KRISHAN KUMAR, NEW DELHI V. ITO, WARD- 1, NARNAUL

ITA 3985/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2987 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Cost of acquisition; Reason to believe; Reassessment proceedings
• Section: 54B; 147; 148; 54

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO. 3985/DEL/2017 (ASSESSMENT YEAR: 2007-08) ASSESSEE BY : SH. KAPIL GOEL, ADV. DEPARTMENT BY : SH. AMIT JAIN, SR. DR DATE OF HEARING : 25.10.2017 DATE OF PRONOUNCEMENT : 15.12.2017 O R D E R PER R. K. PANDA, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 30.12.2015 OF LD. CIT(A), ROHTAK, RELAT ING TO ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IN THE GROUNDS OF APPEAL HAS CHALLENG ED THE VALIDITY OF RE-ASSESSMENT PROCEEDINGS AS WELL AS TH E ADDITION OF RS. 36,26,500/- MADE BY THE AO AND SUSTAINED BY LD. CIT(A). 2.1 FACTS OF THE CASE IN BRIEF ARE THAT ON THE BASIS OF AIR INFORMATION, THE AO ISSUED NOTICE U/S 148 OF IT ACT TO THE ASSESS ON 16.03.2012 AFTER RECORDING THE FOLLOWING REASONS. AS PER AIR INFORMATION FOR F. Y. 2006-07 RECEIVED IN THIS OFFICE, THE ASSESSEE HAS MADE CASH DEPOSITS OF RS. 1900000/- IN HIS BANK ACCOUNT WITH PUNJAB KRISH A N KUMAR C/P KAPIL GOEL, ADV. F-26/124, SECTOR-7 ROHINI, NEW DELHI - 110085 VS IT O WARD NO. 1 NARNAUL GIR/PAN: BXRPK4146E / (APPLICANT) /(RESPONDENT) 2 ITA NO. 3985/DEL/2017 NATIONAL BANK, CIRCULAR ROAD, REWARI. A QUERY NOTICE WAS ISSUED TO THE ASSESSEE ON 24.01.2012, BU T NO RESPONSE HAS BEEN RECEIVED FROM THE ASSESSEE. I, THEREFORE, HAVE REASON TO BELIEVE THAT THE ASSE SSEE HAS DEPOSITED CASH IN HIS BANK ACCOUNT OUT OF HIS INCOME FROM UNEXPLAINED SOURCE. ACCORDINGLY, INCOME TO THE EXTENT OF RS. 1900000/- AND ANY OTHER INCOME WHICH SUBSEQUENTLY COMES TO THE NOTICE OF THE UNDERSIGNED HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. ISSUE NOTICE U/S 148 OF THE I. T. ACT, 1961 FOR THE ASSES SMENT YEAR 2007-08. 3. IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE FILED HIS RETURN INCOME DECLARING NIL INCOME ON 26.12.2013. I N RESPONSE TO NOTICE U/S 143(2) ALOGWITH QUESTIONNAIR E, THE ASSESSEE FILED CERTAIN DETAILS FROM TIME TO TIME. F ROM THE DETAILS FURNISHED BY THE ASSESSEE THE AO OBSERVED A S UNDER: 3. THE ASSESSEE HAS SOLD HIS AGRICULTURE LAND AT RS . 38,56,250/- I.E RECEIVED RS. 5,00,000 FROM 1/3 SHAR E IN THE LAND SOLD FOR RS. 1500000/- ON 11.05.2006, RECEIVED RS. 1406250/- 1/3 SHARE IN THE LAND SOLD FOR 4218750/-, ON 11.05. 2006, AND RECEIVED RS. 6,50,000/- HALF SHARE RECEIVED ON AGRE EMENT FOR SALE OF LAND TO SH. DINESH SINGH S/O SH. ARJUN SINGH PAD IYAWAS ON 11.05.2006 AND RECEIVED RS. 1300000/- RECEIVED ON A GREEMENT FOR SALE OF LAND TO AMIT KUMAR S/O SH. GAJENDER PADIYAW AS ON 08.05.2006 TOTALING TO RS. 38,56,250/- .THE ASSESSE E HAS CLAIMED DEDUCTION U/S 54B AT RS. 17,96,500/- ON ACCOUNT OF PROPOSED INVESTMENT OUT OF SALE OF AGRICULTURAL LAND. THE AS SESSEE HAS SUBMITTED THAT THE CONSIDERATION RECEIVED ON SALE A GREEMENT WERE INCURRED ON CONSTRUCTION OF HOUSE. THE ASSESSEE WAS ASKED TO FURNISH THE PROOF OF INVESTMENT MADE IN PURCHASE OF LAND.AND THE PROOF OF INVESTMENT MADE IN THE CONSTRUCTION OF HOU SE. IN RESPONSE TO THIS, THE ASSESSEE HAS SUBMITTED THAT AGRICULTUR E LAND HAVE BEEN PURCHASED IN THE NAME OF HIMSELF AND IN THE NA ME OF HIS MOTHER. THE ASSESSEE SUBMITTED HE WAS ONLY 22 YEARS WHEN AGRICULTURE WAS SOLD AND BEING HINDU BY RELIGION HE IS SUPPOSED TO HAVE INTEREST IN THE LIFE OF HIS MOTHER AND ALL THE PURCHASE OF LAND ARE JOINTLY WITH HIS MOTHER, FATHER AND BROTHER. TH E ASSESSEE FURTHER SUBMITTED THAT AS PER SECTION 54 B OF THE A CT,THERE IS NO BINDING THAT THE ASSESSEE SHOULD PURCHASE THE AGRIC ULTURE LAND IN 3 ITA NO. 3985/DEL/2017 HIS OWN NAME. THE ASSESSEE HAS FURNISHED THE PHOTOC OPY OF THE SALE DEED FOR PURCHASE OF AGRICULTURE LAND. PERUSAL OF THE PHOTOCOPY REVEALS THAT THE ASSESSEE HAS INVESTED ON LY RS. 1,00,000/- I.E HALF SHARE OF THE ASSESSEE FOR PURCH ASE OF LAND FOR RS. 2,00,000/- ON 26.05.2006 FROM SH. SHER SINGH AN D RAM AVTAR SONS OF LAI CHAND S/O RATI RAM VILL. RUTHAL GHARI, TEH. NARNAUL. THE SUBMISSION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE LAND PURCHASED IN THE NAME OF MOTHER IS NOT AN ALLOWABLE DEDUCTION U/S 54B OF THE ACT. THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 54B OF THE ACT, IN-RESPECT OF PURCHAS E OF LAND IN THE NAME OF HIS MOTHER AND THE SAME IS DISALLOWED AN AD DED TO THE TOTAL INCOME OF THE ASSESSEE. THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 54 B OF T HE ACT AT RS. 1,00,000/- ONLY AND THE SAME IS ALLOWED TO THE ASSE SSEE. THE ASSESSEE HAS ALSO NOT FURNISHED ANY DOCUMENTARY EVIDENCE FOR CONSTRUCTION OF HOUSE AND FOR INVESTMENT MADE I N THE CONSTRUCTION OF HOUSE, THEREFORE, THE ASSESSEE IS A LSO, NOT ENTITLED TO DEDUCTION U/S 54 F OF THE ACT. THE CALCULATION OF CAPITAL GAIN IS WORKED OUT AS UN DER: SALE CONSIDERATION RS. 38,56,250/- COST OF ACQUISITION CLAIMED IN RETURN BY THE ASSESSEE RS. 1,29,750/- CAPITAL GAIN RS. 37,26,500/- DEDUCTION U/S 54B RS.1,00,000/- BALANCE CAPITAL GAIN RS. 36,26,500/- 4. THE AO ACCORDINGLY MADE ADDITION OF RS. 36,26,500/ - TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF CAPI TAL GAIN. FURTHER, THE AO ALSO MADE ADDITION OF RS. 38,362/- ON ACCOUNT OF INTEREST WHICH WAS NOT DISCLOSED BY THE ASSESSEE. ACCORDINGLY THE AO COMPLETED THE ASSESSMENT ON A TO TAL INCOME OF RS. 36,64,860/-. 5. BEFORE LD. CIT(A), THE ASSESSEE CHALLENGED THE VAL IDITY OF THE RE-ASSESSMENT PROCEEDINGS AS WELL AS THE ADDIT IONS ON MERIT. HOWEVER, LD. CIT(A) WAS NOT SATISFIED WITH T HE ARGUMENTS ADVANCED BEFORE HIM AND UPHELD THE REOPEN ING OF THE ASSESSMENT AS WELL AS THE ADDITION MADE BY THE AO ON MERIT. 4 ITA NO. 3985/DEL/2017 6. AGGRIEVED WITH SUCH ORDER OF LD. CIT(A), THE ASSES SEE IS IN APPEAL BEFORE THE TRIBUNAL. 7. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET, DREW T HE ATTENTION OF THE BENCH TO THE REASONS RECORDED BY T HE AO FOR ISSUE OF NOTICE U/S 148 AND SUBMITTED THAT THE REOP ENEING WAS MADE ON ACCOUNT OF CASH DEPOSIT OF RS. 19 LAKH IN THE BANK ACCOUNT. HOWEVER, IN THE ORDER PASSED BY THE A O, HE HAS MADE ADDITION ON ACCOUNT OF CAPITAL GAIN AND INTERE ST EARNED. THUS, NOTHING HAS BEEN MENTIONED IN THE ASSESSMENT ORDER FOR WHICH THE ASSESSMENT WAS REOPENED AND SOME OTHE R ADDITION HAS BEEN MADE. THEREFORE, IN VIEW OF THE D ECISION OF HONBLE DELHI HIGH COURT, IN THE CASE OF RANBAXY LA BORATORIES LTD., VS CIT, REPORTED IN 336 ITR 136, SUCH ADDITIO N IS NOT PERMISSIBLE AND THE ASSESSMENT ORDER HAS TO BE QUAS HED. 7.1. REFERRING TO THE DECISION OF THE DELHI BENCH OF TRIBUNAL IN THE CASE OF MAHAVIR PRASAD VS ITO, ITA NO. 924/DEL/2015, ORDER DATED 09.10.2017, FOR THE ASSES SMENT YEAR 2007-08, HE SUBMITTED THAT UNDER IDENTICAL FAC TS AND CIRCUMSTANCES, THE TRIBUNAL HAS QUASHED THE RE-ASSE SSMENT PROCEEDINGS HOLDING THAT THERE IS NO NEXUS BETWEEN PRIMA FACIE INFERENCE ARRIVAL IN THE REASONS RECORDED AND INFORMATION. THE TRIBUNAL HAS HELD THAT THE INFORMA TION WAS RESTRICTED TO CASH DEPOSITS IN BANK ACCOUNT BUT THE RE WAS NO MATERIAL MUCH LESS TANGIBLE, CREDIBLE, COGENT AND R ELEVANT MATERIAL TO FORM A REASON TO BELIEVE THAT CASH DEPO SITS REPRESENTED INCOME OF THE ASSESSEE. ACCORDINGLY, TH E REOPENING WAS HELD TO BE INVALID BY RELYING ON VARI OUS 5 ITA NO. 3985/DEL/2017 DECISIONS. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE IN VIEW OF THE DEC ISION OF THE TRIBUNAL AS WELL AS DECISION OF HONBLE DELHI HIGH COURT, THE REASSESSMENT PROCEEDINGS SHOULD BE QUASHED. 8. LD. DR ON THE OTHER HAND HEAVILY RELIED ON ON THE ORDER OF LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE HAD M ADE CASH DEPOSIT OF 19 LAKHS IN THE BANK ACCOUNT. THE AO, ON THE BASIS OF AIR INFORMATION RECEIVED, REOPENED THE ASSESSMEN T BY ISSUE OF NOTICE U/S 148 AFTER RECORDING REASONS. THEREFOR E, SUCH REOPENING IS ABSOLUTELY VALID AS PER LAW. FURTHER, THE AO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE HAS MADE ADDITION ON ACCOUNT OF CAPITAL GAIN AND UNDISCLOSED INTEREST INCOME WHICH HAS RIGHTLY BEEN SUSTAINED BY LD. CIT(A). HE ACCORDINGLY, SUBMITTED THAT THE ORDER OF LD. CIT(A) BE UPHELD AND THE GROUNDS RAISED BY THE ASSESSEE SHOULD BE DI SMISSED. 9. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND LD. CIT(A) AND THE PAPERBOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE A LSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. A PERUSAL OF THE REASONS RECORDED BY THE AO AS REPRODUCED BY HIM IN THE ASSESSMENT ORDER SHOWS THAT THE REOPENING WAS MADE ON ACCOUNT OF CASH DEPOSIT OF RS. 19 LAKH IN THE BANK ACCOUNT OF THE ASSESSEE. HOWEVER, THE AO IN THE ASSESSMENT ORD ER HAS MADE ADDITION OF RS. 36,26,500/- ON ACCOUNT OF CAPI TAL GAIN AND INTEREST INCOME. THUS, THERE IS NO ADDITION ON ACCOUNT OF WHICH THE ASSESSMENT WAS REOPENED BY ISSUE OF NOTIC E U/S 148 OF THE I.T. ACT. HONBLE DELHI HIGH COURT I N THE CASE OF 6 ITA NO. 3985/DEL/2017 RANBAXY LABORATORY LTD., VS CIT(SUPRA) HAS HELD THA T THE ASSESSING OFFICER HAS THE JURISDICTION TO REASSESS THE ISSUES OTHER THAN ISSUES IN RESPECT OF WHICH PROCEEDINGS W ERE INITIATED. BUT HE WAS NOT JUSTIFIED WHEN THE REASON S FOR THE INITIATION OF THOSE PROCEEDINGS SEIZED TO SURVIVE. SINCE, IN THE INSTANT CASE, THERE WAS NO ADDITION MADE IN THE ASS ESSMENT ORDER ON ACCOUNT OF WHICH THE ASSESSMENT WAS REOPEN ED BUT SOME OTHER ADDITIONS HAVE BEEN MADE BY THE AO, THER EFORE, THE AO DOES NOT HAVE JURISDICTION TO MAKE SUCH OTHE R ADDITIONS IN ABSENCE OF ANY ADDITION MADE FOR WHICH THE ASSESSMENT WAS RE-OPENED IN THE LIGHT OF THE DECISI ON OF HONBLE DELHI HIGH COURT IN THE CASE OF RANBAXY LAB ORATORY LTD. (SUPRA). THEREFORE, THE RE-ASSESSMENT PROCEEDI NGS HAVE TO BE QUASHED. 10. EVEN OTHERWISE, ALSO THE REOPENING WAS MADE ON THE BASIS OF AIR INFORMATION RECEIVED THAT THE ASSESSEE HAS MADE CASH DEPOSIT OF RS. 19 LAKHS. I FIND IDENTICAL ISSU E HAD COME UP BEFORE THIS BENCH OF THE TRIBUNAL IN THE CASE OF MAHAVIR PRASAD (SUPRA). THE TRIBUNAL VIDE ITA NO. 924/DEL/2 015 ORDER DATED 09.10.2017 FOR ASSESSMENT YEAR 2007-08 HAD QU ASHED SUCH RE-ASSESSMENT PROCEEDINGS BY OBSERVING AS UNDE R: 9. AFTER GOING THROUGH THE REASONS RECORDED BY THE ITO, WARD-2, REWARI, AM OF THE VIEW THAT THERE IS NO NEXUS BETWEEN THE P RIMA FACIE INFERENCE ARRIVED IN THE REASONS RECORDED AND INFORMATION; TH E INFORMATION WAS RESTRICTED TO CASH DEPOSITS IN BANK ACCOUNT BUT THE RE WAS NO MATERIAL MUCH LESS TANGIBLE, CREDIBLE, COGENT AND RELEVANT MATERI AL TO FORM A REASON TO BELIEVE THAT CASH DEPOSITS REPRESENTED INCOME OF TH E ASSESSEE; THAT EVEN THE COMMUNICATION DATED 24.1.2012 COULD NOT BE MADE A B ASIS TO ASSUME JURISDICTION IN VIEW OF THE FACT THAT SUCH AN ENQUI RY LETTER IS AN ILLEGAL ENQUIRY LETTER AND THUS CANNOT BE RELIED UPON; THAT THE PROCEEDINGS INITIATED ARE BASED ON SURMISES, CONJECTURES AND SU SPICION AND THEREFORE, 7 ITA NO. 3985/DEL/2017 THE SAME ARE WITHOUT JURISDICTION; THAT THE REASONS RECORDED ARE HIGHLY VAGUE, FAR-FETCHED AND CANNOT BY ANY STRETCH OF IMA GINATION LEAD TO CONCLUSION OF ESCAPEMENT OF INCOME AND THESE ARE ME RELY PRESUMPTION IN NATURE; THAT IT IS A CASE OF MECHANICAL ACTION ON T HE PART OF THE AO AS THERE IS NON-APPLICATION OF MIND MUCH LESS INDEPENDENT AP PLICATION OF MIND SO AS TO SHOW THAT HE FORMED AN OPINION BASED ON ANY MATE RIAL THAT SUCH DEPOSITS REPRESENTED INCOME. KEEPING IN VIEW THE FACTS AND C IRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAW APPLICABLE IN THE CAS E OF THE ASSESSEE, I AM OF THE CONSIDERED VIEW THAT THE REOPENING IN THE CA SE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES T OBE QUASHED. 11. IN VIEW OF THE ABOVE DISCUSSION, THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO ARE HELD TO BE VOID . SINCE ASSESSEE SUCCEEDS ON THIS LEGAL GROUND I.E. VALIDIT Y OF REASSESSMENT PROCEEDING, THEREFORE, GROUNDS ON MERI T BECOME ACADEMIC IN NATURE AND THEREFORE ARE NOT BEING ADJU DICATED. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 15.12.2017. SD/- (R. K. PANDA) ACCOUNTANT MEMBER DATE: 15.12.2017 @M!T