIVIL LINES ROAD DURING 2001, AS COMPARED TO THE ASSESSEES PLOT WHI CH WAS LOCATED IN BLIND LANE. THUS, APPLICATION OF LAND RATE IN VIEW OF THE MUCH BETTER LOCATION OF THE HOUSE PROPERTY ON MAIN CIVIL LINES ROAD WITH PROPERTY IN QUESTION LOCATED IN UNDERHILL LANE, A BLIND ONE IS APPARENTLY NOT REASONABLE. IN VIEW OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF K.P.VERGHESE, UNLESS A NYTHING CAN BE BROUGHT ON RECORD TO SUGGEST THAT ASSESSEE HAS CLAIMED OVER AN D ABOVE THE VALUE INDICATED IN THE REGISTERED SALE DEED, NO ADDITION CAN BE MADE M ERELY ON THE BASIS OF ESTIMATES ARRIVED AT BY THE DVO. IT IS NOT THE CASE OF CONST RUCTION OF PROPERTY BY THE ASSESSEE BUT IS A CASE WHERE THE ASSESSEE HAS PURCH ASED READYMADE HOUSE, THE VALUE OF WHICH IS DULY INDICATED IN THE SALE DEED W HICH IS REGISTERED BY THE APPROPRIATE GOVERNMENT AUTHORITY. IN VIEW OF THE F INDINGS RECORDED, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING ADDITION MADE BY AO WITH RESPECT TO THE ESTIMATED VALUE ARRIVED AT BY THE DV O. ITA-2709/D/2007 & CO-173/D/2008 11 13. WE HAVE ALSO GONE THROUGH THE STATEMENT OF THE ASSESSEE RECORDED U/S 131 OF THE ACT AND FOUND THAT ASSESSEE IS A QUALIFIED L ADY, MA IN POLITICAL SCIENCE, WAS WORKING WITH M/S DURGA ASSOCIATES ON A SALARY OF RS .6,000/- PER MONTH. THERE IS NO MERIT IN THE ACTION OF THE AO FOR TREATING SUCH SALARY INCOME AS INCOME FROM OTHER SOURCES. 14. WITH REGARD TO CROSS-OBJECTION TAKEN BY THE ASS ESSEE FOR THE FIRST TIME BEFORE US CHALLENGING VALIDITY OF REOPENING, WE FOU ND THAT ORIGINAL ASSESSMENT WAS FRAMED U/S 143(1), IT DOES NOT AMOUNT TO ASSESSMENT AS PER THE VERDICT OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKER 291 ITR 500. IT WAS ALSO OBSERVED BY THE HON'BLE SUPREME COURT THAT THE EXPRESSION REASON TO BELIEVE IN SECTION 157 WOULD MEAN CAUSE OR JUSTIFI CATION, IF AO HAS CAUSED OR JUSTIFIED TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPE D ASSESSMENT, HE CAN BE SAID TO HAVE REASON TO BELIEVE THAT INCOME HAD ESCAPED A SSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. IN THE INSTANT CASE, THE R EASON SO RECORDED CLEARLY INDICATE ESCAPEMENT OF INCOME. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF AO FOR INITIATION OF REASSESSMENT PROCEEDINGS U/S 1 47. 15. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE A ND CROSS-OBJECTION ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2009. SD/- SD/- (RAJPAL YADAV) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30.11.2009. VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT DEPUTY REGISTRAR ITA-2709/D/2007 & CO-173/D/2008 12