SHRI SITARAM B. CHAUTE( KHATRI ), V. THE ACIT, CIRCLE-3,

ITA 4234/AHD/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9321 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 27-07-2009
• Assessment Year: 1995-1996
• Appeal Filed On: 28-11-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHI RAJAT BANSAL
• Assessee Lawyers: J P SHAH
• Keywords: Reopening of assessment; Search and seizure; Reason to believe; Capital Gains
• Section: 271(1)(c); 143(3); 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD D BENCH (BEFORE S/SHRI T.K. SHARMA, JUDICIAL MEMBER AND D.C. AGRAWAL, ACCOUNTANT MEMBER) ITA.NO.4304/AHD/2003 [ASSTT.YEAR : 1995-1996] SHRI KANTILAL B. CHAUTE C/O. SRI RAM TEXTILES 8/63, GUJARAT HOUSING COLONY, KHATODRA, SURAT. VS. ACIT, CIR.2 SURAT. ITA.NO.4234/AHD/2003 [ASSTT.YEAR : 1995-1996] SHRI SITARAM B. CHAUTE C/O. KIRAN TEXTILES 8/63, GUJARAT HOUSING COLONY, KHATODRA, SURAT. VS. ACIT, CIR.2 SURAT. ASSESSEE BY : SHRI J.P. SHAH REVENUE BY : SHI RAJAT BANSAL O R D E R PER T.K. SHARMA, JUDICIAL MEMBER : THESE TWO APPEALS ARE AGAINST TWO SEPARATE ORDERS OF THE CIT (A)-VI, SURAT. SIN CE BOTH TAXPAYERS ARE BROTHER AND ISSUES INVOLVED ARE COMMON, REPRESENTED AND ARG UED BY THE SAME COUNSEL, THEREFORE FOR THE SAKE OF CONVENIENCE WE DISPOSE OF BOTH APPEALS BY THIS COMMON ORDER. 2. THE ONLY GRIEVANCE RAISED IN BOTH THE APPEAL S IS WITH REGARD TO REOPENING OF ASSESSMENT UNDER SECTION 148 OF THE INCOME TAX A CT, 1961. IT IS PLEADED THAT (I) THE REOPENING OF THE ASSESSMENT UNDER SECT ION 148 IS NOT GOOD IN LAW, (II) CAPITAL GAINS DOES NOT ACCRUE NOR DOES IT ARIS E IN THE ASSESSMENT YEAR 1995- 96 AND THE RELEVANT CAPITAL GAINS TAX HAS BEEN DECL ARED AND TAXED IN THE ASSESSMENT YEAR 1998-99 WHICH IS THE CORRECT YEAR I N WHICH CAPITAL GAINS IS TAXABLE. PAGE - 2 ITA.NO.4304 AND 4234/AHD/2003 -2- 3. THE FACTS IN BRIEF ARE THAT A SEARCH UNDER SECTI ON 132 OF THE IT ACT WAS CARRIED OUT ON 16-11-1994 AT THE RESIDENTIAL PREMIS ES OF THE ASSESSEE. DURING THE COURSE OF SEARCH, THE ASSESSEE DISCLOSED A SUM OF RS.5 LAKHS UNDER SECTION 271(1)(C) EXPLANATION 5 IN THE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASS ESSEE FILED RETURN OF INCOME OF RS.98,750/- ON 31-8-1995. THE AO FRAMED ASSESSM ENT UNDER SECTION 143(3) ON 31-3-1998 WHEREIN HE BROUGHT TO TAX 50% PROFIT O N SALE OF PLOT OF LAND BEING PLOT NO.7, WARD NO.4, NONDH NO.2336 AT SALABA TPURA, SURAT AT RS.315500/- ON THE BASIS OF DISCLOSURE MADE UNDER E XPLANATION TO SECTION 271(1)(C) IN THE STATEMENT RECORDED U/S 134(4) OF THE ACT DURING COURSE OF SEARCH. AGAINST THIS ORDER, AN APPEAL WAS FILED AN D THE LEARNED CIT(A)-I, SURAT VIDE ORDER DATED 13-7-2000 DELETED THE ADDITION BY OBSERVING THAT ALL THE RECEIPTS (INCLUDING ON-MONEY OF RS.5 LAKHS) WERE TA XABLE AS INCOME FROM LONG TERM CAPITAL GAINS ONLY IN THE YEAR OF ACTUAL SALE. EXCEPT FOR THE LITTLE ADVANCE RECEIVED IN THIS YEAR, NOTHING HAS HAPPENED TO JUST IFY SUCH ADDITION. THEREAFTER, THE AO ISSUED NOTICE UNDER SECTION 148 ON 30-5-2001 . THE REASONS RECORDED FOR ISSUANCE OF THE NOTICE WAS THAT THE ASSESSEE FA ILED TO RETURN VOLUNTARILY DISCLOSED INCOME OF RS.5 LAKHS IN ITS RETURN OF INC OME FILED FOR THE ASSESSMENT YEAR 1995-96. THEREFORE, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. SUBSEQUENTLY, THE AO FRAMED ASSESSMENT UNDER SECTIO N 143(3) READ WITH SECTION 147 ON 10-12-2002 WHEREIN HE BROUGHT TO TAX A SUM OF RS.5 LAKHS DISCLOSED BY THE ASSESSEE IN ITS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT. AGAINST THIS, AN APPEAL WAS FILED AND THE LEA RNED CIT(A)-II, SURAT IN THE IMPUGNED ORDER UPHELD THE ACTION OF THE AO REGARDIN G REOPENING OF THE ASSESSMENT UNDER SECTION 147 FOLLOWING THE JUDGMENT OF THE GUJARAT HIGH COURT IN THE CASE OF PRAFUL C. PATEL VS. MJ MACKWAN A VS. ACIT, 148 CTR 62. THE LEARNED CIT(A) IN THE IMPUGNED ORDER HAS STATE D THAT THE AO HAS DISCOVERED HIS MISTAKE MADE IN THE ASSESSMENT ORDER U/S.143(3) AND THEREFORE HE HAD REASON TO BELIEVE THAT THE INCOME CHARGEABL E TO TAX HAD ESCAPED ASSESSMENT AND ACCORDINGLY REOPENING OF THE ASSESSM ENT IS VALID. APART FROM PAGE - 3 ITA.NO.4304 AND 4234/AHD/2003 -3- THIS, IN THE IMPUGNED ORDER, THE LEARNED CIT (A) HA S STATED THAT IN THE CASE OF BROTHER OF THE ASSESSEE, SHRI SITARAM B. CHAUTE, TH E APPEAL OF THE ASSESSEE IS DISMISSED. 4. AGGRIEVED BY THE ORDER OF THE LEARNED CIT (A), T HE ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEARING, BOTH SIDES CONC EDED THAT FACTS OF THE ASSESSEES CASE IN THE PRESENT APPEAL ARE IDENTICAL TO THAT OF HIS BROTHER VIZ. SITARAM B. CHAUTE. IN THAT CASE ALSO, ORIGINAL ASS ESSMENT WAS MADE UNDER SECTION 143(3) ON 21-8-1998 AND ADDITION OF RS.3,15 ,500/- WAS MADE IN RESPECT OF CAPITAL GAIN ON SALE OF 50% SHARE OF THE ASSESSE E IN THE AFORESAID LAND. ON APPEAL, LEARNED CIT(A) VIDE ORDER DATED 13-7-2000 D ELETED THE ADDITION. THE NOTICE UNDER SECTION 148 WAS ISSUED ON 14-6-2001. THEREAFTER, THE AO FRAMED ASSESSMENT UNDER SECTION 143(3) READ WITH SECTION 1 47 ON 10-12-2002 AND BROUGHT TO TAX ON-MONEY AS DECLARED BY THE ASSESSEE UNDER SECTION 132(4) OF RS.5 LAKHS. IN THAT CASE ALSO, THE LEARNED CIT (A ) UPHELD THE ACTION OF THE AO BY OBSERVING THAT THE AO IN THE ORIGINAL ORDER FAIL ED TO TAX A SUM OF RS.5 LAKHS, OVER AND ABOVE SALE PRICE OF LAND, THOUGH THE ASSES SEE HAS DECLARED THE SAME VOLUNTARILY DURING THE COURSE OF SEARCH AND SEIZURE ACTION. IT WAS ALSO CATEGORICALLY STATED ON 16-12-1994 THAT POSSESSION OF LAND WAS HANDED OVER TO BUYER AND ALSO AGREED TO INCLUDE THE RS.5,00,000/- IN CASES OF BOTH BROTHERS FOR THE A.Y.1995-96. ON BEHALF OF THE ASSESSEE IT IS CONTENDED THAT THE LEARNED CIT(A) ERRED IN OVERLOOKING THE FACT THAT THE AO IN THE FIRST ROUND IN HIS ORDER UNDER SECTION 143(3) HAD, AT GREAT LENGTH, DISCUSSE D THE ISSUE PERTAINING TO CAPITAL GAINS ARISING OUT OF DISCLOSURE OF RS.5,00, 000/- DECLARED IN ANTICIPATION OF TRANSACTION GETTING FINALIZED. IN THE ORIGINAL AOS ASSESSMENT UNDER SECTION 143(3) THE A.O. NOT ONLY CONSIDERED THE ISSUE OF C APITAL GAIN BUT ALSO BROUGHT TO TAX RS.3,15,500/- IN THE HAND TO BOTH THE TAXPA YERS. ON APPEAL, THE LEARNED CIT(A) DELETED SUCH ADDITION IN RESPECT OF BOTH THE ASSESSEE VIDE ORDER DATED 13-7-2000. LEARNED COUNSEL OF THE ASSESSEE SUBMITT ED THAT THE AO NOT ONLY CONSIDERED ON-MONEY, BUT ALSO COMPUTED THE CAPITAL GAINS AND TAXED THE SAME IN THE ORIGINAL ASSESSMENT FRAMED UNDER SECTION 143 (3) ON 27-3-1998. PAGE - 4 ITA.NO.4304 AND 4234/AHD/2003 -4- WHATEVER STATED BY THE ASSESSEE DURING THE COURSE O F SEARCH IN HIS STATEMENT RECORDED UNDER SECTION 132(4) WAS DULY CONSIDERED I NCLUDING ON-MONEY OF RS.5 LAKHS. IN THESE CIRCUMSTANCES, IT CANNOT BE S AID THAT THE INCOME HAS ESCAPED ASSESSMENT IN THE ORIGINAL ASSESSMENT U/S 1 43(3) WITHIN THE MEANING OF SECTION 147/148 OF THE IT ACT. NO MISTAKE WHATSOEV ER HAS BEEN COMMITTED BY THE AO WHILE FRAMING THE ASSESSMENT UNDER SECTION 1 43(3) AND EVEN IT IS PRESUMED THAT THE AO COMMITTED THE SOME MISTAKES IN FRAMING ORIGINAL ASSESSMENT, IN THAT EVENT NOTICE UNDER SECTION 148 CANNOT BE ISSUED AFTER FOUR YEARS. FOR THIS REASON, IT WAS PLEADED THAT IT MAY BE HELD THAT THE NOTICE UNDER SECTION 148 ISSUED IN RESPECT OF BOTH THE ASSESSEES IS WITHOUT JURISDICTION AND ACCORDINGLY, THE ASSESSMENT FRAMED THEREUNDER IN RE SPECT OF BOTH BROTHERS BE QUASHED. 5. WITHOUT PREJUDICE THE ABOVE CONTENTION, LEARNED COUNSEL PLEADED THAT THE AO WHILE RE-FRAMING THE ASSESSMENT IN PURSUANCE OF NOTICE UNDER SECTION 148 SIMPLY BROUGHT TO TAX ON-MONEY OF RS.5 LAKHS. IT I S WELL SETTLED IN LAW THAT ON- MONEY CAN BE TAXED AS CAPITAL GAIN IN THE YEAR IN W HICH SALE DEED WAS EXECUTED. IN THIS CASE, THE SALE DEED WAS EXECUTED IN THE PRE VIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 1998-99. BOTH THE TAXPAYERS NOT O NLY DECLARED THE CAPITAL GAIN IN A.Y.1998-99 BUT IT WAS ALSO BROUGHT TO TAX. IN VIEW OF THIS, IT IS SUBMITTED THAT EVEN ON MERIT, THE ADDITION OF RS.5 LAKH MADE IN RESPECT OF EACH OF THE ASSESSES IN RESPECT OF ON-MONEY BE DELETED. 6. ON THE OTHER HAND, LEARNED DR SUPPORTED THE ORDE R OF THE AUTHORITIES BELOW. HE POINTED OUT THAT BOTH THE BROTHERS IN TH EIR RETURN OF INCOME FAILED TO DISCLOSE ON-MONEY OF RS.5 LAKHS. SINCE THERE WAS A FAILURE ON THE PART OF BOTH THE ASSESSEE TO DISCLOSE RS.5 LAKHS WHICH WAS DECLA RED DURING THE COURSE OF SEARCH UNDER SECTION 271(1)(C), EXPLANATION 5 THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MA TERIAL FACTS, THE AO WAS RIGHTLY REOPENED THE ASSESSMENT BY ISSUING NOTICE UNDER SEC TION 148, THEREFORE, THE VIEW TAKEN BY THE LEARNED CIT(A) MAY BE UPHELD. PAGE - 5 ITA.NO.4304 AND 4234/AHD/2003 -5- 7. IN REPLY, THE COUNSEL FOR THE ASSESSEE REITERATE D THAT THERE IS NO ESCAPEMENT OF THE INCOME WITHIN THE MEANING OF SECT ION 147, BECAUSE WHILE FRAMING THE ORIGINAL ASSESSMENT UNDER SECTION 143(3 ) IN RESPECT OF BOTH THE BROTHERS, THE AO DULY CONSIDERED ON-MONEY OF RS.5 L AKHS DECLARED DURING THE SEARCH AND COMPUTED THE CAPITAL GAIN THEREFROM AT R S.3,15,500/- IN THE HANDS OF EACH TAXPAYER AND THE SAME WAS TAXED.. THEREFORE , THE ASSESSMENT FRAMED BE QUASHED AS THE NOTICE ISSUED WAS WITHOUT JURISDICTI ON. ALTERNATIVELY, THE ADDITION MAY BE DELETED ON MERIT. 8. HAVING HEARD BOTH THE SIDES, WE HAVE GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW. THE REASON FOR ISSUANCE OF NOTIC E UNDER SECTION 148 AS MENTIONED BY THE AO IN THE ASSESSMENT ORDER UNDER S ECTION 143(3) R.W.S. 147 DATED 10-12-2002, IN THE CASE OF THE ASSESSEE HEREI N IS THAT ON VERIFICATION OF CASE RECORDS IT IS FOUND THAT THE ASSESSEE VIDE HIS STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT ON 16-11-1994 AND 16-12-1 994 HAS VOLUNTARILY DISCLOSED INCOME OF RS.5 LAKHS WHICH WAS NOT RECORD ED IN ITS REGULAR BOOKS OF ACCOUNTS AND ACCORDINGLY OFFERED THIS DISCLOSED INC OME IN HIS RETURN OF INCOME OVER AND ABOVE REGULAR INCOME AS PER THE BOOKS OF A CCOUNTS AND THAT ASSESSEE FAILED TO RETURN THE VOLUNTARILY DISCLOSED INCOME O F RS.5 LAKHS IN THE RETURN OF INCOME FOR A.Y.1995-96 AND AS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT NOTICE UNDER SECTION 148 WAS ISSUED ON 3 0-5-2001. IT IS PERTINENT TO NOTE THAT RS.5 LAKHS WERE DISCLOSED AS ON-MONEY, WHICH THE ASSESSEE PROPOSED TO RECEIVE ON SALE OF 50% SHARE IN LAND. IN THE ORIGINAL ASSESSMENT FRAMED UNDER SECTION 143(3) ON 27-3-1998, THE AO CO NSIDERED THIS DISCLOSURE OF RS.5 LAKHS AND COMPUTED THE CAPITAL GAIN THEREON AT RS.3,15,500/-. ADMITTEDLY, THIS ADDITION WAS DELETED BY THE LEARNE D CIT (A). IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT INCOME OF RS. 5 LAKHS DISCLOSED BY THE ASSESSEE IN THE STATEMENT RECORDED ON 16-11-1994 HA S ESCAPED ASSESSMENT. IT IS NOT DISPUTED BY THE LEARNED DR THAT THE CAPITAL GAI N IN RESPECT OF 50% SHARE IN LAND IN QUESTION HAS BEEN DECLARED BY THE ASSESSEE IN THE A.Y.1998-99 AND THE PAGE - 6 ITA.NO.4304 AND 4234/AHD/2003 -6- ASSESSEE HAS PAID LONG TERM CAPITAL GAINS THEREON. BE THAT AS IT MAY, IN OUR CONSIDERED, THERE IS NO ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 CONSEQUENTLY THE NOTICE ISSUED UNDER SECTION 14 8 IS VOID AB INITIO . EVEN ON MERIT, THE ON-MONEY ALONE CAN NOT BE INCLUDED IN TAXABLE INCOME. THE SAME CAN BE CONSIDERED WHILE COMPUTING THE LONG TER M CAPITAL GAIN. UNDISPUTEDLY IN THE ORIGINAL ASSESSMENT FRAMED UND ER SECTION 143(3) THE AO DULY CONSIDERED THE DISCLOSURE ON-MONEY OF RS.50000 0/-, COMPUTED THE CAPITAL GAIN THEREON AT RS.315500/- IN CASE OF BOTH THE BRO THERS AND INCLUDED THE SAME IN TAXABLE INCOME. ADMITTEDLY IN APPEAL FILED BY BO TH THE ASSESSEES, THE LD.CIT(A) DELETED THE SAME. IN CASE THE DEPARTMENT FEELS THAT CAPITAL GAIN WAS RIGHTLY TAXED IN THE ORIGINAL ASSESSMENT, IN THAT E VENT RIGHT COURSE OPEN TO AGITATE THE DELETION OF THE SAME IN SECOND APPEAL B EFORE ITAT. IN VIEW OF THE FOREGOING, THE ASSESSMENTS FRAMED IN RESPECT OF BOT H THE ASSESSEES ARE CANCELLED. 8. IN THE RESULT, APPEALS OF THE BOTH THE ASSESSEES ARE ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST AUGUST, 2009. SD/- SD/- (D.C. AGRAWAL) ACCOUNTANT MEMBER (T.K. SHARMA) JUDICIAL MEMBER PLACE : AHMEDABAD DATE : 31-08-2009 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR, ITAT, AHMEDABAD