SHRI SATYANARAYAN AGRAWAL, Indore V. THE ITO-4(4), Indore

ITA 340/IND/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5695 (ITAT-INDORE)
• Duration Of Justice: 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 21-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G S GAUTAM
• Assessee Lawyers: ANIL K GARG
• Keywords: Reopening of assessment; Sale consideration of property below Jantri Value; Capital asset; Cost of acquisition; Tangible material; Difference of opinion; Valuation report; Right to appeal; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 50C; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C.MEENA, ACCOUNTANT MEMBER I.T.A.NO. 340/IND/2015 A.Y. : 2006-07. SHRI SATYANARAYAN AGRAWAL, ITO, 14, BHAGAT SINGH MARG, VS. 4(4), INDORE. INDORE. APPELLANT RESPONDENT PAN NO. ABTPA5371L APPELLANTS BY : SHRI ANIL K.GARG AND SHRI ARPIT GAUR, CA RESPONDENT BY : SHRI G.S.GAUTAM, DR O R D E R PER D.T.GARASIA, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A)-II, INDORE, DATED 30.01.2015 FOR THE ASSE SSMENT YEAR 2006-07. DATE OF HEARING : 31 . 12 .201 5 DATE OF PRONOUNCEMENT : 29 .0 2 .2016 SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 2 2 2. THE FIRST GROUND IS AGAINST THE REOPENING OF ASSESS MENT U/S 147 OF THE INCOME-TAX ACT, 1961. 3. THE ASSESSEE HAS SUBMITTED WRITTEN SUBMISSION, WHIC H READS AS UNDER :- THAT, IN THE INSTANT CASE, THE APPELLANT HAD FURN ISHED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, QUITE VOLUNTARILY UNDER THE PROVISIO NS OF S.139(4) OF THE INCOME-TAX ACT, 1961 ON 31-03-2007 VIDE ACKNOWLEDGMENT NO. 0024114841. THAT, IN THE COMPUTATION OF TOTAL INCOME, THE APPEL LANT HAD SHOWN LONG-TERM CAPITAL GAIN AMOUNTING TO RS. 2,01,490/- FROM SALE OF ONE HOUSE SITUATED AT 23,24 & 25 BAJAJ KHANA CHOWK, INDORE. IN THE COMPUTATION OF INCOME, ACCOMPANYING THE RETURN, THE APPELLANT HAD CLEARLY MENTIONED THAT THE LONG-TERM CAPITAL GAIN O F RS.2,01,490/- HAS BEEN ARRIVED AT BY A COMPUTATION MADE IN A SEPARATE STATEMENT. IT IS SUBMITTED THAT ALONG WITH THE COMPUTATION AS WELL AS THE RETURN, T HE APPELLANT HAD DULY FURNISHED THE ABOVE REFERRED SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 3 3 STATEMENT OF COMPUTATION OF LONG-TERM CAPITAL GAIN. A COPY OF SUCH STATEMENT OF COMPUTATION OF LONG-TERM CAPITAL GAIN IS PLACED AT PAGE NO. 4 OF THE PAPER B OOK. THAT, IN SUPPORT OF THE VARIOUS FACTS AND FIGURES STATED IN THE STATEMENT OF LONG-TERM CAPITAL GAIN, THE APPELLANT HAD ALSO FURNISHED ALL THE NECESSARY DOCUMENTS SUCH AS COPY OF THE SALE DEED OF THE HOUS E, COPY OF THE WILL DEED OF THE PREVIOUS OWNER, COPY O F THE DEATH CERTIFICATE OF THE PREVIOUS OWNER, COPY OF TH E BROKERAGE RECEIPT, COPY OF THE AGREEMENT FOR PAYMEN T OF COMPENSATION, COPY OF VALUATION REPORT IN RESPECT O F THE F.M.V. OF THE HOUSE AS ON 01-04-1981, COPY OF CERTIFICATE IN EVIDENCE OF DEPOSIT OF CERTAIN SUM I N THE CAPITAL GAIN ACCOUNT WITH STATE BANK OF INDIA, ETC. THUS, IN NUTSHELL, THE APPELLANT HAD NOT ONLY DISCL OSED THE ACCRUAL OF LONG-TERM CAPITAL GAIN IN HIS ORIGIN AL RETURN OF INCOME BUT HAD ALSO FURNISHED ALL THE NECESSARY DOCUMENTS AND EVIDENCES IN SUPPORT OF THE SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 4 4 COMPUTATION OF LONG-TERM CAPITAL GAIN SHOWN IN HIS RETURN OF INCOME FILED UNDER S.139(4) OF THE ACT. THAT, THE FACTUM OF FURNISHING OF THE DOCUMENTS STATED IN PARA (3) SUPRA CAN BE VERIFIED BY YOUR HO NOUR FROM THE DETAILS OF DOCUMENTS ENCLOSED GIVEN BY WAY OF FOOT NOTE IN THE COMPUTATION OF TOTAL INCOME OF THE APPELLANT FOR THE RELEVANT ASSESSMENT YEAR. FURTHER , IN ORDER TO VERIFY THE VERACITY OF SUCH ASSERTION OF T HE APPELLANT, THE ORIGINAL RETURN OF INCOME AS FILED MANUALLY BY THE APPELLANT WITH THE ITO-4(1), INDORE ON 31-03-2007 VIDE ACKNOWLEDGEMENT NO. 0024114841 MAY BE CALLED UPON BY YOUR HONOUR AND THE DOCUMENTS AS STATED IN THE PARA (3) SUPRA MAY BE FOUND. THAT, FROM THE VARIOUS DOCUMENTS AND OTHER MATERIALS PLACED ON RECORD OF THE LEARNED AO, NO PE RSON OF THE ORDINARY PRUDENCE COULD HAVE FORMED A BELIEF THAT ANY INCOME OF THE APPELLANT, FOR THE ASSESSMENT YEA R UNDER CONSIDERATION, ESCAPED TO ASSESSMENT. IN ANY SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 5 5 EVENT, SINCE THE APPELLANT HAD SUBMITTED A DETAILED STATEMENT, ALONG WITH HIS ORIGINAL RETURN OF INCOME , SHOWING THE COMPUTATION OF LONG-TERM CAPITAL GAIN, THE FACTS STATED BY THE LEARNED AO WHILE RECORDING THE REASONS TO THE EFFECT THAT THE APPELLANT DID NOT RE VEAL COST OF ACQUISITION OR DID NOT DISCLOSED THE BASIS OF VALUATION OF THE COST OF ACQUISITION OF THE SUBJECT PROPERTY AS ON 01-04-1981 IN THE HANDS OF THE PREVI OUS OWNER ARE PATENTLY WRONG AND ABSURD. IT IS SUBMITTE D THAT ALONG WITH THE ORIGINAL RETURN OF INCOME, THE APPELLANT HAD DULY SUBMITTED A COPY OF THE VALUATIO N REPORT DATED 27-11-2005 DULY GIVEN BY SHRI SURESH P . DEOLE, REGISTERED VALUER, ASSESSING THE MARKET VALU E OF THE SUBJECT PROPERTY AS ON 01-04-1981 AT RS.13,14,000/-. A COPY OF THE VALUATION REPORT, AS FILED ALONG WITH THE ORIGINAL RETURN OF INCOME, IS BEING SUBMITTED HEREWITH. SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 6 6 THAT, THE LEARNED AO ALSO ERRED IN ASSUMING THE JURISDICTION FOR ISSUANCE OF NOTICE UNDER S.148, WI THOUT APPRECIATING THE MATERIAL FACT THAT UNDER THE SECON D PROVISO TO S.48 OF THE INCOME-TAX ACT, 1961 FOR THE PURPOSE OF COMPUTING THE LONG-TERM CAPITAL GAIN, AN ASSESSEE IS ELIGIBLE FOR CLAIM OF INDEXED COST OF ACQUISITION INSTEAD OF COST OF ACQUISITION. THE LEA RNED AO ALSO ERRED IN NOT APPRECIATING THAT AN ASSESSEE IS ALSO ELIGIBLE FOR CLAIM OF DEDUCTION UNDER S.54 OF THE ACT OUT OF THE LONG-TERM CAPITAL GAIN, SUBJECT TO FULFI LLMENT OF CERTAIN CONDITIONS AS ENJOINED IN THE SAID SECTION. THAT, THE LEARNED AO WHILE FRAMING THE RE-ASSESSMEN T UNDER S.143(3)/147 OF THE ACT DID NOT FIND ANY ADVERSITY EITHER IN THE COST OF ACQUISITION OR INDE XED COST OF ACQUISITION OR CLAIM OF THE DEDUCTION UNDER S.54 OF THE ACT AND IT WAS THEREFORE, NO ADDITION HAS BEEN MADE ON THESE COUNTS. IN OTHER WORDS, THE LEARNED AO DID NO T MAKE ANY ADDITION ON ANY OF THE GROUNDS FOR WHICH SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 7 7 NOTICE UNDER S. 148 WAS ISSUED BY HIM. THE LEARNED AO MADE THE ADDITION BY INVOKING PROVISIONS OF S. 50C OF THE ACT AND INCIDENTALLY, ON SUCH COUNT NO REASON W AS RECORDED BY HIM BEFORE ISSUANCE OF THE NOTICE. IN S UM AND SUBSTANCE, THE LEARNED AO WAS NOT HAVING ANY INFORMATION OR MATERIAL WHICH HAD ANY LIVE-LINK OR NEXUS WITH HIS FORMATION OF BELIEF FOR ISSUANCE OF THE NO TICE UNDER S.148. IN SUCH CIRCUMSTANCES, THE VERY INITIA TION OF THE NOTICE UNDER S.148 AND THE RESULTANT ASSESSM ENT PROCEEDINGS DESERVES TO BE SET ASIDE ON THIS COUNT ALONE. YOUR HONOUR, THE HON. SUPREME COURT IN THE CASE OF INCOME-TAX OFFICER & ORS. VS. LAKHMANI MEWAL DAS (1976) 103 ITR 437 (SC) WAS PLEASED TO HOLD AS UNDE R : 'THE POWERS OF THE ITO TO REOPEN ASSESSMENT, THOUGH WIDE, ARE NOT PLENARY. THE WORDS OF THE STATUTE A RE 'REASON TO BELIEVE' AND NOT 'REASON TO SUSPECT'. T HE SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 8 8 REOPENING TO THE 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 AS SESSEE HAS ESCAPED ASSESSMENT. THE UNDERLYING REASON FOR THAT IS THAT INSTANCES OF CONCEALED INCOME OR OTH ER INCOME ESCAPING ASSESSMENT IN A LARGE NUMBER OF CASES COME TO THE NOTICE OF THE IT AUTHORITIES AFTE R THE ASSESSMENT HAS BEEN COMPLETED. THE PROVISIONS OF THE ACT IN THIS RESPECT DEPART FROM THE NORMAL RULE THAT THERE SHOULD BE, SUBJECT TO RIGHT OF APPEAL AND REVISION, FINALITY ABOUT ORDERS MADE IN JUDICIAL AND QUASI-JUDICIAL PROCEEDINGS. IT IS, THEREFORE, ESSENTIAL THAT BEFORE SUCH ACTION IS TAKEN THE REQUIREMENTS O F THE LAW SHOULD BE SATISFIED. THE LIVE LINK OR CLOSE NEXUS WHICH SHOULD BE THERE BETWEEN THE MATERIAL BEFO RE THE ITO IN THE PRESENT CASE AND THE BELIEF WHICH H E WAS TO FORM REGARDING THE ESCAPEMENT OF THE INCOME OF T HE ASSESSEE FROM ASSESSMENT BECAUSE OF THE LATTER'S SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 9 9 FAILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS WAS MISSING IN THE CASE. IN ANY EVENT, THE LINK WAS TOO TENUOUS TO PROVIDE A LEGALLY SO UND BASIS FOR REOPENING THE ASSESSMENT. THE MAJORITY OF THE LEARNED JUDGES IN THE HIGH COURT, IN OUR OPINI ON, WERE NOT IN ERROR IN HOLDING THAT THE SAID MATERIAL COULD NOT HAVE LED TO THE FORMATION OF THE BELIEF TH AT THE INCOME OF THE ASSESSEE-RESPONDENT HAD ESCAPED ASSESSMENT BECAUSE OF HIS FAILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. WE WOULD, THEREFORE UPHOLD THE VIEW OF THE MAJORITY AND DISMI SS THE APPEAL WITH COSTS.' FURTHER, THE LORDSHIPS OF THE SUPREME COURT IN THE CASE OF SHEO NATH SINGH VS. AAC 1973 CTR (SC) 484 WAS PLEASED TO HOLD AS UNDER : 'THE WORDS `REASON TO BELIEVE' SUGGEST THAT THE B ELIEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THAT THE ITO SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 10 10 MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BU T NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE ITO WOU LD BE ACTING WITHOUT JURISDICTION IF THE REASON FOR HI S BELIEF THAT THE CONDITIONS ARE SATISFIED DOES NOT EXI ST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION.' THE LORDSHIPS OF CALCUTTA HIGH COURT IN THE CASE O F H.A. NANJI & CO. VS. ITO (1979) 120 ITR 593 (CAL) HAS HELD AS UNDER : SUCH BELIEF MUST BE HELD IN GOOD FAITH AND SHOULD NOT BE A MERE PRETENCE OR CHANGE OF OPINION ON INFERENTIAL FACTS OR FACTS EXTRANEOUS OR IRRELE VANT TO THE ISSUE AND THE MATERIAL ON WHICH THE BELIEF IS BASED MUST HAVE A RATIONAL CONNECTION OR LIVE LINK OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF.' SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 11 11 THE HON. HIGH COURT OF GAUHATI IN THE CASE OF SMT. JASWANT KAUR SEHGAL VS. COMMISSIONER OF INCOME-TAX & ORS. AS REPORTED IN (2005) 193 CTR (GAU) 530 HAS HELD THAT THE ITO FOR THE PURPOSE OF INITIATING A PROCEEDING UNDER S. 147/148 MUST HAVE REASON TO BELIEVE THAT THE INCOME SOUGHT TO BE ASSESSE D HAD ESCAPED ASSESSMENT AND THE REASONS THEREFORE HAVE T O RECORDED. THE REASONS HAVE TO BE COGENT, CONVINC ING AND EXISTING, AND SHOULD NOT BE UNREAL OR IMAG INARY. THE BELIEF HAS TO BE BONA FIDE AND NOT A PRETENS E. THE NOTICE UNDER S. 147/148 HAS TO BE IN COMPLIANCE WIT H REQUIREMENTS PRESCRIBED THEREBY TO VALID WHICH IS AN ESSENTIAL PRECONDITION FOR THE VALIDITY OF THE PROCEEDING. IT IS ON A COMPLIANCE WITH THE A BOVE REQUIREMENTS THAT AN ITO ASSUMES JURISDICTION T O INITIATE A PROCEEDING UNDER S. 147/148. AGAIN, THE APEX COURT IN CALCUTTA DISCOUNT CO. LTD. VS. ITO (1961) 41 ITR 191 (SC) HAD ON OCCASION TO INTE RPRET SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 12 12 THE EXPRESSION 'REASON TO BELIEVE' USED IN S. 34 (1)(A) OF THE INCOME-TAX ACT, 1922. IT WAS HELD AS UNDER : 'THE EXPRESSION `REASON TO BELIEVE' POSTULATES B ELIEF AND THE EXISTENCE OF REASONS FOR THAT BELIEF. THE BELIEF MUST BE HELD IN GOOD FAITH : IT CANNOT BE MERELY A PRETENSE. THE EXPRESSION DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION OF THE ITO; THE FORUM OF DE CISION AS TO THE EXISTENCE OF REASONS AND THE BELIEF IS NO T IN THE MIND OF THE ITO. IF IT BE ASSERTED THAT THE ITO HAD REASON TO BELIEVE THAT INCOME HAD BEEN UNDER ASSESSED BY REASON OF FAILURE TO DISCLOSED FULLY AND TRULY THE FACTS MATERIAL FOR ASSESSMENT, THE EXI STENCE OF THE BELIEF AND THE REASONS FOR THE BELIEF, BUT NOTE THE SUFFICIENCY OF THE REASONS, WILL BE JUSTICIA BLE. THE EXPRESSION, THEREFORE, PREDICATES THAT THE ITO HOL DS THE BELIEF INDUCED BY THE EXISTENCE OF REASONS FOR HOL DING SUCH BELIEF. IT CONTEMPLATES EXISTENCE OF REASON S ON WHICH THE BELIEF IS FOUNDED AND NOT MERELY A BELI EF IN SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 13 13 THE EXISTENCE OF REASONS INDUCING THE BELIEF; IN OTHER WORDS, THE ITO MUST ON INFORMATION AT HIS DISP OSAL BELIEVE THAT INCOME HAS BEEN UNDER ASSESSED BY REAS ON OF FAILURE FULLY AND TRULY TO DISCLOSE ALL MATERIA L FACTS NECESSARY FOR ASSESSMENT. SUCH A BELIEF, BE IT SAID MAY NOT BE BASED ON MERE SUSPICION : IT MUST BE FOUNDED UPON INFORMATION.' THE HON. HIGH COURT OF PATNA IN THE CASE OF CHUNNI LAL SURAJMAL VS. COMMISSIONER OF INCOME-TAX AS REPORTED IN (1986) 160 ITR 141 (PAT) HAS HELD THAT WHEN THE QUESTION RELATES TO THE VALIDITY OF INITIATION OF A PROCEEDING U/S. 147, IT MUST BE TESTED ON MAT ERIALS AVAILABLE ON THAT DAY. MATERIALS OR EVENTS BECOMIN G AVAILABLE LONG AFTER INITIATION CANNOT SUSTAIN THE INITIATION OF THE PROCEEDING. SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 14 14 THE HON. HIGH COURT OF KERALA IN THE CASE OF M. S. RAMRAJ VS. COMMISSIONER OF AGRICULTURAL INCOME-TA X AS REPORTED IN (1981) 23 CTR (KER) 429 WHILE DEALI NG WITH AN ISSUE RELATING TO REASSESSMENT U/S. 35 OF THE KERALA AGRICULTURAL INCOME-TAX ACT, 1922 HAS HELD THAT - 'THE LEGALITY OF THE ACTION TAKEN BY THE ITO HAS TO BE JUDGED WITH REFERENCE TO THE GROUNDS ON WHICH HE PROCEEDED TO ACT UNDER S. 35 AND THE TRIBUNAL CAN NOT ADD TO THOSE GROUNDS BY RELYING ON SOME ADDITIONAL FACTS WHICH MIGHT HAVE CONSTITUTED 'INFORMATION' IN THE HANDS OF THE ITO-WE EXPRESS NO OPINION AT ALL ON T HAT ASPECT-HAD THOSE MATTERS COME TO KNOWLEDGE AT THE APPROPRIATE TIME AND MADE THE BASIS OF INITIATION OF PROCEEDINGS FOR REOPENING OF ASSESSMENT UNDER S. 35 .' 15. THE HON. JURISDICTIONAL HIGH COURT OF MADHYA PRADESH IN CASE OF ARJUN SINGH & ANR VS. ASSISTA NT SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 15 15 DIRECTOR OF INCOME-TAX & ORS. AS REPORTED IN (2000 ) 159 CTR (MP) 53 HAS HELD THAT 'FURTHER THE REASONS TO BELIEVE MUST BE BASED ON OBJECTIVE AND RELEVANT MATERIALS AND NOT THOSE WH ICH ARE EXTRANEOUS AND MERELY OPINION OR IPSE DIXIT BY THE OFFICER, VAGUE, FARFETCHED, FANCIFUL, REMOTE INFOR MATION OR ONLY ALLEGATION.' 'THE MATERIALS SHOULD BE EXISTENCE AT THE TIME OF T HE FORMATION OF THE OPINION IN REGARD TO `REASON TO BELIEVE'. AT THE TIME OF INITIATION OF PROCEEDINGS UNDER S. 148 OF THE ACT, AS WELL AS UNDER S. 17 OF THE WT ACT, ONLY THE REASON RECORDED UNDER S. 148(2) OF THE ACT AND S. 17(2) OF THE WT ACT ON THE BASIS OF COGENT AND DEFINITE MATERIAL WOULD BE SEEN TO ASCERTAIN WHET HER THE REASONS TO BELIEVE BASED ON MATERIAL EXIST OR DO NOT EXIST. THE DEPARTMENT CANNOT THEREFORE JUSTIFY OR SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 16 16 RELY UPON THE ADDITIONAL MATERIALS FOR FORMING PART OF REASONS TO BELIEVE OF THE AO.' 16 . RELIANCE IS ALSO PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : I) MADHYA PRADESH INDUSTRIES LTD. VS. INCOME-TAX OFFICER (1965) 57 ITR 637(SC) II) INDRA PRASTHA CHEMICALS (P) LTD. & ORS. VS. COMMISSIONER OF INCOME-TAX & ANR. (2004) 191 CTR (ALL) 125 III) DESAI BROTHERS VS. DEPUTY COMMISSIONER OF INCO ME- TAX (1999)156 CTR (GUJ) 120 IV) DEPUTY COMMISSIONER OF INCOME-TAX & ORS. VS. NAGINIMARA VENEER & SAW MILLS (P) LTD. (2000) 163 C TR (GAU) 572. V) SURAJMAL SRIGOPAL VS. ITO (1979) 117 ITR 3 26 (CAL). VI) IMPERIAL CHEMICAL INDUSTRIES LTD. VS. ITO & OR S. (1978) 111 ITR 614 (CAL) VII) C.D. SINGH VS. ITO (2002) 77 TTJ (ALL) 282 VIII) HATECHAND JAIRAM DAS VS. CIT (1973) 88 ITR 226 (P&H) IX) MOHINDER SINGH MALIK VS. CCIT (2003) 183 CT R (P&H) 237 SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 17 17 YOUR HONOUR, AT THE COST OF REPETITION, IT IS SUBMI TTED THAT THE ISSUE REGARDING THE APPLICABILITY OF THE PROVISIONS OF SECTION 50C CAME TO THE NOTICE OF THE LEARNED AO ONLY DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND AT THE TIME OF ISSUANCE OF THE NOTI CE AND RECORDING OF THE REASONS, SUCH ISSUE WAS NOT AT ALL CONSIDERED BY THE AO. HOWEVER, IT SHALL NOT BE OUT OF PLACE TO MENTION HERE THAT EVEN AT THE TIME OF ISSU ANCE OF THE NOTICE UNDER S.148 BASED UPON THE DOCUMENTS ACCOMPANYING THE ORIGINAL RETURN, SUCH AS COPY OF REGISTERED SALE DEED, COPY OF COMPUTATION OF INCOME , COPY OF STATEMENT OF LONG TERM CAPITAL GAIN ETC. TH E LEARNED AO COULD HAVE NOTICED DIFFERENCE BETWEEN TH E SALE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY AND THAT CONSIDERED BY THE AO WHILE COMPUTING THE LONG-TERM CAPITAL GAIN. IN ANY EVENT, THE ISSUE OF APPLICABILITY OF THE PROVISIONS OF S.50C OF THE ACT WAS NEVER CONSIDERED BY THE LEARNED AO WHILE ISSUING TH E NOTICE UNDER S.148 AND THE ISSUES WHICH WERE SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 18 18 CONSIDERED WHILE ISSUING THE NOTICE UNDER S.148 WER E IRRELEVANT AND NON-EXISTENT WITH THE RESULT THAT NO ADDITION GOT MADE ON THE REASONS RECORDED AND INSTE AD THE ONLY ADDITION GOT RECORDED ON AN ISSUE FOR WHIC H NO REASON WAS RECORDED. IT WOULD BE APPRECIATED BY Y OUR HONOUR THAT FOR THE PURPOSE OF ADJUDGING THE JUSTIFICATION OF ISSUANCE OF NOTICE U/S. 148, IT I S ONLY THE MATERIAL OR EVIDENCE USED BY THE A.O. FOR FORM ING HIS BELIEF IS RELEVANT AND THE MATERIAL/EVIDENCES SUBSEQUENTLY COMING TO HIS POSSESSION DURING THE COURSE OF REASSESSMENT PROCEEDINGS WOULD BE OF N O RELEVANCY. OUTCOME OF THE SUBSEQUENT ASSESSMENT PROCEEDINGS CAN NEVER BE A YARDSTICK FOR JUDGING TH E VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS. RELIANCE IS PLACED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS : I) SHETH BROS. VS. CIT (2003) 130 TAXMAN 367 (GUJ) SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 19 19 II) ASA JOHN DEVINATHAN VS. ADDL. CIT )1980) 126 I TR 270 (MAD) III) PANCHANAN HATI VS. CIT (1978) 115 ITR 336 (CA L) IV) MURANKA PAINTS & VARNISH WORKS LTD. VS. ITO, (1978) 114 ITR 480 (CAL) V) RAUNAQ & CO. (P) LTD. VS. ITO & ANR (1986) 56 C TR (DEL) 127 VI) FISHER XOMORE SANMAR LTD. VS. CIT (2003) 130 TAXMAN 247 (MAD) VII) TADIKONDA RAMULU VS. ITO (1990) 180 ITR 148 (AP) YOUR HONOUR, FULL BENCH OF HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1 (DEL.) (FB) HAS CLEARLY LAID DOWN THE RATIO T HAT THE AMENDED SECTION 147 WOULD NOT GIVE ARBITRARY POWERS TO THE AO TO REOPEN PAST ASSESSMENT ON MERE CHANGE OF OPINION. AGAINST THE SAID JUDGMENT, THE REVENUE PREFERRED APPEAL BEFORE THE HON'BLE SUPREME COURT B UT SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 20 20 THE HON'BLE SUPREME COURT AFFIRMING THE VIEW OF THE HON'BLE DELHI HIGH COURT AND DISMISSED THE DEPARTMENTAL APPEAL IN THE CASE CITED AS CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SC). I T SHALL BE PERTINENT TO NOTE THAT THE HON'BLE DELHI BENCH A GAIN IN THE CASE OF CIT VS. ORIENT CRAFT LTD. (2013) 215 TAXMAN 28 (DEL.) HELD THAT EVEN IN A CASE WHERE THE RETURN FILED BY AN ASSESSEE IS ACCEPTED UNDER S.143 (1) WITHOUT SCRUTINY, THE AO WOULD NOT BE JUSTIFIED IN EXERCISING POWERS CONFERRED UNDER S. 147 WITHOUT HAVING ANY TANGIBLE MATERIAL ON RECORD. IN SUCH CIRCUMSTANCES, IN VIEW OF THE PRONOUNCEMENT OF THE VARIOUS JUDICIAL AUTHORITIES, THE VERY INITIATI ON OF NOTICE UNDER S. 148 DESERVES TO BE HELD AS INVALID AND CONSEQUENTLY, THE IMPUGNED ASSESSMENT ORDER SO PASSED ALSO DESERVES TO BE STRUCKED DOWN. SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 21 21 4. WE HAVE GONE THROUGH THE WRITTEN SUBMISSION AND OBSERVED THAT THE ASSESSEE HAD COMPUTED LONG TERM C APITAL GAIN AMOUNTING TO RS. 2,01,490/- FROM SALE OF HOUSE SITUATED AT 23, 24, & 25, BAJAJ KHANA CHOWK, INDORE. THROUGH A NOTE IN COMPUTATION OF CAPITAL GAIN, THE ASSESSEE HAS DU LY DISCLOSED THE FACTS REGARDING SALE OF ABOVE HOUSE AND CAPITAL GAIN. FURTHER THE ASSESSEE VIDE PARA 3 OF THE SUBMISSION HAS STATED THAT THE ASSESSEE HAD FURNISHED ALL THE NECESSARY D OCUMENTS SUCH AS SALE DEED OF HOUSE, COPY OF WILL DEED, COPY OF DEATH CERTIFICATE OF PREVIOUS ORDER, COPY OF BROKERAGE RE CEIPT ETC. THEREFORE, IT HAS BEEN CONTENDED THAT THE ASSESSEE HAS FULLY DISCLOSED THE ACCRUAL OF CAPITAL GAIN AND ALSO FILE D THE SUPPORTING DOCUMENTS ALONGWITH ORIGINAL RETURN OF I NCOME. THEREFORE, IT HAS BEEN STRONGLY CONTENDED THAT THE REOPENING WAS NOT PROPER AS NOTHING WAS CONCEALED AND THE AO HAD NOT FOUND NEW MATERIAL TO FORM HIS BELIEF. A NUMBER OF CASE LAWS OF APEX COURT, HIGH COURT AND I.T.A.T.S HAVE BEEN CITED IN SUPPORT. SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 22 22 5. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND REASONS BROUGHT OUT BY THE ASSESSING OFFICER IN REO PENING THE ASSESSMENT. IT HAS BEEN OBSERVED THAT THE ORIGINAL RETURN WAS FILED ON 31.03.2007. THE SAME SEEMS TO HAVE BEEN PR OCESSED U/S 143(1) OF THE INCOME-TAX ACT, 1961. THE REASONS HAVE BEEN FOUND PROPERLY RECORDED AND A COPY OF THE SAME HAS BEEN FOUND SUPPLIED TO THE APPELLANT. THE OBJECTIONS RAI SED BY THE APPELLANT ON THE REASONS FOR REOPENING HAVE ALSO BE EN FOUND DULY DEALT WITH AND SPEAKING ORDER WAS PASSED ON 07 .06.2010. IT HAS NOT BEEN DISPUTED BY THE ASSESSEE THAT THE A SSESSMENT WAS NOT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. WE HAVE ALSO GONE THROUGH THE NOTE STATED TO HAVE BEEN PLACED IN THE COMPUTATION OF INCOME WHICH IS DULY REPRODUCED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. THE IMPU GNED NOTE SPEAKS ABOUT THE NATURE OF ACQUISITION OF THE PROPE RTY WHICH WAS SOLD DURING THE RELEVANT ASSESSMENT YEARS. IT A LSO BRINGS OUT THE FACT THAT A COPY OF WILL DEED AND DEATH CER TIFICATE OF EARLIER OWNER OF THE PROPERTY WERE FILED ALONGWITH THE NOTE. IT WAS FURTHER CLARIFIED THAT RENTAL INCOME ON THE SAI D PROPERTY SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 23 23 WAS NOT REALIZED AS THE PROPERTY WAS DISPUTED BY TH E REAL BROTHER OF THE ASSESSEE. THE NOTE DOES NOT SPEAK AB OUT FILING OF COPY OF REGISTERED SALE DEED SHOWING THE ACTUAL SAL E CONSIDERATION AND MARKET VALUE ADOPTED FOR THE PURP OSE OF STAMP DUTY. THE ASSESSEE HAS ALSO NOT STATED THE FA CT ABOUT THE MARKET VALUE OF THE PROPERTY IN THE IMPUGNED NO TE. THEREFORE, IN MY OPINION, THE AO COULD NOT HAVE DON E ANYTHING WHILE PROCESSING THE RETURN OF INCOME. THE REOPENIN G TOOK PLACE ONLY WHEN IT CAME TO THE NOTICE OF THE AO THA T THE MARKET VALUE ADOPTED FOR THE PURPOSE OF STAMP DUTY WAS HIGHER THAN THE ACTUAL SALE CONSIDERATION OF THE PR OPERTY. SINCE THE AO IS DUTY BOUND TO INVOKE SECTION 50C OF INCOME- TAX ACT, 1961, FOR THE PURPOSE OF CALCULATION OF CA PITAL GAIN, THE ASSESSMENT WAS LEGALLY AND CORRECTLY REOPENED U /S 147 OF INCOME-TAX ACT, 1961. THE CASE LAWS CITED BY THE AS SESSEE WERE GONE THROUGH AND OBSERVED THAT THE SAME ARE DISTINGUISHABLE ON THE FACTS ON PRESENT CASE. THERE FORE, WE DO NOT FIND ANY ILLEGALITY AND INFIRMITY IN REOPENING OF THE ASSESSMENT. THIS GROUND OF APPEAL IS DISMISSED. SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 24 24 6. GROUND NO.2 READS AS UNDER :- THAT THE LD. CIT(A) GROSSLY ERRED IN CONFIRMING TH E ADDITION OF RS. 12,29,600/- MADE BY THE ASSESSING OFFICER IN THE LONG TERM CAPITAL GAIN SHOWN BY THE APPELLANT IN HIS RETURN OF TOTAL INCOME, BY INVOKIN G PROVISIONS FO SECTION 50C OF THE ACT, WITHOUT FIRST REFERRING THE VALUATION OF CAPITAL ASSET TO A DVO I N TERMS OF SUB-SECTION (2) OF SECTION 50C OF THE ACT. 7. THE AO HAS MADE THE ADDITION OF RS. 12,29,600/- AS ADDITIONAL CAPITAL GAIN. THE AO HAS DISCUSSED THE I SSUE IN DETAIL IN PARA 6 OF THE ASSESSMENT ORDER. THE ASSES SEE HAS SOLD THE HOUSE PROPERTY SITUATED AT 23, 24, 25, BAJAJ KH ANA CHOWK, INDORE, AND ACTUAL SALE CONSIDERATION WAS RS. 54,52 ,000/-, WHEREAS THE MARKET VALUE DETERMINED BY THE STAMP VA LUATION AUTHORITY WAS RS. 66,81,000/-. THE ASSESSEE HAS WOR KED OUT THE CAPITAL GAIN ON THE BASIS OF ACTUAL SALE CONSID ERATION STATED TO HAVE BEEN REALIZED WHEREAS SECTION 50C MA NDATES THE AO TO ADOPT THE MARKET VALUE FOR COMPUTATION OF CAPITAL SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 25 25 GAIN. THEREFORE, THE AO HAS MADE THE ADDITION OF AD DITIONAL CAPITAL GAIN OF RS. 12,29,600/-. 8. THE MATTER CARRIED TO THE LD. CIT(A) AND THE LD. C IT(A) HAS DISMISSED THE APPEAL. 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PAR TIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND THAT THE ISSUE IN CONTROVERSY IS COVERED BY THE DEC ISION OF JODHPUR TRIBUNAL IN THE CASE OF MEGHRAJ BAID VS. IT O, 114 TTJ 841, WHEREIN SIMILAR ISSUE HAS BEEN DECIDED THAT IF THE AO DOES NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE LOWER SALE OF CONSIDERATION THAN THE VALUE ADOPTED BY THE STAMP VALUATION AUTHORITY, HE SHOULD REFER THE MATTER TO DVO UNDER SUB SECTION (2) OF SECTION 50C. THE TRIBUNAL HAS HELD AS UNDER :- 4. AFTER EXAMINING THE PROVISION EXTRACTED HEREINABOVE IN ITS LETTERS AND SPIRIT, WE ARE OF THE OPINION THAT IN CASE THE AO DOES NOT AGREE WITH THE EXPLANATION OF THE ASSESSEE WITH REGARD TO LOWER CONSIDERATION DISCLOSED BY HIM SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 26 26 THEN HE SHOULD REFER THE MATTER TO DVO FOR GETTING ITS MARKET RATE ESTABLISHED AS ON DATE OF THE SALE TO ARRIVE AT THE CORRECT SALE CONSIDERATION. IF THIS PROVISION IS READ IN THE SENSE THAT IF THE AO IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THEN HE MAY OR MAY NOT SEND THE MATTER FOR VALUATION TO THE DVO THEN IN THAT CASE THIS PROVISION WOULD BE RENDERED REDUNDANT. THE WORD MAY USED IN THIS SUB-SECTION SIGNIFIES THAT IN CASE LD. AO IS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, HE SHOULD REFER THE MATTER TO THE DVO FOR THE MENTIONED PURPOSE. LD. AUTHORIZED REPRESENTATIVE HAS RELIED ON THE DECISION OF THE HON'BLE SUPREME COURT RENDERED IN THE CASE OF ASHOK LEYLAND LIMITED VS. UNION OF INDIA & ORS. (1997) 105 STC 152 ( S.C.) WHEREIN IT HAS BEEN HELD THAT THE DEEMING PROVISIONS ARE REBUTTABLE ONE. WE HAVE EXAMINED THE ENTIRE SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 27 27 FACTS OF THIS CASE IN THE LIGHT OF THE PROVISIONS AND PRECEDENTS RELIED BEFORE US. IN OUR CONSIDERED OPINION THE BEFITTING REPLY OF ALL THE QUERIES AROUSE IN OUR MINDS AS WELL AS RAISED BY THE PARTIES IS THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE LD. AO WITH A DIRECTION THAT HE SHALL REFER THIS MATTER OF VALUATION IN THE LIGHT OF SUB-SECTION (2) OF SECTION. 50C TO THE DVO FOR DETERMINING THE CONSIDERATION OF THIS PLOT SOLD BY THE ASSESSEE U/S 50C OF THE ACT. THE OTHER CONNECTED GROUNDS ARE ALSO RELATED TO THIS MAIN GROUND. THEREFORE, THE ENTIRE APPEAL IS RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTION THAT HE WOULD DO AS DIRECTED ABOVE AND ALSO GIVE OPPORTUNITY OF HEARING TO THE ASSESSEE AS PER LAW. 10. WE, RESPECTFULLY FOLLOWING THE ABOVE DECISION, THE MATTER IS RESTORED TO THE FILE OF WITH THE DIRECTION THAT HE WOULD DO AS SHRI SATYANARAYAN AGARWAL, INDORE VS. ITO, 4(4), IN DORE, I.T.A.NO. 340/IND/2015 A.Y. 2006-07. 28 28 DIRECTED ABOVE AND AFFORD AN OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STA TISTICAL PURPOSES. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 29 TH FEBRUARY, 2016. SD/- (B.C.MEENA) ACCOUNTANT MEMBER SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED : 29 TH FEBRUARY, 2016. CPU* 25