ITO, New Delhi V. Sh. Paras Verma, New Delhi

ITA 2746/DEL/2011

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4113 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: V P MISHRA
• Keywords: Reason to believe
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER AND SH.O.P.KANT, ACCOUNTANT MEMBER I.T.A .NO.-2 746/DEL/2011 (ASSESSMENT YEAR-2005-06) ITO, WARD-36(2), IST FLOOR, H-BLOCK, VIKAS BHAWAN, I.P.ESTATE, NEW DELHI. (APPPELLANT) VS PARAS VERMA, F-25, PREET VIHAR, NEW DELHI-110092. PAN-ACYPV8333M (RESPONDENT) C.O.NO.-236/DEL/2011 (IN I.T.A .NO.-2746/DEL/2011) (ASSESSMENT YEAR-2005-06) PARAS VERMA, F-25, PREET VIHAR, NEW DELHI-110092. PAN-ACYPV8333M (APPPELLANT) VS ITO, WARD-36(2), IST FLOOR, H-BLOCK, VIKAS BHAWAN, I.P.ESTATE, NEW DELHI. (RESPONDENT) ASSESSEE BY SH.V.P.MISHRA, SR.DR REVENUE BY SH. C.S.ANAND, ADV. PER DIVA SINGH, JM THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AS SAILING THE CORRECTNESS OF THE ORDER DATED 25.02.2011 OF CIT(A)-XXVII, NEW DEL HI PERTAINING TO 2005-06 ASSESSMENT YEAR WHEREIN THE ADDITION MADE HAS BEEN DELETED. THE ASSESSEE HAS FILED HIS C.O OBJECTING TO THE JURISDICTION OF THE AO. DATE OF HEARING 07 .06.2016 DATE OF PRONOUNCEMENT 10 .0 8 .2016 I.T.A .NO.-2746/DEL/2011 & C.O.NO.-236/DEL/2011 PAGE 2 OF 5 2. THE LD.AR INVITING ATTENTION TO THE FACTS ON REC ORD SUBMITTED THAT THE ASSESSEE HAD PURCHASED A PLOT BEARING NO.E-72 (AREA MEASURIN G 268 SQ. MTRS) SITUATED IN SECTOR- 40, NOIDA FOR RS.16,00,000/- AND INVESTED RS.3,00,8 68/- ON THE REGISTRATION OF THE DOCUMENTS, TRANSFER FEE & OTHER ALLIED CHARGES. TH EREAFTER, ASSESSEE HAD INVESTED RS.10,77,655/- TOWARDS CONSTRUCTION OF THE SAID PLO T DURING F.Y. 2003-04. THUS, THE TOTAL INVESTMENT IN THE SAID PARTLY BUILT UP PROPER TY UPTO 31.03.2004 WORKED OUT AT RS.29,78,523/- WHICH WAS REFLECTED BY ASSESSEE IN T HE BALANCE SHEET AS AT 31.03.2004 OF HIS SOLE PROPRIETARY CONCERN-M/S VERMA CONSTRUCT IONS. THE ASSESSEE HAD FURTHER INVESTED RS.16,83,584/- TOWARDS CONSTRUCTION/FINISH ING OF THE PARTLY BUILT UP PROPERTY DURING F.Y.2004-05, WHILE RECORDING ALL SUCH TRANSA CTIONS IN THE BOOKS OF THE SAID M/S VERMA CONSTRUCTION. 3. INVITING ATTENTION TO THE ASSESSMENT ORDER IT WAS H IS SUBMISSION REFERRING TO PARA 3 PAGE 2 OF THE SAME THAT THE ASSESSMENT HAS BEEN R E-OPENED ON THE BASIS OF THE FOLLOWING INFORMATION WHICH WAS INCORRECT ON FACTS: - INFORMATION WAS RECEIVED FROM DAO INDICATING THAT THE ASSESSEE SOLD A PROPERTY FOR RS.49 LAKHS. THE ASSESSEE WAS REQUIEM TO EXPLAIN THE SAME. IN RESPONSE ASSESSEE FILED COMPUTATION O F INCOME AND BALANCE SHEET FOR AY 2004-05 AND COMPUTATION OF INCOME, BAL ANCE SHEET AND P&L A/C FOR AY 2005-06. THE ASSESSEE IS PROPRIETOR OF M/S VERMA CONSTRUCTION. PERUSAL OF P&L A/C FOR AY 2005-06 REVEALS THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.2,03,200/- BEING INTEREST PAID. PERUSAL OF BALANCE SHEET FOR AY 2004-05 REVEALS THAT THERE IS NO LIABI LITY ON ACCOUNT OF LOANS WHICH COULD BEAR INTEREST ELEMENT OF RS.2,03,200/-. THEREFORE, I HAVE REASON TO BELIEVE THAT ASSESSEE HAS CONCEALED TAXABLE INCO ME TO THE EXTENT OF RS.2,03,200/- 4. ASSAILING THE REASONS RECORDED FOR RE-OPENING TH E ASSESSMENT IT WAS ARGUED THAT THE INFORMATION RELIED UPON IS FACTUALLY INCORRECT AS NO PROPERTY HAD BEEN SOLD BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. IT WAS H IS ARGUMENT REFERRING TO THE ADDITION I.T.A .NO.-2746/DEL/2011 & C.O.NO.-236/DEL/2011 PAGE 3 OF 5 MADE AS A RESULT OF THE RE-OPENING THE ASSESSMENT T HAT THE RE-OPENING HAS BEEN DONE ON THE BASIS OF INCORRECT FACTS AS THE ASSESSEE ADM ITTEDLY HAD PURCHASED A PROPERTY AND NOT SOLD A PROPERTY. INVITING ATTENTION TO THE IMP UGNED ORDER IT WAS HIS SUBMISSION THAT APART FROM THIS ARGUMENT, VARIOUS OTHER ARGUMENTS W ERE ADVANCED ON BEHALF OF THE ASSESSEE WHICH ARE FOUND DISCUSSED IN PAGE 4 TO 5 I N PARA 5.1 TO 5.15 OF THE IMPUGNED ORDER. IT WAS SUBMITTED THAT THOUGH THE CIT(A) HAS REPRODUCED THE SUBMISSIONS IN HIS ORDER BUT HAS NOT CARED TO ADDRESS THEM. REFERRING TO THE IMPUGNED ORDER IT WAS SUBMITTED THAT ALTHOUGH ON MERITS THE ADDITIONS MAD E BY THE AO WERE DELETED BY THE CIT(A) IN APPEAL AND RELIANCE IS PLACED THEREON ON MERITS. HOWEVER, IT WAS ARGUED THAT THE GRIEVANCE OF THE ASSESSEE REMAINS AS THE JURISD ICTIONAL ISSUE REMAINS UNADDRESSED AND IT SHOULD HAVE BEEN FIRST ADDRESSED. 5. THE LD. SR. DR ON THE OTHER HAND QUA THE REVENUE S APPEAL SUBMITTED THAT THE ADDITIONS WERE MADE AS NECESSARY DETAILS DESPITE AN OPPORTUNITY WERE NOT MADE AVAILABLE TO THE AO WHICH FACT IS COMING OUT FROM T HE REMAND REPORT FILED BY THE AO WHO OBJECTED TO THE ADMISSION OF THE ADDITIONAL EVI DENCES. IT WAS HIS SUBMISSION THAT THE CIT(A) HAS DELETED THE ADDITION WITHOUT REFERRI NG TO THE RELEVANT FACTS WHICH POSITION WAS STRONGLY DISPUTED BY THE LD.AR. HOWEV ER, QUA THE JURISDICTIONAL ISSUE, THE LD. SR. DR WAS UNABLE TO REBUT THE BASIC FACTUAL FI NDING ASSAILED BY THE ASSESSEE THAT THE REASONS RECORDED MADE A REFERENCE TO WRONG FACT S AND IT WAS FAIRLY CONCEDED BY HIM ON QUERY THAT IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD PURCHASED AND MADE INVESTMENT AND NOT SOLD ANY PROPERTY IN THE YE AR UNDER CONSIDERATION. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT ADMITTEDLY IN THE YEAR UNDER C ONSIDERATION THE FACT IS THAT NO I.T.A .NO.-2746/DEL/2011 & C.O.NO.-236/DEL/2011 PAGE 4 OF 5 PROPERTY WAS SOLD BY THE ASSESSEE. THE ASSESSEE BY WAY OF ITS C.O FILED HAS ASSAILED THE INITIATION OF PROCEEDINGS U/S 147 AND CONSEQUEN TLY THE NOTICE U/S 148 AND THE RE- ASSESSMENT PROCEEDINGS AS BAD IN LAW. WE FIND THAT ONCE THE VERY FACTUAL BASIS OF THE RE-OPENING FAILS THE RE-OPENING BASED ON WRONG AND INCORRECT FACTS BECOMES UNSUSTAINABLE IN LAW. NO AUTHORITY NEED BE CITED I N ORDER TO HOLD THAT THE POWER TO RE- OPEN ASSESSMENTS HAS TO BE EXERCISED FAIRLY AND JUD ICIOUSLY WHICH NECESSARILY POSTULATES THAT THE REASON TO BELIEVE THAT INCOME HAS ESCAPE D ASSESSMENT MUST BE BASED ON SOME FACT OR EVIDENCE WHICH CAN LEAD TO THE FORMATI ON OF SUCH A BELIEF. HOWEVER, A NON-EXISTENT FACT CANNOT BE MADE THE BASIS OF FORMA TION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AS IN SUCH A SITUATION WHERE THE FOUNDATIONAL FACT OF THE FORMATION OF BELIEF ITSELF IS NOT AN EXISTING FACT THE ENTIRE EDIFICE BUILT ON THIS ERRONEOUS FOUNDATIONAL FACT CANNOT SURVIVE. THUS ONCE IT IS ESTABLISHED THAT THE RE-OPENING HAS BEEN BASED ON INCORRECT FACTS THE PROCEEDINGS HAVE TO BE QUASHED. THE LD.SR.DR CONSIDERING THE MATERIAL AVAILABLE ON RECORD WAS UN ABLE TO DEFEND THE REASON RECORDED I.E. THE ASSESSEE HAD SOLD ANY PROPERTY AND INFACT AGREED ON QUERY THAT THE ASSESSEE HAD INFACT INCURRED EXPENDITURE ON CONSTRUCTION. TH US, WHERE THE FOUNDATIONAL FACT ITSELF IS INCORRECT THE FORMATION OF BELIEF ON INCORRECT F ACTS CANNOT BE HELD TO BE A LEGITIMATE EXERCISE OF POWER TO RE-OPEN THE ASSESSMENT. WE FIN D THAT THE SAID GROUND HAD BEEN RAISED BEFORE THE CIT(A) WHO INSTEAD OF ADDRESSING THE SAID GROUND PROCEEDED TO CONSIDER THE MAINTAINABILITY OF THE ADDITIONS MADE ON MERIT. THE SAID APPROACH IS CONTRARY TO THE SETTLED LEGAL POSITION AND CANNOT B E APPROVED. THUS, WE HOLD THAT THE LD.CIT(A) FELL IN ERROR IN NOT FIRST DECIDING THE J URISDICTIONAL ISSUE AND INSTEAD PROCEEDED TO CONSIDER THE ISSUE ON MERITS WHOSE CORRECTNESS I S ASSAILED BY THE REVENUE. THOUGH I.T.A .NO.-2746/DEL/2011 & C.O.NO.-236/DEL/2011 PAGE 5 OF 5 THE LD.AR HAS HEAVILY RELIED UPON THE IMPUGNED ORDE R ON MERITS ALSO, WE FIND NO REASON TO ADDRESS THE SAME AND BY ALLOWING GROUND NO.1 IN THE C.O. FILED THE PROCEEDINGS ARE DIRECTED TO BE QUASHED. 7. IN THE RESULT THE C.O. FILED BY THE ASSESSEE IS ALLOWED AND THE DEPARTMENTAL APPEAL IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10 TH OF AUGUST, 2016. SD/- SD/- (O.P.KANT) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI