Om Prakash Gulati, Jind V. ACIT, Bhiwani

ITA 5255/DEL/2016

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 5059 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 06-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Audit objection; Tangible material; Difference of opinion; Change of opinion; Reassessment proceedings; Set aside
• Section: 143(3); 13; 147; 148; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI (THROUGH VIDEO CONFERENCING) BEFORE, SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.5255/DEL/2016 (ASSESSMENT YEAR-2008-09) OM PARKASH GULATI, PROP. GULATI PROPRITIES, FARIDABAD HEAD OFFICE JHANJ GATE, JIND. PAN:AHVPG 8460A VS. ASST. CIT, HISAR. (APPELLANT) (RESPONDENT) APPELLANT BY SH. SHANTANU JAIN, ADV. RESPONDENT BY MS. RAKHI VIMAL, SR. DR DATE OF HEARING 18.08.2020 DATE OF PRONOUNCEMENT 30.09.2020 ORDER PER SUDHANSHU SRIVASTAVA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST O RDER DATED 09.08.2016 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-HISSAR {CIT (A)} FOR ASSESSMENT YEAR 2008-09. 2.0 THE BRIEF FACTS OF THE CASE ARE THAT THE ASSE SSEE DERIVES INCOME FROM PURCHASE AND SALE OF PROPERTIES . THE RETURN OF 2 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT INCOME WAS FILED DECLARING AN INCOME OF RS.42,19,312 /-. THE ASSESSMENT WAS COMPLETED AFTER MAKING AN ADDITION OF RS.1,25,000/-. SUBSEQUENTLY, NOTICE U/S 154 OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) WAS ISSUED TO EX AMINE WHETHER THE AGRICULTURAL LAND SOLD BY THE ASSESSEE WAS CAPI TAL ASSET OR NOT. THE 154 PROCEEDINGS WERE CLOSED WITHOUT MAKING ANY A DDITION. THEREAFTER, A REPORT ON A MAJOR AUDIT OBJECTION ON THE ISSUE WHETHER AGRICULTURAL LAND SOLD BY THE ASSESSEE IS CAPITAL A SSET OR NOT WAS PREPARED. IN THIS REPORT ALSO, THE ASSESSING OFFICE R OBSERVED THAT THE OBJECTION RAISED BY THE INTERNAL AUDIT PARTY WERE N OT MAINTAINABLE. SUBSEQUENTLY, THE ASSESSEES CASE WAS REOPENED AND N OTICE U/S 148 WAS ISSUED FOR THE PURPOSE OF ASCERTAINING AS TO WHET HER THE AGRICULTURAL LAND SOLD WAS CAPITAL ASSET OR NOT. THE ASSESSMENT U/S 147 OF THE ACT WAS COMPLETED AFTER MAKING AN ADDITIO N OF RS.42,27,046/- AND THE ASSESSMENT WAS COMPLETED AT A N INCOME OF RS.85,71,360/-. 2.1 THE ASSESSEES APPEAL BEFORE THE LD. FIRST AP PELLATE AUTHORITY WAS PARTLY ALLOWED WHEREIN THE ASSESSEE HAD CHALLENGED THE REOPENING AND HAD ALSO CHALLENGED THE ADDITION ON MERITS. THE 3 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT LD. CIT (A) UPHELD THE REOPENING BUT GIVEN PART REL IEF TO THE ASSESSEE ON MERITS. 2.2 NOW, THE ASSESSEE HAS APPROACHED THIS TRIBUNAL AND HAS CHALLENGED THE ORDER OF THE LD. CIT (A) BY RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER PASSED BY THE LD. ACIT BHIWANI DATED 30.01.2014 IS AGAINST FACTS, BAD IN THE EYES OF LAW AND BASED ON CHANGE OF OPINION. THE CASE HAS BEEN RE-OPENED F IRSTLY, BY ISSUING NOTICE UNDER SECTION 154 AND THEREAFTER, IS SUING NOTICE UNDER SECTION 147/148 ON THE OBJECTION RAISED BY TH E IAP IS NOT THE INDEPENDENT OPINION OF THE LD. ACIT TO REOPEN T HE CASE UNDER SECTION 148. 2. THE LD. C.I.T. (APPEAL) ERRED IN LAW BY HOLD ING THAT THE A.O. APPLIED HIS MIND INDEPENDENTLY TO THE INFORMATION R ECEIVED FROM THE AUDIT PARTY TO INITIATE PROCEEDINGS UNDER SECTI ON 148 IGNORING THE FACT THAT THE A.O. HAS HIMSELF SENT THE ANNOTAT ED REPORT DT. 05-10-2012 TO THE HIGHER AUTHORITIES PROPOSING THAT THE OBJECTION RAISED BY THE I.A.P. IS NOT MAINTAINABLE AND THE PA RA MAY PLEASE BE TREATED AS SETTLED. 3. THE LD. C.I.T. (APPEAL) ERRED IN LAW BY TREATI NG THE AGRICULTURE LAND AS STOCK IN TRADE INSPITE OF THE F ACT THAT THE LAND IS NOT COVERED IN DEFINITION OF SECTION 2 (14) OF T HE INCOME TAX ACT AS CAPITAL ASSETS. THE AGRICULTURE LAND IN QUESTION IS MORE THAN 8 KM AWAY FROM THE MUNICIPAL LIMIT OF PALWAL NAGAR PARISHAD. THE NOTIFICATION UNDER SECTION 2 (1A)/2(14) OF THE I.T. ACT 196! NO. 9447 DT. 06 LH JANUARY. 1994 COVERS THE AREAS UP TO A DISTANCE OF 5 KM FROM MUNICIPAL LIMITS IN ALL DIREC TIONS, WHERE THE LAND IN QUESTION IS AWAY MORE THAN 8 KM FROM MU NICIPAL LIMIT OF PALWAL. 4. THE LD. C.I.T. (APPEAL) HAS ALSO NOT CONSIDE RED THE JUDGMENT OF HON'BLE PUNJAB & HARYANA COURT IN THE C ASE OF 4 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT C.I.T. VS. SATENDER PAL SINGH (2010) 2 SET 16 VIDE SARAL TAX ADDITION 2010 IN WHICH THE HON'BLE HIGH COURT HAS H ELD THAT DISTANCE OF THE AGRICULTURE LAND TO BE MEASURED BY ROAD AND NOT BY STRAIGHT LINE DISTANCE ON HORIZONTAL PLANE OR AS PER CROWS FLIGHT. 5. THE LD. C.I.T. (APPEAL) HAS ALSO NOT CONSIDERE D THE CERTIFICATE OF TAHASILDAR PALWAL REGARDING THE DISTANCE OF LAND FROM THE MUNICIPAL LIMIT PALWAL AS WELL AS KHASRA GIRDWARI O F AGRICULTURE LAND OF VILLAGE BHAGOLLA TEH. PALWAL FOR THE F.Y. 2 005 TO 2007. SHOWING THAT THE LAND WAS UNDER CULTIVATION ON THE DATE OF TRANSFER. 6. THE APPELLANT CRAVES, LEAVE TO ADD AMEND OR RESCIND ANY OF THE GROUNDS ARISING FROM THE ORDER UNDER APPEAL: 3.0 THE LD. AUTHORIZED REPRESENTATIVE (AR) SUBMIT TED THAT THE ASSESSEE WAS CHALLENGING THE REOPENING ON T HE GROUND THAT THE REOPENING WAS DONE FOR THE VERY SAME REASON WHICH HAD EARLIER BEEN CONSIDERED UNDER THE ORIGINAL ASSESSMENT PROCE EDINGS. IT WAS ALSO SUBMITTED THAT 154 PROCEEDINGS INITIATED FOR T HE SAME REASON WERE ALSO DROPPED AND THAT FURTHER THE OBJECTION OF THE AUDIT PARTY ON THE SAME ISSUE HAD ALSO BEEN DISCARDED BY THE AS SESSING OFFICER. IT WAS SUBMITTED THAT THE REASSESSMENT WAS BAD IN LA W IN AS MUCH AS THE ISSUE HAD BEEN THE SUBJECT MATTER OF PROCEED INGS IN THE ORIGINAL ASSESSMENT PROCEEDINGS AS ALSO THE PROCEED INGS U/S 154 OF THE ACT. TO BUTTRESS THIS CONTENTION, THE LD. AUTHO RIZED REPRESENTATIVE DREW OUR ATTENTION TO PARAGRAPH-4 OF THE ORIGINAL 5 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT ASSESSMENT ORDER PASSED U/S 143(3) OF THE ACT (DATE D 12.11.2010) WHEREIN THE ASSESSING OFFICER HAS STATED THAT PROOF REGARDING AGRICULTURAL LAND HAS BEEN FURNISHED WHICH IS AWAY BY 8 K.M. FROM THE MUNICIPAL COMMITTEE LIMIT AND THAT NO CAPITAL G AIN ATTRACTS AS PER PATWARIS REPORT. THE ASSESSING OFFICER HAS FURTHER STATED T HAT AFTER VERIFICATION AND EXAMINATION OF REQUISITE INF ORMATION, NOTHING ADVERSE HAS BEEN NOTICED. THE LD. AUTHORIZED REPRES ENTATIVE POINTED OUT THAT A LUMP SUM ADDITION OF RS.1.25 LAC S WAS MADE TO COVER ANY POSSIBLE REVENUE LEAKAGE. 3.1 THE LD. AUTHORIZED REPRESENTATIVE ALSO DREW OU R ATTENTION TO THE SHOW-CAUSE NOTICE ISSUED U/S 154 O F THE ACT WHEREIN THE ASSESSEE WAS ASKED TO DEMONSTRATE HOW AGRI CULTURAL LAND WAS NOT A CAPITAL ASSET. THE LD. AUTHORIZED REP RESENTATIVE ALSO DREW OUR ATTENTION TO THE NOTICE ISSUED U/S 148 OF T HE ACT AND POINTED OUT THAT THE REASONS IN THIS NOTICE AND THE SHOW CAUSE NOTICE ISSUED U/S 154 WERE IDENTICAL. IT WAS ALSO BR OUGHT TO THE NOTICE OF THE BENCH THAT THE PROCEEDINGS U/S 154 OF THE ACT WERE DROPPED WITHOUT MAKING ANY ADDITION. OUR ATTENTION WA S ALSO DRAWN TO A SIMILARLY WORDED OBJECTION OF THE INTERNAL AUDIT PARTY 6 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT WHEREIN IN THE COMMENTS THE ASSESSING OFFICER HAS ME NTIONED THE OBJECTION AS SETTLED. 3.2 THE LD. AUTHORISED REPRESENTATIVE ARGUED THAT IT WAS APPARENT THAT THE DEPARTMENT HAD NO TANGIBLE FRE SH MATERIAL TO IN ITS POSSESSION TO JUSTIFY THE REOPENING AND THAT IT WAS ONLY A CASE OF CHANGE OF OPINION. THE LD. AUTHORIZED REPRESENTA TIVE PLACED RELIANCE ON NUMEROUS JUDICIAL PRECEDENTS TO SUPPORT HIS CONTENTION THAT THE REOPENING WAS BAD IN LAW. 4.0 IN RESPONSE, THE LD. SR. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE REPORT OF THE ASS ESSING OFFICER WITH RESPECT TO THE AUDIT OBJECTION IS AN INTERNAL P ROCEDURE AND IT DOES NOT INVALIDATE THE IMPUGNED NOTICE U/S 148. I T WAS ALSO ARGUED THAT AUDIT OBJECTION CONSTITUTES INFORMATION AND, THEREFORE, A REOPENING ON THAT BASIS IS PERFECTLY VALID. IT WAS ALSO SUBMITTED THAT THE DROPPING OF PROCEEDINGS U/S 154 DOES NOT M EAN THAT THE DEPARTMENT IS SATISFIED WITH THE EXPLANATION OF THE ASSESSEE. THE LD. SR. DR ALSO SUBMITTED THAT THERE IS A SETTLED J UDICIAL PRECEDENT BY THE HONBLE APEX COURT IN THE CASE OF R.K. MALHOTRA, ITO VS. KASTURBHAI LALBHAI REPORTED IN 109 ITR 537 (SC) AND CIT VS. P.V.S 7 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT BEEDIES PVT. LTD. REPORTED IN 237 ITR 13 (SC) THAT REOPENING OF CASE ON THE BASIS OF FACTUAL INFORMATION GIVEN BY INTERN AL AUDIT PARTY IS VALID IN LAW. THE LD. SR. DR SUBMITTED THAT THE REOP ENING DESERVE TO BE UPHELD. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALSO PERUSED THE MATERIAL ON RECORD. A PERUSAL OF THE AS SESSMENT ORDER PASSED U/S 143(3) OF THE ACT VIDE DATED 12.11.2010 SHOWS THAT THE ISSUE AS TO WHETHER THE AGRICULTURAL LAND SOLD BY TH E ASSESSEE WAS CAPITAL ASSET OR NOT HAS BEEN CONSIDERED BY THE ASS ESSING OFFICER WHEREIN HE HAS STATED THAT PROOF REGARDING AGRICULTU RAL LAND HAS BEEN FURNISHED WHICH IS AWAY BY 8 K.M. FROM THE MUNIC IPAL COMMITTEE LIMIT AND THAT NO CAPITAL GAIN ATTRACTS A S PER PATWARIS REPORT. THE ASSESSING OFFICER HAS FURTHER STATED TH AT AFTER VERIFICATION AND EXAMINATION OF REQUISITE INFORMATI ON, NOTHING ADVERSE HAS BEEN NOTICED. THUS, IT IS ESTABLISHED B EYOND DOUBT THAT THE MATTER HAD RECEIVED DUE TO CONSIDERATION OF THE ASSESSING OFFICER WHILE FINALISING THE ORIGINAL ASSESSMENT PRO CEEDINGS U/S 143(3) OF THE ACT. MOVING FURTHER ON, IT SEEN THAT NOTICE U/S 154 OF THE ACT WAS ISSUED IN WHICH THE ASSESSEE WAS REQUIRED TO ESTABLISH 8 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT HOW THE AGRICULTURAL LAND SOLD BY HIM DID NOT FALL U NDER CAPITAL ASSET. WE ALSO NOTE THAT THE PROCEEDINGS INITIATED U/S 154 OF THE ACT WERE DROPPED VIDE ORDER DATED 04.02.2013 WITHOUT MAKING ANY ADDITION. THE LD. SR. DR HAD ARGUED THAT DROPPING O F 154 PROCEEDINGS DOES NOT MEAN THAT THE ASSESSEES EXPLA NATION HAS BEEN ACCEPTED. HOWEVER, WE CANNOT AGREE WITH THIS PR OPOSITION OF THE LD. SR. DR. IF THE ASSESSING OFFICER HAS INITIA TED PROCEEDINGS UNDER SPECIFIC PROVISION OF THE ACT AND HAS, THEREA FTER, CLOSED THE PROCEEDINGS AFTER OBTAINING AN EXPLANATION FROM THE ASSESSEE, BY NO STRETCH OF IMAGINATION CAN IT BE ASSUMED THAT THE A SSESSING OFFICER HAD NOT ACCEPTED OR WAS NOT SATISFIED WITH THE EXPLAN ATION GIVEN BY THE ASSESSEE. THEREFORE, IT IS OUR CONSIDERED OPINI ON THAT THE ISSUE AS TO WHETHER THE AGRICULTURAL LAND SOLD BY THE ASSE SSEE WAS A CAPITAL ASSET OR NOT WAS AGAIN GIVEN DUE CONSIDERATI ON BY THE ASSESSING OFFICER DURING THE 154 PROCEEDINGS AND BY DROPPING OF THESE PROCEEDINGS, IT IS APPARENT TO THAT HE HAD AC CEPTED THE EXPLANATION OF THE ASSESSEE. 5.1 NOW COMING TO THE NOTICE ISSUED U/S 148 OF THE ACT, A PERUSAL OF THE REASONS RECORDED SHOWS THAT THEY AR E RECORDED ON 9 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT ALMOST IDENTICAL LINES AS THE SHOW CAUSE NOTICE ISS UED U/S 154 OF THE ACT. THERE IS NO MENTION BY THE ASSESSING OFFIC ER IN THE REASONS RECORDED AS TO WHETHER THE DEPARTMENT HAD COME IN P OSSESSION OF ANY TANGIBLE FRESH MATERIAL JUSTIFYING THE REOPENIN G. REFERENCE HAS BEEN MADE BY THE LD. DR. DR TO THE AUDIT OBJECTION RAISED BY THE INTERNAL AUDIT PARTY AND TO TWO JUDGMENTS OF THE HON BLE APEX COURT IN THE CASES OF R.K. MALHOTRA, ITO VS. KASTURBHAI LALBHAI REPORTED IN 109 ITR 537 (SC) AND CIT VS. P.V.S BEED IES PVT. LTD. REPORTED IN 237 ITR 13 (SC) FOR THE PROPOSITION THAT INFORMATION RECEIVED FROM AUDIT PARTY ON FACTUAL ISSUES CONSTIT UTES INFORMATION AND THAT REOPENING ON THAT BASIS IS VALID. HOWEVER, IT IS OUR CONSIDERED OPINION THAT THE INFORMATION RECEIVED FR OM AUDIT PARTY MIGHT BE CONSIDERED FRESH INFORMATION ONLY IN THOSE CASES WHERE THE ASSESSING OFFICER WOULD NOT HAVE EXAMINED THE ISSUE BEING BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER IN THE ORIGI NAL ASSESSMENT PROCEEDINGS. HOWEVER, IN THE PRESENT CASE, THIS IS N OT SO AS THE REASON FOR WHICH THE REOPENING HAD BEEN DONE HAD BEE N THE SUBJECT MATTER BOTH UNDER THE 143(3) PROCEEDINGS AS WELL AS 154 PROCEEDINGS. WE ALSO NOTE THAT THE JUDGMENT RELIED UPON BY THE LD. 10 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT SR. DR AS AFORESAID ARE OF 1977 & 1999 RESPECTIVELY WHEREAS IN 2019 THE HONBLE APEX COURT IN THE CASE OF ACIT VS. FIS GLOBAL SOLUTIONS INDIA PVT. LTD. REPORTED IN 263 TAXMANN 3 69 (SC) DISMISSED THE DEPARTMENTS SLP AGAINST THE ORDER OF THE HONBLE DELHI HIGH COURT WHEREIN THE HONBLE DELHI HIGH COUR T HAD HELD THAT AUDIT OBJECT BEING ONLY AN INFORMATION, REASSE SSMENT NOTICE BASED ON SUCH OBJECTION IS NOT SUSTAINABLE. THEREFO RE, IN VIEW OF THE FACTUAL MATRIX AND THE JUDICIAL PRECEDENTS, WE ARE OF THE CONSIDERED OPINION THAT OBJECTION OF THE AUDIT PARTY IN THE PR ESENT CASE CANNOT BE CONSIDERED AS INFORMATION FOR THE PURPOSE OF REO PENING OF THE ASSESSEES CASE. 5.2 WE ALSO NOTE THAT IN THE PRESENT FACTUAL MATR IX IT IS APPARENTLY A CASE OF CHANGE OF OPINION OF THE ASSES SING OFFICER AS HE HAS ON TWO EARLIER OCCASIONS ACCEPTED THE ASSESSEES EXPLANATIONS AND HAS MADE NO ADDITIONS. WE WOULD LIKE TO MAKE REF ERENCE TO THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. USHA INTERNATIONAL LTD. REPORTED IN 348 ITR 485 (DE LHI ) WHEREIN IT WAS HELD BY THE MAJORITY VIEW THAT ASSESSMENT PROCEED INGS CANNOT BE VALIDLY REOPENED U/S 147 OF THE ACT EVEN WITHIN 4 YEARS IF AN 11 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT ASSESSEE HAS FURNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL ASSESSMENT WITH REFERENCE TO THE INCOME ALL EGED TO HAVE ESCAPED ASSESSMENT, IF THE ORIGINAL ASSESSMENT WAS M ADE U/S 143(3). IN THIS PRESENT APPEAL THERE IS NO ALLEGATI ON IN THE REASONS RECORDED THAT THE ASSESSEE HAS NOT FURNISHED FULL A ND TRUE PARTICULARS. IT IS ALSO EVIDENT FROM THE ASSESSMENT ORDER THAT THE ISSUE HAD BEEN DULY CONSIDERED BY THE ASSESSING OFF ICER. 5.3 THE HONBLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. REPORTED IN 320 ITR 561 (SC) HELD THAT THERE HAS TO BE SOME NEW TANGIBLE MATERIAL IN POSSESSION O F THE ASSESSING OFFICER TO COME TO THE CONCLUSION OF ESCAPEMENT OF INCOME AND MERE CHANGE OF OPINION CANNOT BE THE REASON TO RE-OPEN T HE ASSESSMENT. AS WE HAVE ALREADY OBSERVED, THERE IS NO NEW TANGIBL E MATERIAL WHICH HAD COME INTO THE POSSESSION OF THE ASSESSING OFFICER IN THE PRESENT CASE. ACCORDINGLY, THE REOPENING ON THE SAM E MATERIAL AMOUNTS TO A MERE CHANGE OF OPINION WHICH CANNOT BE UPHELD. 5.4 THEREFORE, IN VIEW OF THE JUDICIAL PRECEDENTS RELIED UPON BY US IN THE PRECEDING PARAGRAPHS, COUPLED WITH THE FACTUAL MATRIX OF THE CASE, WE ARE OF THE VIEW THAT THE REOP ENING IN THE 12 ITA NO.5255/DEL/2016 OM PRAKASH GULATI, JIND VS. ACIT PRESENT CASE IS NOT SUSTAINABLE. WE SET ASIDE THE O RDER OF THE LD. CIT (A) AND QUASH THE REASSESSMENT PROCEEDINGS. 6.0 IN THE FINAL RESULT, THE APPEAL OF THE ASSESS EE STANDS ALLOWED. ORDER PRONOUNCED ON 30/09/2020. SD/- SD/- (G.S.PANNU) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEM BER DATED: 30/09/2020 PK/PS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI