The ACIT, Circle 2, JUNAGADH V. Shri Kiran Jamnadas Sheth, JUNAGADH

ITA 368/RJT/2007

• Counselvise Citation: 36824914 RSA 2007
• Duration Of Justice: 4 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-05-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 05-06-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: I VIJAYKUMAR
• Assessee Lawyers: J C RANPURA
• Keywords: Reopening of assessment; Cost of acquisition; Wrong claim; Difference of opinion; Valuation report; Revised return; Reason to believe; Change of opinion; TDS; Set aside
• Section: 143(3); 54F; 143(1); 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.352/RJT/2007 (ASSESSMENT YEAR 1999-2000) SHRI KIRANBHAI JAMNADAS SHETH VS ACIT, JUNAGADH CI RCLE-1 HUF(SMALL), AT : NALIYA-MANDVI JUNAGADH UNA-DIU ROAD, O.O.DELWADA-362 510 TAL : UNA, DIST : JUNAGADH PAN : AAEHK3448N (APPELLANT) (RESPONDENT) I.T.A. NO.368/RJT/2007 (ASSESSMENT YEAR 1999-2000) ACIT, CIR.2 VS SHRI KIRANBHAI JAMNADAS SHETH JUNAGADH HUF (SMALL), DELWADA, TAL : UNA (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI JC RANPURA REVENUE BY : SHRI I VIJAYKUMAR O R D E R PER AL GEHLOT, AM THESE ARE CROSS APPEALS AND ARE DIRECTED AGAINST T HE ORDER DATED 28-03- 2007 PASSED BY THE CIT(A)-IV, RAJKOT FOR THE ASSESS MENT YEARS 1999-2000. 2. THE EFFECTIVE GROUNDS RAISED IN THE APPEALS ARE AS FOLLOWS: ITA NO.352/RJT/2007 APPEAL BY ASSESSEE: 2.0 THE LEARNED COMMISSIONER OF INCOME-TAX (APPEAL S)-IV, RAJKOT [HEREINAFTER REFERRED TO AS THE CIT(A)] ERRE D ON FACTS AS ALSO IN LAW IN DISMISSING THE APPELLANTS GROUND OF APPEAL RELATING AS TO VALIDITY OF ISSUE OF NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ) AND CONSEQUENT ASSESSMENT MADE BY THE AO. THE NOTICE U /S 148 OF THE ACT AND THE ASSESSMENT MAY KINDLY BE HEL D AS INVALID AND VOID-AB-INITIO AND MAY KINDLY BE QUASHE D. ITA NO.352 & 368/RJT/2007 2 3.0 THE LEARNED CIT(A) FURTHER ERRED ON FACTS AS AL SO IN LAW IN CONFIRMING THE ACTION OF THE AO IN REJECTING THE VA LUATION REPORT AND ESTIMATING FAIR VALUE AS ON 01.04.1981 A T RS.1,750/- PER SQ.FT. AS AGAINST VALUE DETERMINED A T RS.2,200/- BY THE REGISTERED VALUER AS PER THE VALU ATION REPORT AND DIRECTING THE AO TO ADOPT SUCH VALUE IN RESPECT OF 1,675 SQ.FTS. THE VALUATION MAY KINDLY BE DIRECTED TO ACCEPT AS PER THE REPORT OF THE REGISTERED VALUER. 4.0 THE LD.CIT(A) ERRED ON FACTS AS ALSO IN LAW IN CONFIRMING THE DISALLOWANCE OF RS.1,90,000/- MADE IN RESPECT OF CO ST OF IMPROVEMENT. THE DISALLOWANCE BEING TOTALLY UNJUST IFIED ON FACTS AS ALSO IN LAW AND MAY KINDLY BE DELETED. 5.0 THE LEARNED CIT(A) ERRED ON FACTS AS ALSO IN LA W IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 54 OF THE ACT ON THE ALLEGED GROUND THAT THE HOUSE BOAT IS NOT A RES IDENTIAL PROPERTY WITHIN THE MEANING OF SECTION 54 OF THE AC T. THE DISALLOWANCE CONFIRMED IS TOTALLY UNJUSTIFIED ON FA CTS AS ALSO IN LAW AND DESERVES TO BE DELETED AND MAY KINDLY BE DELETED. ITA NO.368/RJT/2007 APPEAL BY REVENUE 1. THE LD.CIT(AQ) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO RECOMPUTED THE VALUE AS ON 01. 