Shri Vitthal Somji Kalbhor, Pune V. Asst. CIT, Circle 9, Pune

ITA 730/PUN/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9269 (ITAT-PUNE)
• Duration Of Justice: 4 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL
• Assessee Lawyers: HARI KRISHAN
• Keywords: Business income; Additional evidence; Question of law; Tangible material; Validity of assessment; Reassessment proceedings
• Section: 143(3); 234B; 147; 148

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO.730/PUN/2013 / ASSESSMENT YEAR : 2004-05 SHRI VITTHAL SOMJI KALBHOR, KALBHOR CORPORATE, NEAR BANK OF MAHARASHTRA, TULJAI WASTI, AKURDI, PUNE 4110035. PAN : AAZPK8336N. . / APPELLANT V/S ASST.COMMISSIONER OF INCOME TAX, CIRCLE 9, PRATYAKSHAKAR BHAVAN, DR. AMBEDKAR MARG, NEAR AKURDI RAILWAY STATION, PRADHIKARAN, PUNE 411044. . / RESPONDENT / APPELLANT BY : SHRI HARI KRISHAN / RESPONDENT BY : SHRI VIVEK AGGARWAL / ORDER PER ANIL CHATURVEDI, AM : THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) V, PUNE DT.02.01.2013 FOR THE ASSESSMENT YEAR 2004-05. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- / DATE OF HEARING : 27.06.2017 / DATE OF PRONOUNCEMENT: 07.07.2017 2 2.1 ASSESSEE IS AN INDIVIDUAL ENGAGED IN THE BUSINESS AS DEVELOPER AND BUILDER, BUILDING ACTIVITY AND SALE AND PURCHAS E OF LAND. ASSESSEE FILED THE RETURN OF INCOME FOR A.Y. 2004-05 ON 0 1.11.2004 DECLARING TOTAL INCOME OF RS. 51,90,275/- INCLUDING LONG TERM CAPITAL GAINS OF RS. 5,86,830/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE ACT VIDE ORDER DATED 11.12.2006 AND THE TOTAL INCOME WAS DETERMINED AT RS. 54,63,210/-. LATER ON, THE CASE WAS REOPENED BY ISSUING NOTICE U/S 148 ON 17.3.2010 WHICH WAS DULY SERVED ON THE ASSESSEE. THEREAFTER THE ASSESSMENT WAS FRAMED U/S 143(3) RWS 147 OF THE ACT VIDE ORDER DT. 27.12.2010 AND THE TOTAL INCOME WAS DETERMINED AT RS 65,76,710/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A) WHO VIDE ORDER DATED 0 2.01.2013 ( IN APPEAL NO.PN/CIT(A)-V/ACIT, CIR.9/366/10-11) DISMISSED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT (A), ASSESSEE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FO LLOWING EFFECTIVE GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED C .I. T .(A) HAS ERRED IN HOLDING THAT THE PROFITS OF RS . 16,38,600 . 00 EARNED BY THE APPELLANT DURING THE RELEVANT PREVIOUS YEAR ON SALE OF LAND CONSTITUTE BUSINESS I NCOME OF THE APPELLANT . IT MAY PLEASE BE HELD THAT LONG TERM CAPITAL GAIN O N SALE OF LAND AND GRANT THE BENEFIT OF INDEXATION CL AIMED BY THE APPELLANT . 2 . IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE FINDING OF THE LEARNED C .I. T .(A) THAT THE PROFITS OF RS.16,38,600.00 EARNED BY THE APPELLANT DURING THE RELEVANT PREVIOU S YEAR ON SALE OF LAND CONSTITUTE BUSINESS INCOME OF THE APPELLANT BEING ARBITRARY, PERVERSE AND BASED ON SURMISES AND CONJE CTURES THE SAME MAY PLEASE BE VACA T ED . THE VARIOUS REASONS GIVEN BY THE LEARNED C .I. T .(A) IN SUPPORT OF HIS SAID CONCLUSION BEING DEVOID OF MERITS AND LEGALLY UNSUSTAINAB L E THE SAME MAY PLEASE BE VACATED AND THE FINDINGS OF THE LEARNED C .I. T .(A) MAY PLEASE BE VACATED. 3 3 . THE APPELLANT DENIES HIS LIABILITY TO PAY ANY INT EREST U/S 234B AND 234C OF THE I.T. ACT 1961 AND HENCE THE SAME MA Y PLEASE BE DELETED. 3. SUBSEQUENTLY ASSESSEE VIDE LETTER DATED 1 6.09.2015 RAISED FOLLOWING ADDITIONAL GROUNDS AND IT WAS ASSESSEE'S SUBMISSION THAT THE ADDITIONAL GROUND RAISED BY THE ASSESSEE ARE P URELY LEGAL GROUND AND THE SAME CAN BE ADJUDICATED ON THE BASIS O F MATERIAL AVAILABLE ON RECORD WITHOUT ANY FURTHER INVESTIGATION OF FACTS. 1. IN THE ABSENCE OF CONDITIONS PRECEDENT FOR ISSUA NCE OF NOTICE U/S 148 OF THE I. T. ACT 1961, THE IMPUGNED REASSES SMENT PROCEEDINGS ARE BAD IN LAW AND WITHOUT JURISDICTION AND HENCE THE IMPUGNED REASSESSMENT PROCEEDINGS MAY PLEASE BE ANN ULLED / QUASHED. 2. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT THE AF ORESAID ADDITIONAL GROUND OF APPEAL SOUGHT TO BE RAISED IS PURELY A LEGAL GROUND AND THE SAME CAN BE ADJUDICATED ON THE BASIS OF MATERIALS AVAILAB L E ON THE FILE OF THE LEARNED ASSESSING OFFICER WITH OUT ANY FURTHER INVESTIGATION OF FACTS. 3. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT AT TH E INITIAL STAGE OF REASSESSMENT PROCEEDINGS BEFORE THE LEARNED ASSE SSING OFFICER, THE APPELLANT DID RAISE THE GROUND TO THIS EFFECT. HOWEVER DUE TO LACK OF PROPER KNOWLEDGE AND ADVICE THE APPELLANT C OULD NOT PUT UP HIS CASE IN PROPER PERSPECTIVE, FOR WHICH THE AP PELLANT SUBMITS HIS SINCERE APOLOGIES. 4. THE APPELLANT MOST RESPECTFULLY SUBMITS THAT THE A FORESAID ADDITIONAL GROUND OF APPEAL SOUGHT TO BE RAISED IS PURELY A LEGAL GROUND AND THE SAME GOES TO THE ROOTS AND JURISDICT ION OF THE LEARNED ASSESSING OFFICER. 5. IF THE APPELLANT IS PERMITTED TO RAISE THE AFORESA ID ADDITIONAL GROUND OF APPEAL, NO PREJUDICE OR INJUSTICE SHALL B E CAUSED TO THE RESPONDENT REVENUE AND THE MATTER CAN BE DECIDED AS PER PROVISIONS OF LAW. 4. BEFORE US, WITH RESPECT TO THE ADDITIONAL GROUNDS, ASS ESSEE IS CHALLENGING THE INITIATION OF REASSESSMENT PROCEEDINGS FOR THE REASON THAT THE ESSENTIAL CONDITIONS PRECEDENT FOR ISSUAN CE OF NOTICE U/S 148 ARE NOT SATISFIED IN THE PRESENT CASE. IT IS FURTHER SUBMITTED THAT ADDITIONAL GROUNDS BEING LEGAL IN NATURE AND SINCE 4 IT GOES TO THE ROOT OF THE MATTER THE SAME BE ADMITTED AND FOR THIS PROPOSITION RELIANCE WAS PLACED ON THE DECISION IN THE CASE OF NTPC VS. CIT 229 ITH 383 (SC) AND JUTE CORPORATION OF INDIA VS CIT 187 ITR 688 (SC). THE LD.AR FURTHER SUBMITTED THAT IN THE PRESENT CASE, NO ADDITIONAL EVIDENCE WAS REQUIRED TO EXAM INE THE ISSUE RELATING TO VALIDITY OF ASSESSMENT. THE LD.D.R. ON BEHALF OF REVENUE OBJECTED TO THE ADMISSION OF THE ADDITIONAL GROUN DS AND SUBMITTED THAT THE ASSESSEE CANNOT BE ALLOWED TO RAISE ADDITIONAL GROUND IN MECHANICAL MANNER. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS WITH RESPECT TO T HE ADMISSIBILITY OF ADDITIONAL GROUNDS. THROUGH THE ADDITIONAL GROUNDS, THE ASSESSEE IS CHALLENGING THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 148/147 OF THE ACT. THE QUESTION RAISED BY THE ASSESSEE BY WAY OF ADDITIONAL GROUNDS BEING A QUESTION OF LAW, WE ARE OF THE VIEW THAT THE ADDITIONAL GROU NDS REQUIRES TO BE ADMITTED. WE ACCORDINGLY ADMIT THE SAME A ND PROPOSE TO DISPOSE OF THE SAME FIRST. 6. BEFORE US, LD.A.R. SUBMITTED THAT ASSESSEE HAD PURCHA SED LAND AT BHOSARI, SECTOR NO.3, PLOT NO.75 ADMEASURING 10,337.5 0 SQ.MTRS FOR RS 54 LACS ON 17.08.1999. DURING FINANCIAL YEAR 02-03 ASSESSEE HAD SPENT TOWARDS THE DEVELOPMENT OF LAND. ASSESSEE SOLD THE LAND ON 20.06.2003 FOR RS. 74 LACS AND THE SURPLUS EARNED ON SALE OF LAND WAS OFFERED AS CAPITAL GAINS IN THE RETURN OF INCOME FILED ON 0 1.11.2004 FOR AY 2004-05. HE SUBMITTED THAT THEREAFTER THE ASSESSMENT WAS FRAMED U/ S 143(3) 5 OF THE ACT ON 11.12.2006 DETERMINING TOTAL INCOME AT RS. 54,63,210/-. SUBSEQUENTLY NOTICE U/S 148 OF THE ACT WAS ISSUED AND SERVED ON ASSESSEE ON 17.3.2010 I.E. AFTER A PERIOD OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR (PERIOD OF 4 YEARS EXPIRED ON 31.3.2009). HE SUBMITTED THAT SINCE IN THE PRESE NT CASE, THE ASSESSMENT IS SOUGHT TO BE REOPENED BEYOND THE PERIOD OF 4 YEARS, THEREFORE CONSIDERING THE PROVISO TO SECTION 1 47 OF THE ACT UNLESS AND UNTIL THERE IS ANY FAILURE ON THE PART OF THE ASSESSEE IN NOT DISCLOSING TRUE AND CORRECT FACTS NECES SARY FOR THE PURPOSE OF ASSESSMENT, THE ASSESSING OFFICER IS NOT JUSTIFIED IN REOPENING THE ASSESSMENT. HE SUBMITTED THAT ASSESSEE HAD FILED ALL THE REQUIRED DETAILS DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND THE SAME WAS ACCEPTED BY AO WHILE FRAMIN G THE INITIAL ASSESSMENT ORDER. LD AR POINTING TO THE COPY OF TH E REASONS RECORDED FOR REOPENING THE ASSESSMENT SUBMITTE D THAT THE ASSESSMENT WAS REOPENED INTER-ALIA FOR THE REASON T HAT THE ASSESSEE HAD SOLD DEVELOPMENT RIGHTS. AS PER REVENUE, TH E GAINS ON SALE OF DEVELOPMENT RIGHTS SHOULD HAVE BEEN OFFERED AS BUSINESS INCOME BUT ASSESSEE HAD OFFERED IT AS CAPITAL GAINS, WHICH HAS RESULTED INTO ESCAPEMENT OF INCOME. HE SUBMITTE D THAT AT THE TIME OF RECORDING THE SATISFACTION, THERE WAS NOTH ING BEFORE AO WHICH LED HIM TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME NOR IN THE RECORDED REASONS, AO HAS POINTED AS TO WHAT FACTS WERE NOT DISCLOSED BY THE ASSESSEE WHICH LEAD HIM TO BELIEVE TH AT THERE WAS ESCAPEMENT OF INCOME. HE FURTHER SUBMITTED THAT AS T O HOW THE AO CONCLUDED THAT ASSESSEE HAD SOLD DEVELOPMENT RIG HTS WHEN THERE WAS NOTHING ON RECORD TO THAT EFFECT. HE THE REFORE 6 SUBMITTED THAT IN THE PRESENT CASE SINCE THE PREREQUISIT E CONDITIONS FOR REOPENING HAVE NOT BEEN SATISFIED, THE REOPE NING OF ASSESSMENT IS BAD IN LAW. HE ALSO RELIED ON THE DECISION OF PUNE TRIBUNAL IN THE CASE OF ALFA FOAMS LTD VS. DCIT (ITA NO.1350/PUN/2014) ORDER DT.29.04.2016 AND ACIT VS. KIRLOSK AR OIL ENGINES LTD (ITA NO 1853/PUN/2014) ORDER DT.19.05.201 7. HE ALSO PLACED ON RECORD THE COPY OF THE AFORESAID DECISIO NS. ON THE MERITS OF THE ADDITION, HE REITERATED THE SUBMISSIONS M ADE BEFORE LOWER AUTHORITIES. LD. DR ON THE OTHER HAND SUPPO RTED THE ORDER OF LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT IN THE P RESENT CASE, THE ASSESSMENT FOR AY 2004-05 WAS INITIALLY FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.11.12.2006. THEREAFTER, THE REASONS WERE RECORDED FOR REOPENING THE ASSESSMENT AN D THE REASONS WERE SERVED ON THE ASSESSEE ON 17.3.2010. ADM ITTEDLY, NOTICE U/S 148 HAS BEEN ISSUED AFTER EXPIRY OF 4 YEARS FR OM THE END OF RELEVANT ASSESSMENT YEAR. IT HAS BEEN ISSUED ON 17.03.2010 WHEREAS 4 YEARS FOR AY 2004-05 ENDED ON 31 .3.2010. PROVISO APPENDED TO SEC.147 OF THE IT ACT PUTS AN EMB ARGO UPON THE POWER OF THE AO TO ISSUE NOTICE U/S 148 IN THE CASE S WHERE 4 YEARS HAVE EXPIRED AND THE ORIGINAL ASSESSMENT WAS MADE U/S 143(3) OF THE ACT. THE ESSENTIAL CONDITION TO BE SATISFIED A S PER PROVISO TO SEC.147 OF THE ACT IS THAT THE ESCAPEMENT O F INCOME CHARGEABLE TO TAX SHOULD BE DUE TO THE FAILURE ON PART O F THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS. THU S NO NOTICE CAN BE ISSUED U/S 148 FOR REOPENING OF THE ASSESS MENT 7 UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL THE MATER IAL FACTS FULLY AND TRULY IN RESPECT OF THE INCOME. 8. IN THE PRESENT CASE, IN THE REASONS RECORDED FOR RE OPENING, AO HAS NOTED THAT ASSESSEE HAD SOLD DEVELOPMENT RIGHTS DURING THE YEAR AND THE SURPLUS EARNED ON ITS SALE WAS LIABLE TO BE TAXED AS BUSINESS INCOME AS AGAINST THE CLAIM OF ASSESSEE THAT IT IS CAPITAL GAINS. BEFORE US, IT IS ASSESSEES SUBMISSION THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ISSUE OF CAPITA L GAINS WAS EXAMINED BY AO. FURTHER, ASSESSEE HAD SOLD LAND AN D NOT DEVELOPMENT RIGHTS AND THERE IS NO BASIS FOR ARRIVING AT T HE CONCLUSION THAT ASSESSEE HAD SOLD DEVELOPMENT RIGHTS MOR E SO WHEN NO SUCH DOCUMENTS/AGREEMENTS WHICH HAD THE MENT ION OF SELLING OF DEVELOPMENT RIGHTS WAS FILED BY THE ASSESSEE AND THEREFORE THE CONCLUSION OF AO OF ASSESSEE HAVING SOLD THE DEVELOPMENT RIGHTS IS MERELY ON THE BASIS OF SURMISES. BEFORE US, REVENUE HAS NOT PLACED ANY MATERIAL ON RECORD TO CONTR OVERT THE AFORESAID SUBMISSIONS OF ASSESSEE NOR HAS PLACED ANY MATE RIAL ON RECORD TO SHOW THAT THE ASSESSEE HAD INDEED SOLD DEV ELOPMENT RIGHTS. 9. IT IS A SETTLED LAW THAT THE ASSESSING OFFICER MUST HAV E SOME TANGIBLE MATERIAL AT HIS COMMAND TO FORM A BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, THE R EASONS FOR REOPENING THE ASSESSMENT CANNOT BE BASED ON THE B ASIS OF MERE SUSPICION AND UNVERIFIED DETAILS. FURTHER, THE VALIDITY OF A NOTICE FOR REOPENING AN ASSESSMENT MUST BE JUDGED ON T HE BASIS 8 OF REASONS RECORDED BY THE AO FOR ISSUING SUCH NOTICE AN D THE ACTION CANNOT BE SUPPORTED ON THE BASIS OF MATERIALS O UTSIDE OF THE REASONS RECORDED. THE STATUTORY ORDERS CONTAINING REASONS ARE TO BE JUDGED ON THE BASIS OF WHAT IS APPARENT A ND NOT ON WHAT IS EXPLAINED LATER, AS THE VALIDITY OF THOSE O RDERS DOES NOT IMPROVE WITH THE TIME ON ACCOUNT OF BETTER EXPLANAT IONS FURNISHED IN THE COURSE OF LEGAL PROCEEDINGS. 10. IN THE PRESENT CASE, IN VIEW OF THE FOREGOING, WE ARE SATISFIED THAT THE AO HAS FAILED TO DEMONSTRATE ANY PLAUSIBLE REASON WHICH HAS HELPED HIM TO HARBOR A BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND T RULY IN RESPECT OF HIS INCOME. THEREFORE, WE ALLOW THE ADDITIONAL GROUNDS OF APPEAL AND QUASH THE ASSESSMENT ORDER BY HOLDING TH AT THE AO HAS ERRED IN REOPENING THE ASSESSMENT. SINCE WE HAVE HELD THE REOPENING TO BE BAD, THE OTHER GROUNDS RAISED O N THE MERITS OF ADDITION DO NOT REQUIRE ADJUDICATION. THU S THE GROUNDS OF ASSESSEE ARE ALLOWED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 7 TH DAY OF JULY, 2017. SD/- SD/- ( SUSHMA CHOWLA ) ( ANIL CHATURVEDI ) ! / JUDICIAL MEMBER '! / ACCOUNTANT MEMBER PUNE; ! DATED :7 TH JULY, 2017. YAMINI 9 #$%&'('% / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5. 6. CIT(A)-V, PUNE. CIT-V, PUNE. #$% &&'(,* '(, / DR, ITAT, B PUNE; %,-./ GUARD FILE. / BY ORDER, // //// // TRUE COP // /// TRUE // //COPY // TRUE COPY // / 0123 / ASSISTANT REGISTRAR, * '( , / ITAT, PUNE.