ITO, New Delhi V. Sh. Kaushal Sethi, New Delhi

ITA 5252/DEL/2010

• Counselvise Citation: 525220114 RSA 2010
• Duration Of Justice: 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 16-08-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 25-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MONGA
• Assessee Lawyers: GAUTAM JAIN
• Keywords: Unexplained investment; Gift; Fair market value; Reason to believe; Reassessment proceedings
• Section: 147; 69; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D DELHI) BEFORE SHRI A.D. JAIN AND SHRI K.D. RANJAN ITA NO. 5360(DEL)2010 ASSESSMENT YEAR: 2001-02 SHRI KAUSHAL SETHI, INC OME TAX OFFICER, DU-18, PITAMPURA, DELHI. V. WARD 25(1) , NEW DELHI. ITA NO. 5252(DEL)2010 ASSESSMENT YEAR: 2001-02 INCOME TAX OFFICER, SHRI KAUSHAL SETHI, WARD 25(1), NEW DELHI. V. DU 18, PI TAMPURA, DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI GAUTAM J AIN, ADVOCATE DEPARTMENT BY: SHRI A.K. MONGA , DR ORDER PER A.D. JAIN, J.M. THESE ARE CROSS APPEALS AGAINST THE ORDER DATED 30. 9.10 PASSED BY THE CIT(A)VIII, NEW DELHI. ITA NO. 5360(DEL)2010: 2. THIS APPEAL HAS BEEN FILED BY THE ASSESSEE, TAKI NG THE FOLLOWING GROUNDS:- ADJ 5360&5252(DEL)10 2 1. THAT THE LEARNED CIT(A)VIII, NEW DELHI HAS ERRE D BOTH IN LAW AND ON FACTS IN UPHOLDING THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT AND COMPLETION OF ASSESSMENT U/S 147/143(3) OF THE ACT WHICH ARE WITHOUT JURISDICTION AND VOID AB INITIO. 1.1. THAT THE LEARNED CIT(A) HAS FAILED TO APPREC IATE THAT FAIR MARKET VALUE OF THE PLOT BEING ALLEGEDLY HIGHER THAN THE S ALE CONSIDERATION THE SAME CANNOT BE A GROUND TO ASSUME JURISDICTION U/S 147 OF THE ACT, PARTICULARLY WHEN NO ADDITION HAD BEEN MADE ON THE SAID GROUND IN THE ORDER OF ASSESSMENT. 2. THAT THE LD. CIT(A) HAS FURTHER ERRED BOTH IN L AW AND ON FACTS IN UPHOLDING THE ADDITION OF ` 4,50,391/- OUT OF ADDITION OF ` 16,43,000/- REPRESENTING ALLEGED UNEXPLAINED INVESTMENT IN THE PROPERTY LOCATED AT D-779, SARASWATI VIHAR, PITAMPURA, NEW DELHI U/S 69B OF THE ACT. 2.1 THAT THE LEARNED CIT(A) HAS FAILED TO APPRECIA TE THAT THE ADDITION U/S 69B OF THE ACT CANNOT BE MADE ON ASSUMPTION AND PRESUMPTIONS SINCE BURDEN ON THE REVENUE HAD NOT BEEN DISCHARGED THE ADDITION SO SUSTAINED IS UNSUSTAINABLE. 3. THAT THE LD. CIT(A) HAS ERRED BOTH IN LAW AND O N FACTS IN UPHOLDING THE LEVYING INTEREST U/S 234B OF THE ACT. 3. APROPOS GROUND NO.1, IT HAS BEEN CONTENDED ON BE HALF OF THE ASSESSEE THAT IN THE REASONS RECORDED FOR REOPENING THE COMP LETED ASSESSMENT, THE AO STATED THE FAIR MARKET VALUE OF THE PLOT PURCHASED BY THE ASSESSEE TO BE HIGHER THAN THE SALE CONSIDERATION; THAT HOWEVER, N O ADDITION ON THIS GROUND WAS MADE IN THE ASSESSMENT ORDER; THAT THEREFORE, T HE ASSUMPTION OF JURISDICTION U/S 147 OF THE I.T. ACT WAS BAD IN LAW IN KEEPING WITH RANBAXY LABORATORIES LIMITED V. CIT, 336 ITR 136(DEL) AND THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. NAR AYAN SECURITIES PVT. ADJ 5360&5252(DEL)10 3 LTD., DATED 3.6.11, IN ITA NO. 40/2009 (COPY AT PA GES 1 TO 5 OF THE CASE LAWS PAPER BOOK FILED BY THE ASSESSEE.). 4. IT HAS BEEN FURTHER CONTENDED THAT THIS GRIEVANC E WAS SPECIFICALLY RAISED BY THE ASSESSEE BEFORE THE CIT(A), AS NOTED BY THE CIT(A) IN THE IMPUGNED ORDER; THAT HOWEVER, THE LD. CIT(A) HAS FA ILED TO RECORD ANY FINDING ON THIS ISSUE, THOUGH THIS GRIEVANCE OF THE ASSESSEE GOES TO THE ROOT OF THE MATTER. 5. THE LEARNED DR, ON THE OTHER HAND, HAS PLACED ST RONG RELIANCE ON THE IMPUGNED ORDER. IT HAS BEEN CONTENDED THAT THE REA SONS RECORDED BY THE AO TO REOPEN THE COMPLETED ASSESSMENT OF THE ASSESSEE ARE VERY CLEAR IN TERMS ; THAT A BARE PERUSAL OF THESE REASONS SHOWS THAT THE AO WAS DULY VESTED WITH THE JURISDICTION TO REOPEN THE ASSESSMENT, SINCE ES CAPEMENT OF INCOME HAD COME TO HIS NOTICE WHILE RECORDING THE REASONS AND IT WAS ON THE BASIS THEREOF THAT THE AO HAD REASON TO BELIEVE ESCAPEMEN T OF INCOME, DUE TO WHICH IT WAS, THAT THE COMPLETED ASSESSMENT WAS REO PENED; AND THAT THE REOPENING OF THE COMPLETED ASSESSMENT WAS DONE ON THESE REASONS WHICH CLOTHED THE AO WITH AMPLE JURISDICTION TO DO SO. 6. WE HAVE HEARD THE PARTIES ON THIS ISSUE. A COP Y OF THE REASONS RECORDED FOR REOPENING THE COMPLETED ASSESSMENT HAS BEEN PLACED BEFORE US, ADJ 5360&5252(DEL)10 4 AT PAGE 19 OF THE ASSESSEES PAPER BOOK (APB, FOR SHORT) . FOR FACILITY, THESE REASONS ARE BEING REPRODUCED HEREUNDER:- A COMPLAINT WAS RECEIVED IN THE CASE OF THE ASSESS EE FROM THE OWNER OF THE PLOT ADJACENT TO PLOT NO. D 779, SARASWATI V IHAR, PITAM PURA, DELHI. IT WAS CONVEYED THAT THE ASSESSEE ALONG WIT H FOUR OTHER PERSONS HAD PURCHASED PROPERTY AT D-779, SARASWATI VIHAR, PITAM PURA, NEW DELHI BY PAYING A SUM OF ` 12,30,000/- AND ` 2,40,000/- FOR GROUND FLOOR AND FIRST FLOOR RESPECTIVELY. ASSESS EE HAS A 33.3% SHARE IN SUCH PROPERTY. DETAILED INVESTIGATIONS WERE CA RRIED OUT BY INVESTIGATION WING INCLUDING ISSUE OF SUMMONS TO AS SESSEE AND OTHERS. IT HAS BEEN REPORTED THAT AFTER CARRYING LARGE SCA LE ILLEGAL CONSTRUCTION ON SUCH PLOT A PART OF SUCH