Sh. Surinder Singh Sethi, Prop., Delhi V. ITO, New Delhi

ITA 4942/DEL/2011

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1779 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-09-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G S KOHLI
• Keywords: Reason to believe; Reassessment proceedings
• Section: 147; 148; 6; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F NEW DELHI BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NO: 4942/DEL/2011 AY: - 2004-05 SURINDER SINGH SETHI, PROP. VS. ITO M/S. M.D. AUTOMOTIVES, WARD- 2-(2) 1240/15, BARA BAZAR, NEW DELHI. KASHMERE GATE DELHI 110 006 PAN ANDPS5101L (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.S. KOHLI, CA RESPONDENT BY : SHRI SUJIT KUMAR, SR.DR DATE OF HEARING : 10.09.2015 DATE OF PRONOUNCEMENT : .11.2015 O R D E R PER SUDHANSHU SRIVASTAVA JUDICIAL MEMBER THIS IS ASSESSEES APPEAL DIRECTED AGAINST ORDER DATED 20.9.2011 PASSED BY THE LD. CIT (A)-XXII, NEW DELHI. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AS SESSEE HAD FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION SHOWING A TAXABLE INCOME OF RS. 77,510/- ON 17.8.2004. THE RETURN WAS PROCESSED U/S 143(1) OF T HE INCOME TAX ACT, 1961. HOWEVER, SUBSEQUENTLY ON RECEIVING AN INFORMATION F ROM INCOME TAX OFFICER, LUCKNOW THAT THE ASSESSEE HAD NOT DISCLOSED LONG TE RM CAPITAL GAINS IN HIS RETURN OF INCOME FOR THE YEAR, PROCEEDINGS U/S 148 OF THE INC OME TAX ACT WERE INITIATED. IT ITA NO. 4942/DEL/2011 SURINDER SINGH SE THI VS. ITO 2 20X5 WAS THE CONTENTION OF THE AO THAT DURING THE YEAR T HE ASSESSEE, ALONG WITH HIS BROTHER SHRI KANWAL PAL SINGH HAD SOLD THE PROPERTY SITUATED AT KHASRA NO. 159 AT BARGAWAN, VIP ROAD, LUCKNOW FOR RS. 40 LACS (ASSESS EES SHARE BEING IN THE PROPERTY I.E. RS. 20 LACS) AND LONG TERM CAPITAL GA IN ON THE SALE OF THE SAME WAS NOT DISCLOSED BY THE ASSESSEE. THE ASSESSSEE CONTESTED THE REASSESSMENT PROCEEDINGS BEFORE THE AO AND SUBMITTED THAT THE RELEVANT INFOR MATION WAS ALREADY ON RECORD WITH THE ORIGINAL RETURN OF INCOME FILED BY HIM. IT WAS ALSO THE ASSESSEES CONTENTION THAT THE PROPERTY WAS PURCHASED FOR RS. 50,000/- BY SHRI DEVA SINGH GURMUKH SINGH, HUF IN 1992 AND IT WAS AFTER THE DEMISE OF T HE KARTA OF THE SAID HUF NAMELY SHRI GURMUKH SINGH THAT THE ASSESSEE BECAME THE KAR TA OF THAT HUF. THE RETURN OF THE HUF WAS BEING FILED IN HALDWANI AND AT THE TIME OF PURCHASE OF PROPERTY, THE ASSESSEE HIMSELF ALSO WAS RESIDING IN HALDWANI. LA TER THE ASSESSEE SHIFTED TO DELHI IN AY 2000-01 AND HE HAS BEEN FILING HIS RETURN OF INCOME IN DELHI SINCE THEN. IT IS ALSO THE ASSESSEES CONTENTION THAT SINCE THE HUF W AS NOT DERIVING ANY INCOME, NO RETURN OF INCOME WAS FILED IN THE STATUS OF HUF. TH E ASSESSEE ALSO CONTENDED BEFORE THE AO THAT HE HAS IN FACT NOT SOLD THE PROPERTY FO R HIS INDIVIDUAL BENEFIT BUT HAS ACTED FOR AND ON BEHALF OF THE HUF AND THE PROCEEDS OF THE SALE, AS PER THE WISHES OF THE ELDERS EXPRESSED AT THE TIME OF PURCHASE OF THE PROPERTY ITSELF, HAVE BEEN DISTRIBUTED TO THE SISTER OF THE ASSESSEE SMT. RAVI NDER KAUR SETHI (AMOUNT OF RS. 16 LACS) AND THE BALANCE (AMOUNT OF RS. 4 LACS) HAVE B EEN DISTRIBUTED BETWEEN THE CHILDREN OF THE ASSESSEE. THE ASSESSEE ALSO SUBMITT ED THAT THE TAX ON THE CAPITAL GAINS HAS BEEN ALREADY MET BY SHRI KANWAL PAL SINGH AND SMT. RAVINDER KAUR SETHI AND THEREFORE TAXING IT AGAIN AT THE HANDS OF THE A SSESSEE WAS NOT JUSTIFIED. ITA NO. 4942/DEL/2011 SURINDER SINGH SE THI VS. ITO 3 20X5 HOWEVER, THE AO DID NOT ACCEPT THE SUBMISSIONS OF T HE ASSESSEE AND TAXED HIS HALF SHARE IN THE PROPERTY AND WORKED OUT THE LONG TERM CAPITAL GAIN AT RS. 18,75,426/-. 3. THE ASSESSEE WENT INTO APPEAL BEFORE THE LD. CIT (A). HOWEVER THE LD. CIT (A) WAS OF THE OPINION THAT THE FAMILY SETTLEME NT DEED AND THE BALANCE SHEET OF DEVA SINGH GURMUKH SINGH HUF, WHICH SHOWS THAT THE PROPERTY WAS BELONGING TO THE HUF, WAS AN AFTERTHOUGHT. LD. CIT (A) ALSO NOTE D THAT THE OTHER CO-OWNER SHRI KANWAR PAL SINGH SETHI HAD ALREADY ADMITTED HIS LIA BILITY TO THE CAPITAL GAIN TAX AND HAS PAID THE TAX THEREON. AS PER THE LD. CIT (A), T HE OTHER HALF SHOULD BE TAXED IN THE HANDS OF THE ASSESSEE ON SIMILAR FOOTING. HE, T HEREFORE, CATEGORICALLY RULED THAT THE PROPERTY WAS HELD IN INDIVIDUAL CAPACITY OF THE ASSESSEE AND THE SAME WAS SOLD BY HIM. ACCORDINGLY, THE ASSESSEES APPEAL WAS DISM ISSED. 4. IN THE PRESENT APPEAL BEFORE US THE ASSESSEE HA S OBJECTED TO THE INITIATION OF PROCEEDINGS U/S 147 / 148 OF THE ACT. THE ASSESSEE HAS SUBMITTED THAT THE RELEVANT DOCUMENTS WERE ALREADY ON RECORD DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS AND AS SUCH THE INITIATION OF REASSESSM ENT PROCEEDINGS WAS NOT JUSTIFIED. LD. AR DREW OUR ATTENTION TO PAGE 1 OF T HE PAPER BOOK WHICH IS A COPY OF COMPUTATION SHEET OF THE ASSESSEES RETURN OF INCOM E FOR THE YEAR UNDER CONSIDERATION. HE POINTED OUT THAT IN THE SAID COMP UTATION THE ASSESSEE HAS ALREADY DISCLOSED BY WAY OF A NOTE THAT HE HAS EXECUTED A S ALE DEED IN HIS NAME FOR ONE HALF SHARE AND HAS ALSO DISCLOSED THAT HE HAS ONLY LENT HIS NAME FOR THE PURPOSE OF REGISTRATION OF SALE DEED. LD. AR PLACED RELIANCE O N THE JUDGMENT OF THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF LOK HOUSING AND CO NSTRUCTION LTD. VS. DCIT 348 ITR 335 (BOM) ON THE EVIDENTIARY VALUE OF FOOT NOTE S WITH REGARD TO THE DISCLOSURE OF ITA NO. 4942/DEL/2011 SURINDER SINGH SE THI VS. ITO 4 20X5 PRIMARY FACTS. THE LD. AR ALSO RELIED ON THE DECISI ON OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MIHIR TEXTILES LTD. VS. JCIT 2 47 ITR 546 (GUJ). THE LD. AR SUBMITTED THAT THE REASSESSMENT PROCEEDINGS BEING B AD IN LAW SHOULD BE QUASHED. ON MERITS, THE LD. AR DREW OUR ATTENTION TO THE COP Y OF THE BALANCE SHEET OF DEVA SINGH GURMUKH SINGH HUF PLACED AT PAGE 19 OF THE PA PER BOOK IN WHICH THE INVESTMENT IN SAID PROPERTY HAS BEEN DULY REFLECTED . HE ALSO DREW OUR ATTENTION TO COPY OF THE FAMILY SETTLEMENT DEED EXECUTED ON 25.4 .1992 AND PLACED AT PAGE 22 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE HAS ONLY BEEN ACTING ON BEHALF OF THE HUF AND NOT IN HIS PERSONAL CAPACITY AND THEREF ORE HE SHOULD NOT BE ASSESSED IN HIS INDIVIDUAL CAPACITY. 5. LD. DR ON THE OTHER HAND SUBMITTED THAT THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT INITIALLY AND THEREFORE IT COULD NOT BE PRESUMED THAT THE DOCUMENTS WOULD HAVE BEEN SEEN. LD. AR SUBMITTED THAT THE FAC TS REGARDING ESCAPEMENT OF INCOME CAME TO LIGHT DURING THE SCRUTINY ASSESSMENT OF THE OTHER CO-OWNER OF THE PROPERTY AND HENCE THE REASON TO BELIEVE WAS ADEQUA TE. HE ALSO SUBMITTED THAT THERE IS NO THIRD PARTY CONFIRMATION OF THE TRANSAC TION AND HENCE THE REOPENING OF THE ASSESSMENT WAS VALID. LD. DR PLACED HEAVY RELIA NCE ON THE ORDER OF THE LD. CIT (A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HA VE ALSO PERUSED THE MATERIAL ON RECORD. IT IS SEEN THAT THE REASSESSMENT PROCEEDIN GS WERE INITIATED ON THE BASIS OF A REPORT RECEIVED FROM ITO, LUCKNOW. HOWEVER, IT IS A LSO SEEN THAT THE AO HAS ENTIRELY RELIED ON THE REPORT OF THE ITO, LUCKNOW FOR INITIA TING THE REASSESSMENT PROCEEDINGS. THE AO HAS NOT REFERRED TO THE RETURN ALREADY FILED BY THE ASSESSEE AND/OR THE ITA NO. 4942/DEL/2011 SURINDER SINGH SE THI VS. ITO 5 20X5 DOCUMENTS/INFORMATION FILED ALONG WITH THE RETURN. THE AO HAS ALSO NOT DEMONSTRATED ANY APPLICATION OF MIND PRIOR THE RECO RDING OF REASONS AND IT IS APPARENT THAT HE HAS MERELY RELIED ON THE INFORMATI ON RECEIVED FROM ITO, LUCKNOW FOR THE INITIATION OF REASSESSMENT PROCEEDINGS. THI S, IN OUR CONSIDERED OPINION, IS NOT PERMISSIBLE IN LAW. REFERENCE MAY BE MADE TO THE JU DGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SFIL STOCK BROKIN G LTD. 325 ITR 285 (DEL) WHEREIN THE HONBLE DELHI HIGH COURT HAS OPINED THAT BEFORE AN AO ISSUES A NOTICE U/S 148, THEREBY REOPENING THE ASSESSMENT U/S 147, HE MUST H AVE FORMED A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AND THAT THERE MUST B E SOME BASIS FOR FORMING SUCH A BELIEF. THE BELIEF SHOULD BE DISCERNIBLE FROM TH E MATERIAL ON RECORD WHICH WAS AVAILABLE WITH THE AO. IN THE PRESENT CASE, FROM TH E REASONS, IT IS NOT AT ALL DISCERNIBLE AS TO WHETHER THE AO HAS APPLIED HIS MI ND TO THE INFORMATION AND INDEPENDENTLY ARRIVED AT A BELIEF THAT ON THE BASIS OF MATERIAL WHICH HE HAD BEFORE HIM, INCOME HAD ESCAPED ASSESSMENT. CONSEQUENTLY, O N FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN CIT VS. SFIL STOCK BROKING LTD. (SUPRA), WE HOLD THE REASSESSMEN T PROCEEDINGS AS BAD IN LAW AND QUASH THE SAME. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 30 TH NOVEMBER, 2015. SD/- SD/- . .. . (J.SUDHAKAR REDDY) (SUDHANSHU SRIVASTAV A) ACCOUTANT MEMEBR JUDICIAL MEMBER ITA NO. 4942/DEL/2011 SURINDER SINGH SE THI VS. ITO 6 20X5 DATED: THE 30. 11. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 26.11.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 27.11. 2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER