Sh. Badam Singh Rajpali, Jhansi V. I.T.O.-6(1), Jhansi

ITA 358/AGR/2011

• Counselvise Citation: 35820314 RSA 2011
• Duration Of Justice: 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-06-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 19-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUHAIL AKHTAR
• Assessee Lawyers: S K AGARWAL
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 2(14); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, AGRA BENCH, AGRA BEFORE : SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO. 358/AGRA/2011 ASSTT. YEAR : 2004-05 BADAM SINGH RAJPALI, VS. INCOME-TAX OFFICER, S/O SHRI RAM PRASAD, 6(1), JHANSI. 195 O/S, UNNAO GATE, JHANSI. (PAN :APYPR 4397A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.K. AGARWAL, C.A. RESPONDENT BY : SHRI SUHAIL AKHTAR, JR. D.R. DATE OF HEARING : 07.06.2012 DATE OF PRONOUNCEMENT OF ORDER : 22.06.2012 ORDER PER BHAVNESH SAINI, J.M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LD. CIT(A)-II, AGRA DATED 14.06.2011 FOR THE ASSESSMENT YEAR 2004- 05 ON THE FOLLOWING GROUNDS : 1. THE LD. CIT(APPEALS)-II, AGRA HAS GROSSLY ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN CONFI RMING THAT THE ASSESSMENT PROCEEDINGS INITIATED BY AO U/S. 148 OF THE INCOME TAX ACT IS VALID. 2. THE LD. CIT(APPEALS)-II, AGRA HAS GROSSLY ERRED ON THE FACTS OF THE CASE BY MISINTERPRETING THE VARIOUS MODIFICA TIONS ISSUED BY DISTRICT REVENUE AUTHORITIES, JHANSI FOR THE PURPOS E OF ADOPTING CIRCLE RATES AND HENCE DETERMINING THE CAPITAL GAINS BY TA KING COST OF ITA NO. 358/AGRA/2011 2 ACQUISITION OF AGRICULTURE LAND WHICH IS NOT A CAPI TAL ASSET U/S. 2(14) OF THE ACT. 3. THE LD. CIT (A)-II, AGRA HAS GROSSLY ERRED ON T HE FACTS OF THE CASE BY NOT GIVING SUFFICIENT OPPORTUNITY FOR SUBMI TTING REJOINDER ON THE COMMENTS OF THE A.O. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT THE ASSE SSEE HAD SOLD CERTAIN AGRICULTURE LAND ON 05.08.2003 FOR A SUM OF RS.19,50,000/-. AS PER THE AO, THE ASSESSEE HAD NOT FILED ANY INCOME TAX RETURN SHOWING CAPITAL GAI N ARISING OUT OF SALE OF AGRICULTURE LAND. INFORMATION WAS RECEIVED BY THE A O FROM ITO 6(3), JHANSI THAT DURING THE YEAR ASSESSEE HAD SOLD THE LAND TO M/S. SAHARA CITY HOMES (P) LTD. FOR A CONSIDERATION OF RS.19,50,000/- WHEREAS THE LAND VA LUE AS PER GOVT. RATE WAS RS.11,40,000/-. ON RECEIPT OF THIS INFORMATION, THE AO HAD ISSUE NOTICE U/S. 133(6) WAS NOT REPLIED. THE REASONS AS RECORDED BY THE AO FOR ISSUANCE OF NOTICE U/S. 148 ARE REPRODUCED AS UNDER : REASONS RECORDED U/A. 148(2) OF THE IT ACT, 1961 IN THE CASE OF SHRI BADAM SINGH RAJPOOT S/O SHRI RAM PRASAD R/O 19 5, O/S UNNAO GATE, DISTT. JHANSI, AY 2004-05. THE ITO 6(3), JHANSI HAS INFORMED THAT DURING THE ASSESSMENT PROCEEDINGS IN THE CASE OF M/S. SAHARA CITY HOMES ( P) LTD., JHANSI, IT WAS NOTICED THAT ABOVE ASSESSEE HAS SOLD LAND WORTH RS.19,50,000/- ON 05.08.2003 & AS PER GOVT. VALUE RS.11,40,000/-. IN ORDER TO MAKE CONFIRMATION WITH REGARD TO VALUE OF LAND, A NOTICE U/S. 133(6) WAS ISSUED AND SERVED UPON THE ASSESSEE. IT WAS REQUIRE D IN THE NOTICE TO CONFIRM LAND TRANSACTION AND ALSO TO INTIMATE AS TO HOW THE CAPITAL GAIN ARISE OUT OF LAND TRANSACTION HAS BEEN REFLECT ED IN HIS/HER RETURN OF INCOME. SINCE LAND SITUATES WITHIN THE 8 KM. FRO M THE JHANSI ITA NO. 358/AGRA/2011 3 MUNICIPALITY LIMIT, ASSESSEE WAS LIABLE FOR PAYMENT OF CAPITAL GAIN TAX ON THE ABOVE TRANSACTION OF LAND AS PER INCOME TAX ACT, 1961. HOWEVER, ASSESSEE HAS FAILED TO SUBMIT REPLY IN THI S REGARD. IT GOES TO SHOW THAT INCOME CHARGEABLE TO TAX ARISING OUT OF C APITAL GAIN HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SEC. 147 O F THE IT ACT, 1961. ACCORDINGLY, PROCEEDINGS U/S. 147 IS INITIATE D AND ISSUED NOTICE U/S. 148 OF THE IT ACT, 1961. 2.1 THE ASSESSEE CHALLENGED THE REASSESSMENT PROCEE DINGS AND ADDITION ON MERITS BEFORE THE LD. CIT(A) AND SUBMISSIONS OF THE ASSESSEE HAVE BEEN INCORPORATED IN THE IMPUGNED ORDER. IT WAS EXPLAINE D THAT THE VALUE OF LAND AS ON 01.04.1981 WAS HIGHER THAN THE CONSIDERATION AMOUNT . THEREFORE, NO RETURN OF INCOME WAS FILED BEING THE INCOME NOT LIABLE FOR IN COME-TAX. IT WAS EXPLAINED THAT THE REASONS RECORDED FOR REOPENING OF ASSESSMENT AR E WITHOUT DATE. THE REASONS WERE RECORDED ON THE BASIS OF INFORMATION RECEIVED FROM ANOTHER OFFICER AND THE AO HAS NOT APPLIED HIS MIND TO SATISFY HIMSELF THRO UGH HIS OWN ENQUIRY. THERE S NO MENTION THAT THE AO WAS HAVING REASON TO BELIEVE TH AT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. THE SALE CONSIDERATION C ANNOT BE TREATED AS INCOME. THE AO ISSUED NOTICE TO VERIFY THE TRANSACTION AND WAS NOT AWARE WHETHER CAPITAL GAINS ARISE OR NOT. EXPRESSION REASON TO BELIEVE, DOES N OT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE AO. THE REASONS MUS T BE HELD IN GOOD FAITH AND CANNOT BE MERE PRETENCE. THE DETAILED SUBMISSIONS O F THE ASSESSEE ON MERITS ARE ALSO NOTED IN THE IMPUGNED ORDER. THE LD. CIT(A) CO NSIDERING THE ISSUE OF REOPENING OF ASSESSMENT, NOTED IN PARA 2.2 OF THE A PPELLATE ORDER THAT AT THE STAGE OF ITA NO. 358/AGRA/2011 4 INITIATION OF REASSESSMENT PROCEEDINGS U/. 148 OF T HE IT ACT, IT IS A TRITE LAW THAT THE AO SHOULD HAVE REASON TO BELIEVE THAT INCOME ASSESS ABLE TO TAX HAS ESCAPED ASSESSMENT. IT NEED NOT TO PROVE CONCLUSIVELY AND A CCORDINGLY, UPHELD THE REASSESSMENT PROCEEDINGS U/S. 148 OF THE IT ACT AND DISMISSED THE APPEAL OF THE ASSESSEE ON THIS REASON. 3. THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A) AND SUBMITTED THAT INGREDIENTS OF SECTIO N 147 OF THE ACT HAVE NOT BEEN SATISFIED IN THIS CASE. THEREFORE, REOPENING OF ASS ESSMENT IS BAD IN LAW. ON THE OTHER HAND, THE LD. DR RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD. THE REASONS FOR REOPENING OF ASSESSMENT HAVE BEEN INCOR PORATED IN THE IMPUGNED ORDER, WHICH IS ALSO REPRODUCED ABOVE. COPY OF SAME IS ALS O FILED AT PAGE 11 OF THE PAPER BOOK. ACCORDING TO SECTION 147 OF THE IT ACT, THE E SSENTIAL INGREDIENT OF THIS SECTION HAS BEEN THAT IF THE ASSESSING OFFICER HAS REASON TO BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT IN ANY ASS ESSMENT YEAR.. THEREFORE, BEFORE INVOKING JURISDICTION U/S. 147 OF THE IT ACT , THE ASSESSING OFFICER SHALL HAVE REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE AO FOR THE REASONS RECORDED FOR REOPENING OF ASSESS MENT AS MENTIONED ABOVE HAS ITA NO. 358/AGRA/2011 5 NOT MENTIONED ANYTHING IN THE REASONS IF HE WAS HAV ING REASONS TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS MERELY RECEIVED INFORMATION FROM ITO 6(3), JHANSI THAT THE ASSESSEE HAS SOLD THE LAND ON 05.08.2003 AT THE HIGHER RATE AS AGAINST GOVERNMENT VALUE. THE AO HAS NOT VERIFIED THE INFORMATION ISSUED NOTICE U/S. 133(6) TO THE ASSESSEE AND REQUIRED TO CONFIRM THE TRANSACTION AS TO HOW THE CAPITAL GAINS ARISE OUT OF THE TRANSACTION. IT WOULD MEAN THAT THERE WAS NO DEFINITE INFORMATION R ECEIVED FROM ITO 6(3), JHANSI THAT THE ASSESSEE EARNED ANY CAPITAL GAINS OUT OF T HE SALE TRANSACTION OF LAND IN QUESTION. THERE WAS NO MATERIAL WITH THE AO TO PRIM A FACIE PROVE THAT THE ASSESSEE EARNED CAPITAL GAIN BECAUSE HE WANTED THE ASSESSEE TO INTIMATE AS TO HOW CAPITAL GAIN ARISES OUT OF THE TRANSACTION. SINCE NO REPLY WAS SUBMITTED IN THIS REGARD BEFORE THE AO, THEREFORE, THE AO PRESUMED THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND HE INITIATED PROCEEDINGS U/S . 