04.1981 AFTER TAKING THE AREA AT 1675 SQ.FT. AGAINST 1340 S Q.FT. AND THEN TAKE THE RATE PER SQ.FT. AT RS.1,750/- AND CAL CULATE THE VALUE ACCORDINGLY. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN G IVING AN OPINION THAT THE PROPERTIES IN MUMBAI ARE SOLD ON T HE BASIS OF BUILT-UP AREA AND NOT ON CARPET AREA WITHOUT ANY BASIS WHATSOEVER. 3. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN A SSUMING 25% AS THE INCREASE IN CARPET AREA TO ARRIVE AT THE BUILT UP AREA WITHOUT ANY BASIS. 3. THE BRIEF FACTS ARE THAT THE ASSESSEE FILED ORIG INAL RETURN OF INCOME ON 29- 06-1999 DECLARING TOTAL INCOME AT RS. 13,30,948 WHI CH WAS REVISED BY A RETURN FILED ON 12-10-1999 TO RS.18,27,160. THE REVISED R ETURN WAS OCCASIONED, AS PER THE ASSESSING OFFICER, DUE TO NON DISCLOSURE OF CAP ITAL GAIN EARNED BY THE ITA NO.352 & 368/RJT/2007 3 ASSESSEE ON SALE OF FLAT AT MUMBAI FOR A TOTAL CONS IDERATION OF RS.1,70,00,000. IN THE REVISED RETURN OF INCOME, THE ASSESSEE COMPUTED THE TOTAL INCOME AS UNDER: (I) LONG TERM CAPITAL GAIN SALE CONSIDERATION OF FLAT AT MUMBAI RS. 1,70,00,0 00 LESS: BROKERAGE AND OTHER EXPENSES RS. 3,50,0 00 RS. 1,66,50,000 LESS : INDEX COST AS PER VALUATION REPORT RS. 1,25 ,73,486 RS. 40,76,514 LESS : EXEMPTION U/S 54F INVESTMENT IN NEW HOUSE PURCHASED AT KASHMIR RS. 35,80,000 RS. 4,96,514 (II) INCOME FROM OTHER SOURCES DIVIDEND INCOME RS.3,400 EXEMPTED INTEREST INCOME AS PER STATEMENT: RS.13,33,458 LESS : DEDUCTION U/S 80L RS. 2,837 TOTAL INCOME RS.18,32,836 FROM THE ABOVE REVISED RETURN IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 54F ON ACCOUNT O F PURCHASE OF HOUSE BOAT AT SRINAGAR, KASHMIR. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE IS NOT ELIGIBLE FOR EXEMPTION U/S 54F AGAINST THE INVE STMENT IN HOUSE BOAT. FURTHER, THE DEDUCTION CLAIMED ON ACCOUNT OF EXPENDITURE INC URRED IN CONNECTION WITH TRANSFER IS INCLUSIVE OF VALUATION CHARGES FOR THE PURPOSE OF COMPUTATION OF CAPITAL GAIN WHICH IS NOT THE EXPENDITURE IN CONNECTION WIT H TRANSFER. THE AO FOUND THAT THE CASE OF THE ASSESSEE FALLS UNDER EXPLANATION 2 OF SECTION 147 OF THE ACT. THE ASSESSING OFFICER ACCORDINGLY ISSUED NOTICE U/S 148 ON 06-07-2004. 4. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS. 3,50,000 AG AINST THE SALE CONSIDERATION IN COMPUTATION OF LONG TERM CAPITAL GAIN, THE DETAI LS OF WHICH ARE AS UNDER: A. RS.1,70,000 BROKERAGE ITA NO.352 & 368/RJT/2007 4 B. RS.1,64,000 SOCIETY TRANSFER CHARGE C. RS. 16,000 VALUATION REPORT CHARGE RS.3,50,000 THE ASSESSING OFFICER DID NOT ACCEPT THE EXPENDITUR E AMOUNTING TO RS. 16,000 PAID ON ACCOUNT OF VALUATION OF THE PROPERTY AS ON 01-04-1981. THE ASSESSING OFFICER WAS OF THE VIEW THAT SUCH EXPENDITURE IS NO T IN ACCORDANCE WITH SECTION 48(1) OF THE ACT. THE ASSESSING OFFICER DID NOT AC CEPT THE VALUATION AS ON 01-04- 1981 AS CLAIMED BY THE ASSESSEE ON THE BASIS OF VAL UATION REPORT OF APPROVED VALUER. THE ASSESSING OFFICER REFERRED THE MATTER OF VALUATION AS ON 01-04-1981 TO THE DVO. THE DVO CALCULATED THE INDEXED COST AS ON 01-04-1981 AT RS.75,55,330 AS AGAINST THE VALUE ADOPTED BY THE AS SESSEES VALUER AT RS.1,25,73,486. THE ASSESSING OFFICER ADOPTED THE INDEXED COST OF VALUATION AS ON 01-04-1981 AS ESTIMATED BY THE DVO AT RS.75,55,3 30. THE ASSESSING OFFICER HAS ALSO DISALLOWED THE EXEMPTION CLAIMED BY THE AS SESSEE U/S 54F ON ACCOUNT OF INVESTMENT MADE IN HOUSE BOAT AT SRINAGAR. 5. ON APPEAL, THE CIT(A) REJECTED THE ASSESSEES GR OUND OF APPEAL REGARDING REOPENING OF ASSESSMENT STATING THAT THE PROCEEDING S OF REOPENING OF ASSESSMENT WAS INITIATED WITHIN 4 YEARS. AS REGARD S THE VALUATION AS ON 01-04- 1981 THE CIT(A) MODIFIED THE FINDINGS OF THE ASSESS ING OFFICER AS UNDER: 4.2 I HAVE GONE THROUGH THE FACTS OF THE CASE AND HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AR. IN THE INSTANT CASE, THE CASE OF THE APPELLANT IS THAT THEY HAD TRIED TO CO-OPERATE WITH THE VALUATION OFFICER BUT COULD NOT, FOR THE REASON THAT THE OLD DOCUMENTS WERE NOT AVAILABLE AND INSPECTION OF ORIG INAL ASSETS COULD NOT BE ARRANGED AS WHICH HAS ALREADY BEEN SOL D. THE CASE OF THE APPELLANT IS THAT SINCE THEY HAD OBTAINED AP PROVAL U/S 269UL(3) OF THE I.T. ACT, THEREFORE, THE FACTS AS N ARRATED SHOULD BE ACCEPTED. APPELLANT ALSO POINTED OUT THAT VALUATIO N MADE BY THE REGISTERED VALUER SHOULD BE ACCEPTED IN THE PRESENT CASE. HOWEVER, IN THE INSTANT CASE, SO FAR AS THE ACCEPTA NCE OF VALUE U/S 269UL(3) OF THE I.T. ACT IS CONCERNED, THAT MAY BE TRUE IN RESPECT OF SALE-PRICE BUT SO FAR AS VALUE AS ON 1-4-81 FOR THE PURPOSES OF ITA NO.352 & 368/RJT/2007 5 COMPUTATION OF COST OF ACQUISITION IS CONCERNED, IS STILL TO BE DONE SEPARATELY. NO DOUBT THE ESTIMATION MADE BY THE RE GISTERED VALUE IS TO BE GIVEN DUE WEIGHTAGE BUT STILL THE CASE OF THE DEPARTMENT IS THAT IF VALUE GIVEN BY THE ASSESSEE ON 1-4-81 IS AD OPTED, IT HARDLY SHOWS ANY INCREASE IN MARKET VALUE OF PROPERTY IN 1 7 YRS. WHILE IN REALITY THIS IS NOT THE CASE. UNDER THE CIRCUMSTAN CES, IN MY OPINION, THE ASSESSING OFFICER IN PRINCIPLE WAS CORRECT IN M AKING A FRESH ESTIMATE. EVEN WHILE MAKING THIS ESTIMATION, THE A SSESSING OFFICER MADE THIS VALUATION ON THE BASIS OF ESTIMATE MADE B Y THE VALUERS. HOWEVER, IN THE INSTANT CASE, WHILE ADOPTING THE VA LUE, THE ASSESSING OFFICER HAS ADOPTED THE CARPET AREA INSTE AD OF BUILT-UP AREA. ON THIS ISSUE, I DO NOT AGREE WITH THE ASSES SING OFFICER AS VALUATION IS ORDINARILY DONE ON THE BASIS OF BUILT- UP AREA ONLY IN THE CITY LIKE MUMBAI AS ALL THE SALE TRANSACTIONS TILL RECENTLY WERE BEING DONE ON THE BASIS OF BUILT-UP AREA. THEREFORE, I D IRECT THE ASSESSING OFFICER TO ADOPT THE RATE OF RS.1750/- PE R SQ.FT. BUT THE SAME SHOULD BE ADOPTED FOR 1675 SQ.FT. AS IT IS A Q UESTION OF FACT. I DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE VALU E AS ON 1-4-81 AFTER TAKING THE AREA AT 1675 SQ.FT. AGAINST THE 13 14 SQ.FT. AND THEN TAKE THE RATE PER SQ.FT. AT RS.1750/- PER SQ.FT. BU T THE SAME SHOULD BE ADOPTED FOR 1675 SQ.FT. AS IT IS A QUESTION OF F ACT. I DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE VALUE AS ON 1-4 -81 AFTER TAKING THE AREA AT 1675 SQ.FT. AGAINST THE 1314 SQ.FT. AND THEN TAKE THE RATE PER SQ.FT. AT RS.1750/- AND CALCULATE THE VALUE ACC ORDINGLY. HOWEVER, I ALSO CONFIRM THE ACTION OF THE ASSESSING OFFICER IS NOT ADDING THE ADDITION ON ACCOUNT OF RENOVATION ETC. A S ON 1-4-81 FOR THE REASON THAT THERE IS NOTHING BON RECORD TO SAY THAT WHEN THE RENOVATION WAS DONE. ON OTHER POINTS, THE ORDER OF THE ASSESSING OFFICER IS CONFIRMED. 5.1 IN RESPECT OF DEDUCTION U/S 54F, THE CIT(A) CON FIRMED THE ORDER OF ASSESSING OFFICER. BOTH ASSESSEE AND REVENUE ARE I N APPEAL AGAINST THE ORDER OF CIT(A). 6. THE LD.AR WHILE ARGUING THE FIRST GROUND OF APPE AL RELATING TO REOPENING OF ASSESSMENT U/S 147 SUBMITTED THAT THE CIT(A) HAS RE CORDED THE INCORRECT FACT THAT THE REOPENING IS WITHIN FOUR YEARS. THE LD.AR SUBMITTED THAT ASSESSING OFFICER ON PAGE 2 OF HIS ORDER AT PARAGRAPH 2 HAS C LEARLY STATED THAT THE NOTICE U/S 148 WAS ISSUED ON 06-07-2004 WHICH IS APPARENTLY BE YOND FOUR YEARS. THE LD.AR WHILE REFERRING TO PAGE 17 OF PAPER BOOK SUBM ITTED THAT THE ASSESSEE HAS FURNISHED ALL THE RELEVANT DETAILS AND DOCUMENTS AL ONG WITH THE RETURN OF INCOME, ITA NO.352 & 368/RJT/2007 6 COPY OF SALE DEED, VALUATION REPORT, LETTERS DATED 11-07-2000, 03-10-2000, COPY OF AGREEMENT OF NEW HOUSE PURCHASED, COPY OF TDS CE RTIFICATE AND OTHERS, AS STATED IN THE RELEVANT COLUMN OF THE RETURN, DOCUM ENTS ATTACHED WITH THE RETURN. A COPY OF FORM 2D SARAL FORM FILED BY THE ASSESSEE HAS BEEN PLACED AT PAGE 17 OF THE ASSESSEES PAPER BOOK. THE LD.AR SUBMITTED THAT THE ASSESSING OFFICER HAS REOPENED THE CASE ON THE BASIS OF DOCUMENTS WHI CH WERE ATTACHED ALONG WITH THE RETURN OF INCOME. THERE IS NO NEW EVIDENC E OR DOCUMENTS OR OTHER EVIDENCE TO SHOW THAT THE ASSESSEE HAS ESCAPED THE INCOME. THE LD.AR SUBMITTED THAT REOPENING IS BEYOND FOUR YEARS AND T HERE IS NO FAILURE ON THE PART OF THE ASSESSEE REGARDING FURNISHING OF DETAILS AND DOCUMENTS THEREFORE, REOPENING ITSELF IS BAD IN LAW. THE LD.AR FURTHER SUBMITTED THAT SINCE TIME LIMIT FOR ISSUE OF NOTICE U/S 143(2) HAS BEEN EXPIRED, THE AS SESSING OFFICER ISSUED NOTICE U/S 147 OF THE ACT. THE LD.AR FURTHER SUBMITTED TH AT IT IS A SETTLED PRINCIPLE OF LAW THAT WHAT WAS NOT DONE DIRECTLY CANNOT BE DONE INDI RECTLY BY TAKING RECOURSE TO PROVISIONS OF SECTION 147 OF THE ACT. HE SUBMITTED THAT IN THE CASE OF ITO VS MAST KESHAV SURI 228 ITR (ST) 156 (SC), THE APEX CO URT DISMISSED THE SLP FILED BY THE DEPARTMENT AGAINST THE JUDGMENT OF DELHI HIG H COURT IN CM NO.1162 OF 1997 IN CIVIL WRIT NO. NO.664 OF 1997 IN CIVIL WRIT NO.664 OF 1997 HOLDING THAT ACTION PERMISSIBLE UNDER SECTION 143(2) ON THE BASI S OF THE INFORMATION AVAILABLE IN THE RETURN BUT NOT TAKEN IN RESPECT OF WHICH LIM ITATION EXPIRED, CANNOT BE LEGALLY TAKEN U/S 147 IF THE AO HAD REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED THE ASSESSMENT. THE LD.AR HAS ALSO RELIED UPON THE ORDER OF NAGPUR BENCH OF THE ITAT IN THE CASE OF ACIT VS MALLI CHAN D BAID 99 TTJ (NAG) 1016. IT IS ALSO THE SUBMISSION OF THE LD.AR THAT THERE W AS NO REASON TO BELIEVE WITH THE ASSESSING OFFICER THAT THERE IS ESCAPEMENT OF INCOM E. IN THE ABSENCE OF SUCH BELIEF, THE ASSESSING OFFICER CANNOT REOPEN THE ASS ESSMENT. HE RELIED UPON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF KRISHN A PVT LTD (1996) 221 ITR 538 (SC). THE LD.AR HAS ALSO RELIED UPON THE JUDGM ENT OF BOMBAY HIGH COURT IN THE CASE OF PRASHANT S JOSHI VS ITO (UNREPORTED). THE DECISION IS UNREPORTED AND, THEREFORE, THE ASSESSEE FILED COPY OF GIST OF DECISION WHICH HAS BEEN DOWNLOADED FROM INTERNET AND IS FORMING PART OF REC ORD. IN THE SAID DECISION IT IS ITA NO.352 & 368/RJT/2007 7 HELD THAT EVEN IF THERE IS NO ASSESSMENT PASSED REO PENING U/S 147 IS BAD IF THERE IS NO PROPER REASON TO BELIEVE THAT INCOME HAS ES CAPED ASSESSMENT. THE LD.AR SUBMITTED THAT IN THIS JUDGMENT OF THE BOMBAY HIGH COURT, THE JUDGMENT OF APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROK ERS PVT LTD 291 ITR 500 (SC) WHEREIN IT HAS BEEN HELD THAT PASSING OF INTIM ATION U/S 143(1) DOES NOT AMOUNT TO ASSESSMENT AND IN THE ABSENCE OF ASSESSME NT, THERE WAS NO QUESTION OF CHANGE OF OPINION, HAS ALSO BEEN CONSIDERED BY T HE COURT. THE LD.AR HAS ALSO RELIED UPON THE FOLLOWING DECISIONS: BALKRISHNA HIRALAL WANI VS ITO 271 ITR 269 (BOM) BAPALAL & CO EXPORTS VS JTCIT 289 ITR 37 (MAD) ALPITA MARKETING PVT LTD VS ITO 21 SOT 302 (MUM) 7. ON MERITS, THAT IS, WITH REGARD TO GROUND NO.2, THE LD.AR SUBMITTED THAT THE ASSESSEE OBTAINED A VALUATION REPORT FROM REGISTERE D VALUER FOR ESTIMATION OF COST OF ASSETS AS ON 01-04-1981. HE FURTHER SUBMITTED T HAT THE ASSESSING OFFICER IS INCORRECT IN REFERRING THE MATTER TO THE DVO. HE S UBMITTED THAT REFERENCE TO DVO CAN BE MADE ONLY WHEN THE ASSESSING OFFICER IS OF T HE OPINION THAT VALUE OF THE ASSETS CLAIMED BY THE ASSESSEE IS LESS THAN ITS FAI R MARKET VALUE. THEREFORE, FOR THE PURPOSE OF HIGHER VALUATION AS ON 01-04-1981 TH E ASSESSING OFFICER CANNOT REFER THE MATTER TO THE DVO. THE LD.AR RELIED UPON THE FOLLOWING DECISIONS: KAPAKBHAI A MANIAR VS ACIT IT(SS) A NO.55/RJT/2010 RAJKOT BENCH SMC ITO VS SMT. LALITABEN B KAPADIA 115 TTJ (MUM) 938 (MUM K BENCH) SMT. KRISHNABAI TINGRE VS ITO 103 TTJ (PUNE) 216 URMILA BAWA VS ACIT 11 SOT 661 (DEL) THE LD.AR HAS ALSO RELIED UPON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF HIABEN JAYANTILAL SHAH VS ITO & ANR 6 D TR (GUJ) 203. ITA NO.352 & 368/RJT/2007 8 8. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE OR DER OF CIT(A) IN RESPECT OF LEGAL ISSUE. HE ALSO RELIED UPON THE JUDGMENT OF T HE SUPREME COURT IN THE CASE OF CIT VS RAJESH JHAVERI STOCK BROKERS PVT LTD 291 ITR 500 (SC). HE SUBMITTED THAT BY MERE FILING OF PARTICULARS THE ASSESSEE CAN NOT MAKE A WRONG CLAIM. IT IS ALSO THE SUBMISSION OF THE LD.DR THAT THE ASSESSING OFFICER HAS GIVEN REASON FOR REOPENING AND THE ASSESSEE APPEARED BEFORE THE ASSE SSING OFFICER BUT DID NOT OBJECT TO THE REOPENING WHICH INDICATES THAT THE AS SESSEE HAS ACCEPTED THE REOPENING. ON MERIT, THE LD.DR SUBMITTED THAT THE ASSESSING OFFICER IS EMPOWERED TO MODIFY THE VALUATION ESTIMATED BY THE REGISTERED VALUER AND HE ACCORDINGLY REFERRED THE VALUATION TO THE DVO AND H AS CORRECTLY MODIFIED. THE LD.DR SUBMITTED THAT THE ASSESSING OFFICER HAS RIGH TLY OBSERVED THAT THERE IS A LONG PERIOD IN BETWEEN THE PROPERTY PURCHASED AND T HE VALUATION ADOPTED AS ON 01-04-1981 AND THE ASSESSEE HAS NOT SHOWN REASONABL E INCREASE IN THE RATE OF THE PROPERTY. THE LD.DR SUBMITTED THAT THE CIT(A) WITHOUT BASIS DIRECTED THE ASSESSING OFFICER TO ADOPT THE CARPET AREA. 9. IN RESPECT OF EXPENSES, THE LD.DR SUBMITTED THAT IN THE BOOKS OF ACCOUNT, THE EXPENDITURE WAS ONLY ABOUT RS.51,000 WHEREAS TH E ASSESSEE HAS CLAIMED THE REMAINING AMOUNT OF RS.1,90,000 WITHOUT ANY BAS IS. IN RESPECT OF CLAIM U/S 54 THE LD.AR SUBMITTED THAT HOUSE BOAT CANNOT BE A RESIDENTIAL HOUSE. THE ALTERNATIVE PLEA OF THE LD.DR WAS THAT COST OF THE HOUSE BOAT WAS ONLY RS.10 LAKHS AND OTHER AMOUNT IS LEASE CHARGES WHICH CANNO T FORM PART OF COST OF ACQUISITION OF THE NEW PROPERTY. THE ASSESSEE HAS CLAIMED THE FULL AMOUNT FOR CLAIMING EXEMPTION U/S 54F. 10. WE HAVE HEARD THE LD.REPRESENTATIVES OF THE PAR TIES, RECORD PERUSED AND HAVE GONE THROUGH THE DECISIONS CITED. THE ASSESSE E WHILE CHALLENGING THE REOPENING CONTESTED THAT REOPENING IS BEYOND FOUR Y EARS. THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT. FURTHER, THE ASSESSING OFFICER REOPENE D THE ASSESSMENT WITHOUT ISSUING NOTICE U/S 143(2) OF THE ACT. THESE ARE TW O LEGAL ISSUES APART FROM THE ITA NO.352 & 368/RJT/2007 9 MERIT OF THE CASE. WE FIRST DEAL WITH THESE LEGAL ISSUES, THE FIRST ONE BEING THE REOPENING BEYOND FOUR YEARS. WE FIND THAT THE CIT( A) IS NOT CORRECT IN RECORDING THE FACT THAT REOPENING IS WITHIN FOUR YEARS. THIS FINDING IS CONTRARY TO THE APPARENT FACTS NOTED BY THE ASSESSING OFFICER THAT THE DATE OF NOTICE U/S 148 IS 06-07-2004. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) IN THIS REGARD. 11. NOW COMING TO THE FIRST LEGAL ISSUE IT IS WELL SETTLED AS A RESULT OF SEVERAL DECISIONS OF THE APEX COURT THAT TWO DISTINCT CONDI TIONS MUST BE SATISFIED BEFORE THE ITO CAN ASSUME JURISDICTION TO ISSUE NOTICE UND ER SECTION 147(A). FIRST, HE MUST HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND, SECONDLY, HE MUST HAVE REASON TO BE LIEVE THAT SUCH ESCAPEMENT IS BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT. IF EITHER OF THESE CONDITIONS IS NOT FULFILLED, THE NOTICE IS SUED BY THE ITO WOULD BE WITHOUT JURISDICTION. THE IMPORTANT WORDS UNDER S. 147(A) ARE HAS REASON TO BELIEVE AND THESE WORDS ARE STRONGER THAN THE WORDS IS SATISFI ED. THE BELIEF ENTERTAINED BY THE ITO MUST NOT BE ARBITRARY OR IRRATIONAL. IT MU ST BE REASONABLE OR IN OTHER WORDS, IT MUST BE BASED ON REASONS WHICH ARE RELEVA NT AND MATERIAL. THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE ITO IN COMING TO THE BE LIEF, BUT THE COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQUIRED TO ENTERT AIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER SECTION 147(A). IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUC H REASONS, NO ONE PROPERLY INSTRUCTED ON FACTS AND LAW COULD REASONABLY ENTERT AIN THE BELIEF, THE CONCLUSION WOULD BE INESCAPABLE THAT THE ITO COULD NOT HAVE RE ASON TO BELIEVE THAT ANY PART OF THE INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMEN T AND SUCH ESCAPEMENT