PLOT WAS S OLD FOR ABOUT 26 LAKHS (TOTAL CONSIDERATION) AS AGAINST THE MARKET V ALUE OF ABOUT ` 1.38 CRORES. AS A RESULT OF SUCH UNDER DISCLOSURE OF S ALE CONSIDERATION, ASSESSEE HAS SUPPRESSED HIS REAL INCOME RESULTING I N CONCEALMENT. IN LIGHT OF SUCH PRECISE INFORMATION REGARDING TAX EVA SION, I HAVE REASON FOR BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR A.Y. 2001-02. ACCORDINGLY A PROPOSAL IS PUT UP FO R INITIATING ACTION U/S 148. 7. FROM THE ABOVE REASONS, IT COMES OUT THAT THE UN DER-STATEMENT OF SALE CONSIDERATION OF PLOT BY THE ASSESSEE WAS REPORTED TO THE AO. IT WAS ON THIS BASIS THAT THE COMPLETED ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, I.E., ASSESSMENT YEAR 2001-02, WAS R EOPENED. HOWEVER, THE ASSESSMENT ORDER DOES NOT EVINCE ANY ADDITION HAVIN G BEEN MADE ON THIS COUNT. THE DEPARTMENT HAS NOT BEEN ABLE TO SHOW O THERWISE. 8. IN RANBAXY LABORATORIES LIMITED (SUPRA), IT H AS BEEN HELD, UPHOLDING THE TRIBUNAL ORDER, INTER ALIA, THAT THE AO HAS THE JURISDICTION TO ASSESS ISSUES OTHER THAN THOSE IN RESPECT OF WHICH THE REOPENING PROCEEDINGS ADJ 5360&5252(DEL)10 5 WERE INITIATED, BUT HE IS NOT JUSTIFIED TO DO SO WH EN THE REASONS FOR INITIATION OF THOSE PROCEEDINGS CEASE TO SURVIVE. THEREIN, T HE REASONS RECORDED FOR REOPENING THE COMPLETED ASSESSMENT WERE REGARDING C LUB FEES, GIFTS AND PRESENTS AND PROVISION FOR LEAVE ENCASHMENT. IN TH E ASSESSMENT PROCEEDINGS, HOWEVER, DEDUCTIONS CLAIMED UNDER SECTIONS 80 HH AN D 80 I OF THE ACT WERE FOUND BY THE AO TO BE NOT ADMISSIBLE. THE AO, THO UGH DID NOT MAKE ANY ADDITION ON THE ITEMS OF CLUB FEES, GIFTS AND PRESE NTS, ETC., HE REDUCED THE CLAIM OF DEDUCTION UNDER SECTIONS 80HH AND 80I OF T HE ACT. THE HONBLE HIGH COURT UPHELD THE DECISION OF THE TRIBUNAL TO T HE EFFECT THAT THE VERY BASIS OF INITIATION OF REOPENING PROCEEDINGS, FOR W HICH, REASONS TO BELIEF WERE RECORDED BY THE AO, WERE INCOME ESCAPING ASSE SSMENT IN RESPECT OF ITEMS OF CLUB FEE, GIFTS AND PRESENTS, ETC., BUT NO ADDITION WITH REGARD THERETO WAS MADE AND SO, IT WAS NOT PERMISSIBLE FOR THE AO TO PROCEED TO REDUCE THE CLAIM OF DEDUCTION UNDER SECTIONS 80HH AND 80I OF T HE ACT; THAT HAD THE AO PROCEEDED TO MAKE DISALLOWANCE IN RESPECT OF ITEMS OF CLUB FEES, GIFTS AND PRESENTS, ETC., HE WOULD HAVE BEEN JUSTIFIED, AS PE R EXPLANATION 3 TO SECTION 147 OF THE ACT, TO REDUCE THE CLAIM OF DEDUCTION UN DER SECTIONS 80HH AND 80I OF THE ACT AS WELL; AND THAT THE AO WAS NOT JUS TIFIED TO DO SO WHEN THE REASONS FOR INITIATION OF THE REOPENING PROCEEDINGS CEASED TO SURVIVE. ADJ 5360&5252(DEL)10 6 9. IN NARAYAN SECURITIES PVT. LTD. (SUPRA), RANB AXY LABORATORIES LIMITED (SUPRA) HAS BEEN NOTED AS COVERING THE MAT TER SQUARELY. INCIDENTALLY, BOTH NARAYAN SECURITIES PVT. LTD. (SUPRA) AND RANBAXY LABORATORIES LIMITED (SUPRA) ARE DATED 3.6.2011 A ND BOTH ARE OF THE HONBLE JURISDICTIONAL HIGH COURT SO FAR AS REGARDS THE ASSESSEE. 10. THE ISSUE, IT IS SEEN, WAS SPECIFICALLY RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A). IT HAS BEEN POINTED OUT THAT IN PARA 3 OF THE IMPUGNED ORDER, THE LD. CIT(A) HAS TAKEN NOTE OF THE ASSESSEES CONTENT IONS IN THIS REGARD. THE RELEVANT PORTION THEREOF IS AS FOLLOWS:- THE SUBMISSIONS MADE ON BEHALF OF THE APPELLANT HA VE BEEN CAREFULLY CONSIDERED. ON CONSIDERATION, I FIND THAT THE PRO CEEDINGS IN THE PRESENT CASE WERE INITIATED BY THE LD. AO ON RECEIP T OF SPECIFIC INFORMATION IN REGARD TO PURCHASE, RENOVATION/RECON STRUCTION AND SALE OF A PROPERTY SITUATED AT D-779, SARASWATI VIHAR, P ITAMPURA, NEW DELHI. THE CORRECTNESS OF THIS INFORMATION WAS EX AMINED ON MORE THAN ONE OCCASIONS, FIRST BY THE INVESTIGATION WING AND THEREAFTER BY THE LD. AO AND THE SAME WAS SUMMARIZED IN THE REASO NS RECORDED FOR INITIATING PROCEEDINGS U/S 147 OF THE I.T. ACT, 196 1, AS UNDER:- A COMPLAINT WAS RECEIVED IN THE CASE OF THE ASSESS EE FROM THE OWNER OF THE PLOT ADJACENT TO PLOT NO. D 779, S ARASWATI VIHAR, PITAMPURA, DELHI. IT WAS CONVEYED THAT THE ASSESSEE ALONG WITH FOUR OTHER PERSONS HAD PURCHASE D PROPERTY AT D-779, SARASWATI VIHAR, PITAMPURA, NEW DELHI BY PAYING A SUM OF ` 12,30,000/- AND ` 2,40,000/- FOR GROUND FLOOR AND 1 ST FLOOR RESPECTIVELY. ASSESSEE HAS A 33% SHARE IN SUCH PROPERTY. DETAILED INVESTIGATIO NS WERE CARRIED OUT BY INVESTIGATION WING INCLUDING ISSUE O F SUMMONS TO ASSESSEE & OTHERS. IT HAS BEEN REPORTED THAT AFTER CARRYING LARGE SCALE ILLEGAL CONSTRUCTION OR SUCH PLOT ADJ 5360&5252(DEL)10 7 A PART OF SUCH PLOT WAS SOLD FOR ABOUT ` 26 LAKHS (TOTAL CONSIDERATION) AS AGAINST THE MARKET VALUE OF ABOUT ` 1.38 CRORES. AS A RESULT OF SUCH UNDER DISCLOSURE OF S ALE CONSIDERATION, ASSESSEE HAS SUPPRESSED HIS REAL INC OME RESULTING IN CONCEALMENT. IN LIGHT OF SUCH PRECISE INFORMATION REGARDING TAX EVASION, I HAVE REASON FO R BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR A.Y. 2001-02. ACCORDINGLY, A PROPO SAL IS PUT UP FOR INITIATING ACTION U/S 148. 11. HOWEVER, IT IS SEEN THAT THE LD. CIT(A) HAS NOT DEALT WITH AND DISPOSED OF THIS GRIEVANCE OF THE ASSESSEE, THOUGH IT IS AN ISSUE PERTAINING TO THE CORRECTNESS OR OTHERWISE OF ASSUMPTION OF JURISDICT ION BY THE AO U/S 147 OF THE I.T. ACT. UNDISPUTEDLY, THE MATERIAL WITH REG ARD THERETO WAS BEFORE THE LD. CIT(A), AS IT IS BEFORE US. 12. THE MATTER, AS DISCUSSED ABOVE, IS COVERED SQUA RELY BY RANBAXY LABORATORIES LIMITED (SUPRA). SINCE THE ADDITION HAS BEEN MADE WITH REGARD TO THE ITEM/S QUA WHICH REASONS FOR REOPENIN G THE COMPLETED ASSESSMENT OF THE ASSESSEE WERE RECORDED, THESE REA SONS FOR INITIATION OF REASSESSMENT PROCEEDINGS CEASED TO SURVIVE AND THE BASIS ON WHICH THE PROCEEDINGS WERE INITIATED, IS NO LONGER IN EXISTEN CE. THE ADDITION MADE IS REGARDING THE ALLEGED UNEXPLAINED INVESTMENT U/S 69 OF THE ACT, WHEREAS THE REASONS RECORDED FOR REOPENING THE COMPLETED ASSESS MENT TALK OF UNDER- STATEMENT OF SALE CONSIDERATION OF PLOT BY THE ASSE SSEE. ADJ 5360&5252(DEL)10 8 13. THE GRIEVANCE OF THE ASSESSEE IN THIS REGARD IS THUS JUSTIFIED AND IS ACCEPTED. THE ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT BY THE AO TO REASSESS THE COMPLETED ASSESSMENT OF THE ASSESSEE I S, HENCE, HEREBY CANCELLED. 14. SINCE THE ASSUMPTION OF JURISDICTION OF THE AO TO REOPEN THE COMPLETED ASSESSMENT HAS BEEN CANCELLED, NOTHING EL SE SURVIVES FOR ADJUDICATION. ITA NO. 5252(DEL)2010: 15. IN THIS APPEAL, THE DEPARTMENT HAS TAKEN THE FO LLOWING GROUNDS:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A) HAS ERRED IN- 1. SUSTAINING AN ADDITION OF ` 4,50,391/- INSTEAD OF ` 6,25,000/- ON ACCOUNT OF THE COST OF RENOVATION, RECONSTRUCTION A ND ADDITIONS MADE IN THE PROPERTY BY TAKING THE COST OF CONSTRUC TION DECLARED BY THE ASSESSEE AT ` 2,49,649/- AS AGAINST ` 75,000/- SHOWN BY THE ASSESSEE. 2. DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED INV ESTMENT IN PROPERTY IN SPITE OF THE COST OF LAND, THE VALUE OF CONSTRUCTION AND EVASION OF THE SAME BEING HIGHLIGHTED BY THE DVO. 16. THE ASSUMPTION OF JURISDICTION BY THE AO TO REO PEN THE COMPLETED ASSESSMENT OF THE ASSESSEE FOR THE YEAR UNDER CONSI DERATION HAS BEEN ADJ 5360&5252(DEL)10 9 CANCELLED BY US, AS ABOVE. THAT BEING SO, THE DEP ARTMENTS APPEAL ALSO DOES NOT SURVIVE AND IS LIABLE TO BE DISMISSED AS INFRUC TUOUS. ORDERED ACCORDINGLY. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED, WHEREAS THE DEPARTMENTS APPEAL IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON 09.09.2011. SD/- SD/- (K.D. RANJAN) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 09.09.2011 *RM COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR TRUE COPY BY ORDER DEPUTY REGISTRAR