147 OF THE IT ACT. THE REASONS RECORDED BY THE AO, THEREFORE, DO NOT SATIS FY THE REQUIREMENT OF SECTION 147 OF THE IT ACT. THE AO HAD NOT EXAMINED THE INFO RMATION RECEIVED FROM THE ITO 6(3), JHANSI BEFORE RECORDING THE REASONS FOR R EOPENING OF ASSESSMENT. THE AO HAD ACTED ONLY ON THE BASIS OF SUSPICION AND IT COU LD NOT BE SAID THAT IT WAS BASED ON BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER HAD TO ACT ON THE BASIS OF REASON TO BELIE VE AND NOT ON REASON TO SUSPECT. THE INFORMATION RECEIVED FROM ITO 6(3) DI D NOT INDICATE AS TO HOW ITA NO. 358/AGRA/2011 6 CAPITAL GAINS ARISE IN THE CASE OF ASSESSEE AND THE AO MERELY ACCEPTED TRUTH IN VAGUE INFORMATION IN A MECHANICAL MANNER AND PUT TH E ASSESSEE UNDER OBLIGATION TO FILE REPLY TO THE SAME. MERELY BECAUSE NO REPLY WAS FILED, THE AO ACTED IN HASTE AND INITIATED PROCEEDINGS U/S. 147 OF THE IT ACT WI THOUT RECORDING SATISFACTION FOR INITIATION OF PROCEEDINGS IN THE MATTER. HONBLE SU PREME COURT IN THE CASE OF SHEO NATH SINGH VS. APPELLATE ASST. COMMISSIONER OF INCO ME-TAX, 82 ITR 147 HELD THE WORDS REASON TO BELIEVE SUGGEST THAT THE BEL IEF MUST BE THAT OF AN HONEST AND REASONABLE PERSON BASED UPON REASONABLE GROUNDS AND THAT THE INCOME-TAX OFFICER MAY ACT ON DIRECT OR CIRCUMSTANTIAL EVIDENCE BUT NOT ON MERE SUSPICION, GOSSIP OR RUMOUR. THE INCOME-TAX OFFICER WOULD BE ACTING WITHOUT JURI SDICTION IF THE REASON FOR HIS BELIEF THAT THE CONDITIONS ARE SATIS FIED DOES NOT EXIST OR IS NOT MATERIAL OR RELEVANT TO THE BELIEF REQUIRED BY THE SECTION. THE COURT CAN ALWAYS EXAMINE THIS ASPECT THOUGH THE DEC LARATION OR SUFFICIENCY OF THE REASONS FOR THE BELIEF CANNOT BE INVESTIGATED BY THE COURT. 4.1 HONBLE DELHI HIGH CURT IN THE CASE OF CIT VS. ATUL JAIN & SMT. VINITA JAIN, 299 ITR 383 HELD THERE MUST BE REASON TO BELIEVE WARRANTING THE I SSUANCE OF A NOTICE OF REASSESSMENT BY THE ASSESSING OFFICER. IF THERE ARE NO REASONS, THEN THE ENTIRE FOUNDATION FOR INITIATING THE PROCEEDINGS IS BAD AND THE NOTICE INITIATING PROCEEDINGS MUST BE Q UASHED. MERE SATISFACTION OF THE ASSESSING OFFICER FOR THE ISSUA NCE OF A NOTICE IS NOT ENOUGH, THERE MUST BE REASONS ON RECORD WHICH LED H IM TO BELIEVE THAT A NOTICE SHOULD BE ISSUED. AFTER A FOUNDATION BASED ON INFORMATION IS SET UP, THERE MUST STILL BE SOME REASONS WHICH WARR ANT THE HOLDING OF ITA NO. 358/AGRA/2011 7 A BELIEF SO AS TO NECESSITATE THE ISSUANCE OF A NOT ICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961. THE ASSESSEE PURCHASED SHARES AND SUBSEQUENTLY SOL D THESE SHARES AT A MUCH HIGHER VALUE. FOR THE ASSESSMENT Y EAR 1997-98, THE ASSESSEES DISCLOSED LONG-TERM CAPITAL GAINS ARISING FROM THE TRANSACTION. ON THE BASIS OF THE INFORMATION RECEIV ED BY THE DEPUTY DIRECTOR (INVESTIGATION), THE ASSESSING OFFICER ISS UED NOTICE UNDER SECTION 148. THE FILES WERE THEN PUT UP BEFORE THE COMMISSIONER AND IN RESPONSE TO THE QUESTION WHETHER THE COMMISSIONE R WAS SATISFIED THAT INCOME HAD ESCAPED ASSESSMENT, HE WROTE YES. THEREAFTER, THE ASSESSING OFFICER REASSESSED THE INCOME AND CHARGED INTEREST AND LEVIED PENALTY. THE COMMISSIONER (APPEALS) ALLOWED RELIEF PARTLY BUT THE TRIBUNAL CONCLUDED THE ISSUE IN FAVOUR OF THE A SSESSEES. ON APPEAL: HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMATION W AS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAI NS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THA T AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPI TAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHI CH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE ASSESSING OFFICER DID NOT VERIFY THE CORRECTNESS OF THE INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF TH E VAGUE INFORMATION IN A MECHANICAL MANNER. THE ASSESSING O FFICER HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNES S OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE UNDER SECTION 148. WHAT HAD BEEN RECORDED BY THE ASSESSING OFFICER AS HIS REASONS T O BELIEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMM ISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORD ING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE ASSESSING OFFICER HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE AC TION OF THE ASSESSING OFFICER WAS NOT SUSTAINABLE. 4.2 HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SMT. PARAMJIT KAUR, 311 ITR 38 HELD ITA NO. 358/AGRA/2011 8 THE ASSESSEE FILED HER ORIGINAL RETURN DECLARING NIL INCOME. THE ASSESSING OFFICER INITIATED REASSESSMENT PROCEE DINGS ON THE BASIS OF INFORMATION RECEIVED FROM THE SURVEY CIRCLE THAT THE ASSESSEE HAD GOT PREPARED A DEMAND DRAFT FOR A SUM OF RS.83,040 WHICH WAS NOT ACCOUNTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. ON APPEAL BY THE ASSESSEE THE FIRST APPELLATE AUTHORITY UPHELD THE V ALIDITY OF THE NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT, 1961, BUT SET ASIDE THE ASSESSMENT ON THE ADDITION MADE BY THE ASSESSING OF FICER AND REMITTED THE MATTER TO HIM TO FRAME A FRESH ASSESSM ENT. ON SECOND APPEAL, THE TRIBUNAL HELD THAT SINCE THE ASSESSING OFFICER FAILED TO INCORPORATE THE MATERIAL AND ITS SATISFACTION FOR R EOPENING THE ASSESSMENT, THE SAME WAS INVALID. ON A REFERENCE : HELD, THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASS ESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED O NLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THAT IT WAS BASE D ON BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE AS SESSING OFFICER HAD TO ACT ON THE BASIS OF REASONS TO BELIEVE AND NOT ON REASONS TO SUSPECT. THE TRIBUNAL RIGHTLY CONCLUDED THAT THE A SSESSING OFFICER HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SATI SFACTION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID. 4.3 CONSIDERING THE REASONS FOR REOPENING OF ASSESS MENT IN THE LIGHT OF ABOVE DISCUSSION AND THE CASE LAWS REFERRED TO ABOVE, WE ARE OF THE VIEW THAT THE AO HAS NOT SATISFIED THE INGREDIENTS OF SECTION 147 OF THE ACT IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT. THEREFORE, THE AO HAS NOT CORRECTLY ASSUMED JURISDICTION U/S. 147 / 148 OF THE IT ACT. ACCORDINGLY, WE SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REASSESSMENT PROCEEDINGS. IT WO ULD RESULT IN DELETION OF ALL THE ADDITIONS. GROUND NO. 1 OF APPEAL OF ASSESSEE IS, A CCORDINGLY, ALLOWED. IN VIEW OF ITA NO. 358/AGRA/2011 9 THIS, THE OTHER GROUNDS HAVE ONLY ACADEMIC INTEREST AND AS SUCH, WE DO NOT FIND IT NECESSARY TO DECIDE THE ISSUE ON MERITS. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A.L. GEHLOT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER *AKS/- COPY OF THE ORDER FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A), CONCERNED BY ORDER 4. CIT, CONCERNED 5. DR, ITAT, AGRA 6. GUARD FILE SR. PRIVATE SECRETARY TRUE COPY