WAS BY REASON OF THE OMISSION OR FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE I SSUED BY HIM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID. THE PROVISO TO SECTION 147 OF THE ACT PROVIDES THAT IN CASE THE ASSESSMENT COMPLETED U/S 143(3) OR 147 OF THE ACT IS TO BE REOPENED ITA NO.352 & 368/RJT/2007 10 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER COULD TAKE RECOURSE TO SUCH ACTIO N ONLY IF THE ESCAPEMENT OF INCOME CHARGEABLE TO TAX WAS ON ACCOUNT OF ASSESSEE S FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. 12. IF WE APPLY THE FACTS OF THE CASE ON HAND TO TH E ABOVE DISCUSSION WE FIND THAT THE REOPENING IS BEYOND FOUR YEARS AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE. THE LD.AR HAS DEMONSTRATED THAT THE ASSE SSEE HAS FURNISHED ALL THE RELEVANT DETAILS AND DOCUMENTS ALONG WITH THE RETUR N OF INCOME. THE DOCUMENTS FURNISHED WAS COPY OF SALE DEED, VALUATION REPORT, COPY OF AGREEMENT FOR PURCHASE OF HOUSE, AND AGREEMENT AND COPIES OF LETT ERS DATED 11-07-2000, 03- 10-2000, 12-04-2002, COPY OF ACCOUNT AND TDS CERTIF ICATE AND OTHERS. SINCE THERE IS NO FAILURE ON THE PART OF ASSESSEE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT, THE REOPENING U /S 147 IS INVALID AND IS HEREBY QUASHED. 13. NOW COMING TO THE SECOND LEGAL ISSUE THAT THE A O ISSUED NOTICE U/S 148 WITHOUT ISSUING NOTICE U/S 143(2), WE FIND THAT THI S ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE ORDER OF ITAT, NAGPUR BENCH IN THE CASE OF ACIT VS MALLI CHAND BAID 99 TTJ (NAGPUR) 1016. THE RELEVANT FINDING IS REPRODUCED AS BELOW: 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE REASONS FOR FORM ATION OF THE BELIEF CONTEMPLATED BY S.147(A) OF THE IT ACT, 1961 , FOR THE REOPENING OF AN ASSESSMENT MUST HAVE A RATIONAL CON NECTION OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. R ATIONAL CONNECTION POSTULATES THAT THERE MUST BE DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL GIVING (SIC-COMPANY) TO THE NOTICE OR THE ITO AND THE FORMATION OF HIS BELIEF THAT THERE HAS BEEN ESCAPEM ENT OF INCOME BY THE ASSESSEE FROM ASSESSMENT IN THE PARTICULAR Y EAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS. WE FIND FORCE IN THE SUBMISSION OF THE LEARNED COUNSEL FOR THE AS SESSEE THAT THE ISSUE OF NOTICE UNDER S. 143(2) WAS TIME-BARRED AND AS HAS BEEN HELD BY TRIBUNAL, SPECIAL BENCH, DELHI, THE AO HAD LOST JURISDICTION TO MAKE REASSESSMENT MORE SO THE EXISTENCE OF TANGI BLE MATERIAL FOR THE FORMATION OF OPINION WAS A PREPREQUISITE FO R INITIATION OF ITA NO.352 & 368/RJT/2007 11 ACTION UNDER S. 147 OF THE IT ACT, 1961 AS AMENDED W.E.F.1 ST APRIL, 1989. AS HAS BEEN POINTED OUT BY THE LEARNED DEPAR TMENTAL REPRESENTATIVE THAT IT WAS A MERE SUSPICION IN THE MIND OF THE AO AND SO ALSO WHICH APPEARED IN HIS ORDER THE EXPRESS ION REASONS TO BELIEVE AS HAS BEEN HELD IS STRONGER THAN THE WORD S IS SATISFIED. THE REASONS RECORDED ARE NOT RELEVANT AND COULD NOT HAVE BEARING ON THE MATTERS WITH REGARD TO WHICH HE WAS REQUIRED TO FRAME THE ASSESSMENT INSOFAR AS THE ORDER OF THE AO CAN BE PU RSUED HAVE NO NEXUS TO THE RATIONALITY FOR THE PURPOSE OF REASON TO BELIEVE. TO PUT OTHERWISE, THE INFORMATION WHICH FORMED THE BASIS F OR THE REASON TO BELIEVE FOR THE AO LACKED SPECIFIC, RELEVANT AND R ELIABLE CRITERIA WHICH MATERIAL ARE LIABLE TO BE REJECTED ONLY ON TH E GROUND THAT THEY MAY BE REASON TO ESCAPE (SUSPECT) BUT NOT REASONS T O BELIEVE AS WAS NOT CONSIDERED BY THE HONBLE APEX COURT IN THE CASE OF PHOOL CHAND BAJRANG LAL & ANR. VS ITO & ANR. (1993) 113 C TR (SC) 436 : (1993) 203 ITR 456 (SC). IT WAS NOT THE CASE OF THE AO THAT THE RETURN INDICATED POSSIBLE ESCAPEMENT OF INCOME AND HE WAS NOT SURE ABOUT IT TO INITIATE PROCEEDINGS UNDER S. 147. WHEN PROCEEDINGS UNDER S. 147 ARE INITIATED, THE PROCEED INGS ARE O0PEN ONLY QUA ITEMS OF UNDER-ASSESSMENT. THE FINALITY O F ASSESSMENT PROCEEDINGS ON EITHER (OTHER) ISSUES REMAINS UNDIST URBED. IT MAKES NO DIFFERENCE WHETHER THE ASSESSMENT PROCEEDINGS HA VE BECOME FINAL ON ACCOUNT OF FRAMING OF AN ASSESSMENT UNDER S. 143(1) OF THE ACT OR ON ACCOUNT OF NON-ISSUE OF NOTICE UNDER S.14 3(2) OF THE ACT WITHIN THE STIPULATED PERIOD. THEREFORE, IT WAS TH E AOS LOUD THINKING BY REASONING HIS SUSPICION TO VERY THE VER Y RETURN WHICH ENQUIRY COULD ONLY BE MADE BY HIM BY ISSUING A NOTI CE UNDER S.143(2) WITHIN THE STIPULATED PERIOD WHICH IN THE CASE OF THE ASSESSEE HAD ALREADY EXPIRED. IT IS NOT THE CASE O F THE REVENUE THAT DURING THE COURSE OF PROCEEDINGS UNDER S.147 I T HAD COME ACROSS ANY MATERIAL RELATING TO THE ITEMS AS MENTIO NED IN HIS REASON TO BELIEVE SUGGESTING ESCAPEMENT OF INCOME UNDER AN Y OF THOSE HEADS. THERE WAS NO LIVE LINK BETWEEN THE TWO AS W AS CONSIDERED BY TRIBUNAL, CUTTACK BENCH IN THE CASE OF BHUVANESH WAR STOCK EXCHANGE VS. ASSTT.CIT(2005) 95 TTJ (CUTTACK) 1037. WE ARE, THEREFORE, INCLINED TO UPHOLD THE ORDER OF THE LEAR NED CIT(A) INSOFAR AS HE RIGHTLY HELD THAT THE AO HAD SIMPLY WANTED TO INVESTIGATE THE CASE AND HAD NO INFORMATION ON THE BASIS OF WHICH T HERE COULD BE A REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMEN T. HE, THEREFORE, ON THE BASIS OF VARIOUS CASE LAWS AS REL IED ON, RIGHTLY CONSIDERED THAT THE AO WAS DEBARRED FROM, HOLDING J URISDICTION UNDER S. 147 AND, THEREFORE, PROCEEDINGS THEREUPON WERE HELD TO BE INVALID. HE RIGHTLY CONSIDERED THE ASSESSEES APPE AL BEFORE HIM BY ANNULLING THE ORDER OF THE AO. NO INTERFERENCE THE REIN IS CALLED FOR. ITA NO.352 & 368/RJT/2007 12 14. WE, RESPECTFULLY, FOLLOWING THE ABOVE ORDER OF ITAT, NAGPUR BENCH AND IN THE LIGHT OF THAT WE HOLD THAT PROCEEDINGS INITIATE D U/S 147 OF THE ACT IS WITHOUT JURISDICTION AND BAD IN LAW. THEREFORE, THE ORDER OF THE ASSESSING OFFICER TO THAT EXTENT IS QUASHED. 15. SINCE THE LEGAL ISSUES HAVE BEEN DECIDED IN FAV OUR OF THE ASSESSEE, WE DO NOT THINK NECESSARY TO DELIBERATE UPON THE ISSUE RAISED ON MERIT. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF JUNE, 2011. SD/- SD/- (N.R.S. GANESAN) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DT : 17 TH JUNE, 2011 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV, RAJKOT 4. THE CIT-III, RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT