SH. KEWAL SINGH, AMRITSAR V. INCOME TAX OFFICER, WARD 4(3), AMRITSAR

ITA 566/ASR/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 8536 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ENQUIRIES
• Keywords: Difference of opinion; Valuation report; Change of opinion
• Section: 147; 148; 144; 139; 143(3); 54F; 142(1); 234B; 143(2); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE: SH. RAVISH SOOD, JUDICIAL MEMBER AND DR. M. L. MEENA, ACCOUNTANT MEMBER I.T.A. No. 566/Asr/2017 Assessment Year: 2009-10 Sh. Kewal Singh House No. 421, VPO Meeran Kot Kalan Amritsar-143001 Punjab [PAN: AFDPS7781J] Vs. Income Tax Officer, Ward 4(3), Amritsar (Appellant) (Respondent) Appellant by : Sh. P. N. Arora, Adv. Respondent by: Sh. Trilochan Singh PS Khalsa, DR Date of Hearing: 23.12.2021 Date of Pronouncement: 21.02.2022 ORDER Per Dr. M. L. Meena, AM: The captioned appeal has been filed by the Assessee against the impugned order dated 19.07.2017 passed by the Ld. Commissioner of Income Tax (Appeals)- 2, Amritsar, in respect of the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: “1. That the assessment order passed by the AO u/s 143(3) of the IT Act, 1961, as well as the order of the Ld. CIT(A) thereby confirming the order of the A.O. are both against the facts of this case and are untenable under the law. 2. That the Ld. CIT(A) did not appreciate that no reasonable and proper opportunity of being heard was allowed by the AO before making this heavy and uncalled for ITA No.566/Asr/2017 2 addition. - As such, the order of the worthy CIT(A) therein confirming the order of the AO is bad in law and is liable to be cancelled. 3. That the issuance of notice u/s 148 is illegal, invalid and void abinitio and the same is liable to be cancelled as this case has been reopened on the basis of borrowed^ satisfaction and without going into the facts and merits of the case. As such the proceedings thereof are illegal, invalid and void abinitio as there is no application of mind at the time of reopening the case. As such the assessment completed accordingly is bad in law and is liable to be cancelled. As such, the order of the worthy CIT(A) thereby confirming the order of the AO is bad in law and is liable to be cancelled. 4. That the AO did not appreciate that mistake cannot be corrected by invoking the provisions of section 292B of the IT Act, 1961. 5. That the authorities below failed to appreciate that this property belongs to HUF as it was ancestral property belonging to great grandfathers. The said property was not acquired by the assessee out of his own assets. It was only inherited property. Thus there was no justification in treating the property belonging to Individual. As such the assessment order is bad in law and is liable to be cancelled. As such, the order of the worthy CIT(A) therein confirming the order of the AO is bad in law and is liable to be cancelled. 6. That there was no capital gain which was subject to tax. As such the assessment made on total income of Rs.3580540/- is liable to be cancelled. 7. That all the evidences were produced before the authorities below and all these facts are duly incorporated in the shape of affidavit which were summarily rejected by the authorities below. The authorities below did not appreciate that the assessee was clearly entitled for the deduction u/s 54F. It may be submitted that the worthy CIT(A) did not appreciate that the photostat copy of the house was duly filed on which the amount of Rs. 15,53,946/- was spent and in support of this copy of valuation report of the approved valuer and affidavit were duly filed. All these facts have been ignored by the authorities below while not allowing the deduction as claimed u/s 54F. The AO before rejecting the claim of 54F should have made enquiry and should have placed some material on record to justify the refusal of deduction as claimed. It is prayed that the deduction claimed u/s 54F at Rs. 15,53,946/- may kindly be allowed. Similarly, the worthy CIT(A) has grossly erred in confirming the same and deduction u/s 54F as claimed may be allowed. 8. That the AO has grossly erred in charging interest u/s 234B at Rs.6,57,222/- without giving any opportunity of being. As such the interest charged may be cancelled. Alternatively, the interest charged is very high & excessive. 9. That any other ground of appeal which may be urged at the time of hearing of the appeal.” ITA No.566/Asr/2017 3 3. At the time of hearing, the assessee has raised legal issue challenging the issuance of notice u/s 148 as illegal, invalid and void abinitio on the basis of borrowed satisfaction and non-application of mind to the facts and merits of the case as property was inherited by the appellant and as such the CIT(A)’s order was illegal, invalid and void ab initio thereof vide ground no.3 and 5 as above. 4. Briefly, the facts as per record are that the AO had information that the assessee had sold his agriculture land along with his four brothers situated within 3 KM from the local limits of Municipal Corporation, Amritsar during FY 2008- 2009. However, the assessee had not filed his return of income for A Y 2OO9-1O and According to the AO, long term capital gain of Rs 34,36, 175/- had escaped assessment. Therefore, for this reason the case was reopened u/s 147 of the Act in his individual capacity and assessed thereof. 5. The Ld. CIT(A) confirmed the reopening of the case u/s 147 of the act by observing that it is not the case of borrowed satisfaction or lack of application of mind of the AO in reopening the assessment. Although, he has mentioned that earlier also this case was reopened u/s 148 of the Act in the status of "HUF and the assessment was completed u/s 147/148 on 27-02-2015 in the status of "individual" at an income of Rs 35, 80,540/- Since the assessment was reopened in the status of HUF but the assessment completed in the status of individual, the assessment was cancelled by the CIT (A). 5.1 Subsequently the AO again chose to issue notice to the assessee u/s 148 in the 'individual" status of the appellant on the same facts and material before the AO. Since the income on account of long term capital gain for A Y 2009-10 had exceeded the maximum amount which is chargeable to tax, the assessee was liable to file his return of income for AY 2009-10 u/s 139(1) of the Act but as per office ITA No.566/Asr/2017 4 record the assessee had not filed his return of income for A Y 2009-10. Accordingly, the CIT(A) observed that the AO rightly had prima facie reason to believe that long term capital gain of Rs 34,36, 175/- on sale of agriculture land had escaped assessment. He has stated that at the time of reopening the assessment u/s 147 of the Act, the AO is required to have prima facie belief of income escaping assessment on the basis of material before him which was there before the AO in the present case. Therefore, the AO was justified in reopening of assessment: u/s 147 of the Act which is upheld. 6. The Ld. Counsel submitted that this case was reopened by the department vide notice u/s 148 dated 21/03/2014 in the HUF status (APB, Pg. 79); that the reasons was recorded in the status of HUF but the assessment u/s 147/144 was completed in the status of Individual on an income of Rs.35, 80,540/- by the AO on 27/02/2015. Since the assessment was reopened in the status of HUF and completed in the status of individual and so the assessment was cancelled by the CIT(A) vide order dated 29/02/2016 in the case of individual (APB, Pg. 81-88). Further a corrigendum dated 12/03/2015 was passed by ITO 4(2) Amritsar in this regard (APB, Pg. 78A). 6.1 The counsel argued that the appellant objected to the subsequent reopening of the assessee’s case in the status of individual challenging legal issue of reopening of the case on borrowed satisfaction and without application of mind and without appreciating the facts and merits of the case, in recording reasons in mechanical manner for reopening by duplicating as the same in case of HUF earlier and as well as recorded now dated 23.03.2016 are in verbatim except, status has been changed from HUF to Individual and that a sentence reading as follow has been inserted “by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year 2009-10.” the said insertion is to ‘get the benefit of the extended time limit ITA No.566/Asr/2017 5 from 4 years to 6 years for reopening the assessment’. It is stated that there is no failure on the part of the assessee as no return of income u/s 139 was ever filed by him. Brief written submission filed by the assessee is as under: Assessee Submission: That earlier under the same and similar circumstances, the notice u/s 148 dated 21/03/2014 was issued in the case of Shri Kewal Singh [HUF]. [Refer Page No.79 of the paper-book] 2. The copy of reasons recorded in the case of Shri Kewal Singh [HUF] were available at Page No.80 of the paper-book for the same amount of Long Term Capital Gain amounting to Rs.34,36,175/-. 3. The assessment in the case of Shri Kewal Singh was completed on 27/02/2015 and addition of Rs.35,80,540/- was made under the head Long Term Capital Gain. [Refer Page No.71 to 78 of the paper-book] 4. Against the said order of ITO, Ward 4(2) Amritsar dated 27/02/2015, the assessee went in appeal before Ld. CIT(A) who vide his order dated 29/03/2016 in Appeal No.30/2014-15 has allowed the appeal of the assessee by observing as under: [Refer Page No.81 to 88 of the paper- book] “The AO always intended to initiate proceedings in the case of Shri Kewal Singh in the status of “HUF” as is apparent from the reasons recorded for initiating proceedings u/s 147. It has further been found that notice u/s 148 and other notices issued u/s 143(2) & 142(1) were also issued to the appellant by presuming his status as “HUF” with PAN – ABTPS3245H. Therefore once a notice u/s 148 & other sections were issued by treating the assessee as “HUF” then the AO could not have framed the assessment by treating the same income in the hands of Individual with PAN – DEYPS5701H. Accordingly by placing reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Rohtas Singh – the impugned assessment order passed by the AO ITA No.566/Asr/2017 6 u/s 144/147 dated 27/02/2015 in the status of Sh. Kewal Singh (Ind) is invalid. [Refer Page No.87] Now again under the similar circumstances, the ITO Ward 4(3) Amritsar has assessed the same amount of Long Term Capital Gain of Rs.38,80,540/- in the hands of Shri Kewal Singh (Ind) vide order u/s 147 r.w.s. 143(3) dated 16/12/2016. At the time of assessment apart from above narrated facts it was again submitted that this very property belongs to HUF and claiming exemption u/s 54F. As the case of Sh. Baldev Singh S/o Sh. Sardool Singh for the AY 2009- 10 has been decided by Ld. CIT(A) vide order dated 28/03/2014 in Appeal No. 313/2011-12, wherein the Ld. CIT(A) has confirmed 1/5 share of LTCG in each hand. Hence 1/5 th i.e. 20% share of LTCG of Rs.1,86,27,700/- on sale of Agricultural Land i.e. Rs.37,25,540/- purchased for Rs.7,25,000/- [i.e. 1/5 of 7,25,000 = 1,45,000/-]. Thus the net LTCG works out to Rs.35,80,540/-. This is the same figure which was earlier assessed in the hands of Shri Kewal Singh (HUF) vide order dated 27/02/2015. [3] Before Ld. CIT(A) it was again argued that once the proceedings have been cancelled by CIT(A), there was no justification on the part of the AO to restart the proceedings. Thus the department failed to apply its mind and have blow hot & cold in the same breath. As regards the claim of assessee that the property belonged to HUF as it is ancestral property, the AO observed in the assessment order that no doubt the land owned was ancestral land but the assessee has not filed any evidence or pedigree table or any will. It was silent as to how many Legal Heirs of first degree in respect of Major Singh, Sardool Singh, Inder Singh and how the land was divided amongst Legal Heirs in the absence of any will and in what manner the assessee assumed the status of HUF. ITA No.566/Asr/2017 7 Furthermore it may be submitted that the AO cannot be allowed to change his view on the same and similar facts and circumstances of the case and as such there is no justification in reopening the case u/s 148 in Individual Status. It is further relevant to point out that the case cannot be reopened on the basis of change of opinion. This view finds support from the copies of judgments enclosed herewith. 7. Per Contra, the learned DR stands by the impugned order. 8. we have heard the rival contentions, perused the material on record and written submissions filed before us. Admittedly, the land owned by the appellant was ancestral land. The AO observed in the assessment order that the assessee has not filed any evidence or pedigree or any will with regards to such inheritance of the ancestral property. The learned AR argued that the AO was silent as to how many legal hairs of first-degree was there in respect of Maj Singh, Sardool Singh, Inder Singh and how the land was divided amongst legal years in absence of any will and what manner the assessee as you the status of HUF or individual. He further argued that the AO can’t be allowed to changes you on the similar facts and circumstances of the case, once the proceedings have been cancelled by the landed CIT appeal. 9. We have observed that on the similar facts and circumstances, earlier the notice u/s 148 dated 21/03/2014 was issued in the case of Shri Kewal Singh (HUF). [APB, Pg. 79] with the reasons recorded were similar in verbalism except personas evident from reasons in the case of Shri Kewal Singh [HUF] and individual (APB, Pg. 80 and APB, Pg. 56 respectively) of the paper-book for the same amount of Long Term Capital Gain amounting to Rs.34,36,175/- from sale of inherited agricultural land. ITA No.566/Asr/2017 8 10. The assessment in the case of Shri Kewal Singh (Individual) was completed on 27/02/2015 and addition of Rs.35,80,540/- was made under the head Long Term Capital Gain. (APB, Pg.71 to 78) where reason were recorded in the case of Shri Kewal Singh (HUF). The assessee went in appeal before Ld. CIT(A) against the said order of ITO, Ward 4(2) Amritsar dated 27/02/2015,who vide his order dated 29/03/2016 in Appeal No.30/2014-15 has allowed the appeal of the assessee by observing as under (APB, Pg. 81 to 88): “The AO always intended to initiate proceedings in the case of Shri Kewal Singh in the status of “HUF” as is apparent from the reasons recorded for initiating proceedings u/s 147. It has further been found that notice u/s 148 and other notices issued u/s 143(2) & 142(1) were also issued to the appellant by presuming his status as “HUF” with PAN – ABTPS3245H. Therefore once a notice u/s 148 & other sections were issued by treating the assessee as “HUF” then the AO could not have framed the assessment by treating the same income in the hands of Individual with PAN – DEYPS5701H. Accordingly by placing reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Rohtas Singh – the impugned assessment order passed by the AO u/s 144/147 dated 27/02/2015 in the status of Sh. Kewal Singh (Ind) is invalid. [Refer Page No.87] 11. In the case of “ITO v. N.K. Sarada Thampatty”, [1990] 53 Taxman 78/[1991] 187 ITR 696 (sc) while dealing with scope of Section 171 of the Income-tax Act, 1961, the Hon'ble Supreme Court held as under:- 5. The main question which falls for consideration is as to whether the partition as effected by the agreement dated February 21, 1963 and also the decree of the civil court amount to "partition" under the Explanation to Section 171 of the Act and further whether the Income-tax Officer acted contrary to law in holding that in spite of the partition as ITA No.566/Asr/2017 9 alleged by the respondent, the status of HUF was not disrupted and that status continued for the purposes of assessment during the relevant assessment years. Under Section 171 a Hindu family assessed as HUF, is deemed for the purposes of the Act to continue as HUF except where partition is proved to have been effected in accordance with the section. The section further provides that if any person at the time of making of assessment claims that partition total or partial has taken place among the members of the HUF, the Income- tax Officer is required to make an inquiry after giving notice to all the members of the family, and to record findings on the question of partition. If on inquiry he comes to the finding that there has been partition, individual liability of members is to be computed according to the portion of the joint family property allotted to them. What would amount to partition for the purposes of the section is contained in the Explanation to the section which defines partition as under: "Explanation.— In this section,— 'partition' means— where the property admits of a physical division, a physical division of the property, but a physical division of the income without a physical division of the property producing the income shall not be deemed to be a partition; or where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition." where the property does not admit of a physical division, then such division as the property admits of, but a mere severance of status shall not be deemed to be a partition." 38. The Apex Court was of the opinion that sub-section (6) of Section 171 thus, for the first time, imposed a kind of joint and several liability on the members of Hindu Undivided family and thus personal liability as distinguished from the liability of a joint family property received on partition. 38A. Under the Hindu law, members of a joint family may agree to partition of the joint family property by private settlement, agreement, arbitration or through court's decree. Members of the family may also agree to share the income from the property according to their respective share. In all such eventualities joint status of family may be disrupted but such disruption of family status is not recognised by the legislature for purposes of income tax. Section 171 of the Act and the Explanation to it, prescribes a special meaning ITA No.566/Asr/2017 10 to partition which is different from the general principles of Hindu law. It contains a deeming provision under which partition of the property of HUF is accepted only if there has been actual physical division of the property, in the absence of any such proof, the HUF shall be deemed to continue for the purpose of assessment of tax. Any agreement between the members of the joint family effecting partition, or a decree of the court for partition cannot terminate the status of HUF unless it is shown that the joint family property was physically divided in accordance with the agreement or decree of the court. 12. Thus, Section 171 of the Act and the Explanation to it, prescribes a special meaning to HUF partition which is different from the general principles of Hindu law. It contains a deeming provision under which partition of the property of HUF is accepted only if there has been actual physical division of the property, in the absence of any such proof, the HUF shall be deemed to continue for the purpose of assessment of tax. Any agreement between the members of the joint family effecting partition, or a decree of the court for partition cannot terminate the status of HUF unless it is shown that the joint family property was physically divided in accordance with the agreement or decree of the Court. 13. In the case of “A.P. Oree v Income-tax Officer, Non-Corporate Ward 1(1), Chennai [2021] 127 taxmann.com 740, the Hon’ble HIGH COURT OF MADRAS following while following the Hon’ble Apex Court (Supra) has held as under: 38B. The above definition of the partition in Explanation to Section 171 of the Income- tax Act, 1961 does not recognise a partition even if it is effected by a decree of court unless there is a physical division of the property or if the property is not capable of being physically divided then such a division of the property to the extent admits shall be partition However, mere severance of status will not amount to partition. In considering the factum of partition for the purposes of assessment it is not permissible to ignore the special meaning assigned to partition under the explanation, even if the partition is effected through a decree of the court. Ordinarily decree of a civil court in a partition suit is good evidence in proof of partition but under section 171 a legal fiction has been introduced according to which a preliminary decree of partition is not enough. Instead there should be actual physical division of the property pursuant to final decree, by metes and bounds. The legislature has assigned special meaning to the expression partition under the aforesaid Explanation with a view to safeguard the interest of the ITA No.566/Asr/2017 11 revenue. Any assessee claiming partition of HUF must prove the disruption of the status of HUF in accordance with the provisions of Section 171 having special regard to the Explanation. The assessee must prove that a partition effected by agreement or through court's decree, was followed by actual physical division of the property. In the absence of such proof partition is not sufficient to disrupt the status Hindu Undivided Family for the purpose of assessment of tax. 39. A reading of sub-section 171 of the Income Tax Act, 1961 makes it very clear that it is applicable only where a Hindu family was already assessed as an Hindu Undivided Family (HUF). Otherwise, there is no meaning to the expression "hither to" in section 171(1) of the Income-tax Act, 1961. It shall for the purpose of the Act be deemed to continue to be a Hindu Undivided Family, except where and insofar as a finding of partition has been given under the said section in respect of the said Hindu Undivided Family(HUF). 40. Admittedly, during the lifetime of Shir. A.R. Pandurangan, the family was not assessed as a Hindu Undivided Family(HUF). 41. It is only where there is a prior assessment as a Hindu Undivided Family (HUF) and during the course of assessment under section 143 or section 144 it is claimed by or on behalf of member of such Hindu Undivided Family which was assessed as a Hindu Undivided Family that there was a partition whether total or partial among the members of such family, such Assessing Officer shall make an enquiry thereto after giving notice of enquiry of all members. Where no such claim is made, question of making such enquiry by an Assessing Officer does not arise. 42. It is only in the above circumstances, the definition of "partition" in Explanation to Section 171 of the Income-tax Act, 1961 is attracted. The above definition cannot be read in isolation. Where a Hindu family was never assessed as a HUF, section 171 of the Income-tax Act, 1961 will not apply even when there is a division or partition of property which does not answer to the above definition. 14. Admittedly, during the lifetime of Shri Kewal Singh, the family was not assessed as a Hindu Undivided Family (HUF) as he has never filed return of Income being an Agriculturist. Further, the AO always intended to initiate proceedings in the case of Shri Kewal Singh in the status of “HUF” as evident from the earlier reasons recorded for initiating proceedings u/s 147. It has further been found by then CIT(A) that notice u/s 148 and other notices issued u/s 143(2) & 142(1) were also issued to the appellant by presuming his status as “HUF” with ITA No.566/Asr/2017 12 PAN – ABTPS3245H. However, the AO had framed the assessment by treating the same income in the hands of Individual with PAN – DEYPS5701H which was held invalid by the CIT(A) by placing reliance on the decision of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Rohtas Singh (APB, pg.87). 15. The Ld. AR contended that once the proceedings have been cancelled by CIT(A), there was no justification on the part of the AO to restart the proceedings without ascertaining the station of the appellant assessee by enquiries and bringing material on record. Thus, the department failed to apply its mind and have blow hot & cold in the same breath. 16. From the above, it is evident that the subject land property was ancestral property and therefore the capital gains is required to be assessed in the hands of Shri Kewal Singh HUF as observed by Leonard CIT appeal in the earlier proceedings where case was reopened in the hands of HUF whereas assessment was completed in the hands of individual and so it was held invalid. The facts that share of long-term capital gain in the case of Shri Beldev Singh one of the brother of the assessee was assessed and confirmed in individual status cannot be a basis for again reopening the case of the appellant in individual status on the same facts. The finding of the learned CIT appeal, ignoring the affidavit filed by the assessee proving that the property belongs to HUF with the support of necessary evidences as and admitted by the AO that the property was ancestral property. The AO and ITA No.566/Asr/2017 13 the CIT appeal has been silent as to how many heirs of first degree how the land was divided among legal years in absence of any will, agreement and decree to decide the status of the person in the case of the appellant. 17. The question of status granted by CIT appeal to Sh Baldev Singh (Individual) was whether incorrect and capital gains need to be taxed under the status of Baldev Singh HUF remain undecided on merits as Sh Baldev Singh had withdrawal its appeal to buy peace of mind and avoid litigation and accordingly, the appeal of the assessee was dismissed by Hon’ble ITAT, Amritsar vide order dated 20-|0-2016 as dismissed withdrawn cann’t be said to have attained finality. Thus, the learning said appeal was factually wrong in observing so, and in our view such reopening of the assessment on the same material facts amounts to change of opinion by the AO where in the first instance he has reopened the assessment of the appellant in the status of HUF and in the second instance in the status of individual by the change of opinion which is not permitted in the eyes of law. 18. In the backdrop of the discussion and following the Hon’ble Apex Court, we hold that in the present case, the ancestral property is owned by the assessee in the HUF status and so the appellant’s case was to be reopened under section 147 of the act in the status of HUF and consequently assessed in the status of HUF. ITA No.566/Asr/2017 14 19. In the above view, we are of the view that the notice issued u/s 148 by the AO was illegal, and void abinitio. Accordingly, the order of the worthy CIT(A) thereby confirming 2 nd reopening of assessment by issuing notice u/s 148 by the AO on identical facts by treating the status of the appellant as individual is bad in law and hence it is hereby cancelled. 20 Thus, the grounds on legal issue are decided in favour of the assessee, therefore, other ground are not adjudicated which as such remained academic. 21. In the backdrop of the above discussion, the appeal of the assessee is decided in the terms indicated as above. Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board. Sd/- Sd/- (Ravish Sood) (Dr. M. L. Meena) Judicial Member Accountant Member Date: 21.02.2022 prabhat Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T. By Order