Smt. Kalavathi, Bangalore V. ITO, Bangalore

ITA 814/BANG/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 63696 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 13-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FARHAT HUSSAN QURESHI CIT II
• Assessee Lawyers: V SRINIVASAN
• Keywords: Assessment record; Reason to believe
• Section: 143(3); 142(1); 234B; 147; 148; 139

Judgement Text

PAGE 1 OF 17 ITA NO.81 4/BANG/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO. 814/BANG/2011 (ASST. YEAR 2005-06) SMT. KALAVATHI, #7/3, BULL TEMPLE ROAD, SHANKARPURAM, BANGALORE-4. PA NO.ABIPK0259L VS THE INCOME TAX OFFICER, WARD-3(3), BANGALORE. (APPELLANT) (RESPONDENT) DATE OF HEARING : 27.08.2012 DATE OF PRONOUNCEMENT : 21.09.2012 APPELLANT BY : SHRI V SRINIVASAN, C.A. RESPONDENT BY : SHRI FARHAT HUSSAN QURESHI, CIT- II OR DER PER GEORGE GEORGE K : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE CIT (A)-II, BANGALORE DATED 11.8.2011. THE RELEVANT ASSESSMENT YEAR IS 2005-06. 2. THE ASSESSEE HAS RAISED SEVEN GROUNDS IN HER G ROUNDS OF APPEAL. GROUND NOS.1 AND 7 ARE GENERAL IN NATURE AND, THERE FORE, THEY ARE DISMISSED AS INCONSEQUENTIAL . IN GROUND NO.6 , THE ASSESSEE OBJECTS TO THE CHARGING OF INTEREST U/S 234B AND U/S 234C OF THE ACT. CHARGIN G OF INTEREST U/S 234B AND 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL I N NATURE. THEREFORE, THIS GROUND IS NOT MAINTAINABLE AND, HENCE, THE SAM E IS DISMISSED. THE REMAINING GROUNDS ARE RELATED TO THE FOLLOWING ISSU ES, NAMELY: PAGE 2 OF 17 ITA NO.81 4/BANG/2011 2 (1) THAT THE ORDER OF RE-ASSESSMENT IS BAD IN LAW AND V OID-AB-INITIO FOR WANT OF REQUISITE JURISDICTION AND THE MANDATORY REQ UIREMENTS TO ASSUME JURISDICTION U/S 148 OF THE ACT DID NOT EXIS T AND HAVE NOT BEEN DULY COMPLIED WITH; & (2) THAT THE AUTHORITIES BELOW WERE NOT JUSTIFIED IN AS SESSING THE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE ISSUES ARE AS UNDER: THE ASSESSEE, AN INDIVIDUAL, HAD FILED HER RETUR N OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, DECLARING A TOTAL INCOME OF RS.1,37,990/- WHICH WAS INITIALLY PROCESSED U/S 143 (1) OF THE ACT. IN THE MEANWHILE, THE AO WAS IN RECEIPT OF INFORMATION FRO M HIS COUNTER-PART IN WARD 3(2), BANGALORE, TO THE EFFECT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE AY 2005-06 IN THE CASE OF SHRI V.S. BALASUBRAMANYAM (INCIDENTALLY THE ASSESSEES SPOUSE), IT WAS NOTICE D THAT THE ASSESSEE (SMT. KALAVATHI) HAD RECEIVED A SUM OF RS.2.9 CRORES DURI NG THE FINANCIAL YEAR 2004-05 FROM SRIHARI KHODAY AS SALE CONSIDERATION FO R THE TRANSFER OF PROPERTY SITUATED AT SURVEY NO.43, ITTEMADU VILLAGE OF UTTARAHALLI HOBLI. THE PROPERTY WAS BEING NON-AGRICULTURAL LAND ADMEASU RING 5 ACRES AND 9 GUNTAS. AFTER DULY RECORDING THE REASONS, A NOTICE U/S 148 OF THE ACT WAS ISSUED ON THE ASSESSEE. SUBSEQUENTLY, NOTICES U/S 1 43(2) AND 142(1) WERE SERVED ON THE ASSESSEE REQUIRING HER TO FURNISH THE DETAILS AS CALLED FOR. AFTER CONSIDERING THE ASSESSEES CONTENTIONS AND FO R THE ELABORATE AND COMPREHENSIVE REASONS RECORDED THEREIN, THE AO HAD BROUGHT TO TAX THE LONG TERM CAPITAL GAINS [LTCG] OF RS,2,87,60,000/- IN THE HANDS OF THE ASSESSEE. PAGE 3 OF 17 ITA NO.81 4/BANG/2011 3 4. AGGRIEVED, THE ASSESSEE TOOK UP THE ISSUES, NA MELY, (I) RE- OPENING OF THE ASSESSMENT U/S 147 OF THE ACT; AND ( II) BRINGING TO TAX A SUM OF RS.2.87 CRORES BY WAY OF LTCG BEFORE THE CIT (A) F OR RELIEF. AFTER DUE CONSIDERATION OF THE LENGTHY SUBMISSION OF THE ASSES SEE, AS RECORDED IN HER APPELLATE ORDER, THE CIT (A) HAD REJECTED THE ASSES SEES TWIN ISSUES REFERRED SUPRA. THE RELEVANT PORTIONS OF THE FINDI NGS OF THE CIT (A) ARE EXTRACTED AS UNDER: (I) RE-OPENING OF THE ASSESSMENT U/S 147 OF T HE ACT ; 2.3.THE FACT IS THAT NO ASSESSMENT ORDER U/S 143(3) WAS PASSED IN THE APPELLANTS CASE, BUT, THE PROCEEDINGS STOPPED WITH THE ISSUE OF AN INTIMATION U/S 143(1) OF THE ACT. IT IS, THEREFORE, CLEAR THAT TH E AO HAD NO OPPORTUNITY TO EXAMINE AND FORM AN OPINION ON THE ASSESS-ABILITY OR OTHERWISE OF THE LONG TERM CAPITA L GAINS ARISING FROM THE TRANSFER OF THE APPELLANTS PROPER TY MENTIONED SUPRA. IT WAS ONLY ON RECEIPT OF INFORMAT ION THAT, SINCE ON SIMILAR SET OF FACTS THE ASSESSMENT IN THE CASE OF THE APPELLANTS HUSBAND (SHRI V.S. BALASUBRAMANYAM) HAD RESULTED IN BRINGING CONSIDERAT ION ARISING FROM TRANSFER OF HIS PROPERTY TO TAX UNDER T HE HEAD LONG TERM CAPITAL GAINS, IT TRANSPIRED TO T HE AO THAT IN THE APPELLANTS CASE ALSO THE CONSIDERATION RECEIVED BY HER FROM TRANSFER OF HER PROPERTY WAS LIA BLE TO TAX UNDER THE HEAD LONG TERM CAPITAL GAINS. H E, THEREFORE, ISSUED A NOTICE U/S 148 OF THE ACT TO R E-OPEN THE APPELLANTS CASE U/S 147 OF THE ACT FOR BRINGIN G TO TAX THE LONG-TERM CAPITAL GAINS ARISING FROM THE TR ANSFER BY THE APPELLANT OF HER PROPERTY IN FAVOUR OF SHRI K.L.SRIHARI THROUGH DEVIOUS MEANS AFTER RECORDING I N THE FILE THE REASONS FOR SUCH A BELIEF REPRODUCED AT PA RA 3.1 SUPRA. .. PAGE 4 OF 17 ITA NO.81 4/BANG/2011 4 5. EXTENSIVELY AND ELABORATELY ANALYZING AND QUOTING THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF ACIT V. RA JESH JHAVERY STOCK BROKERS P. LTD REPORTED IN (2007) 291 ITR 500 (SC), THE CIT (A) HAD OBSERVED THUS: 2.5. APPLYING THE RATIO LAID DOWN BY THE APEX COURT IN THE AFORESAID CASE [ACIT V. RAJESH JHAVERY STOCK BROKERS P. LTD REPORTED IN (2007) 291 ITR 500], IT CAN BE SEEN IN THE LIGHT OF THE FACTS NARRATED ABOVE IN TH E PRESENT CASE THAT THE AO WAS FULLY JUSTIFIED IN FORM ING A BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. 2.6. AS REGARDS THE APPELLANTS OBJECTION IN GROUND NO.2(B) THAT THE RE-ASSESSMENT ORDER PASSED BY THE A O IS BAD IN LAW IN THE LIGHT OF THE HONBLE SUPREME C OURTS DECISION IN THE CASE OF GKN DRIVESHAFTS REPORTED IN 259 ITR 19, I FIND THAT THE AO HAD COMMUNICATED THE REASONS FOR REOPENING THE ASSESSMENT VIDE HIS LETTE R DATED 3/2/2010 AND 4/3/2010 IN RESPONSE TO WHICH TH E APPELLANT HAD SUBMITTED HER DETAILED REPLY DATED 17/3/2010, REQUESTING THAT THE RETURN SUBMITTED ON 29/7/2005 BE TREATED AS A RETURN FILED IN RESPONSE TO THE NOTICE U/S 148 OF THE ACT. 2.7. IT IS CLEAR, THEREFORE, THAT THE RATIO OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT (SUPRA) HAS BEEN FOLLOWED IN SUM AND SUBSTANCE AND THE APPELLANT HAS BEEN COMMUNICATED T HE REASONS FOR REOPENING THE CASE FOR WHICH SHE HAS FI LED A DETAILED REPLY, SHOWING THEREBY THAT SHE HAS BEEN MAD E AWARE OF THE ISSUES INVOLVED. THE DETAILED REASONS AS RECORDED IN THE ORDER SHEET HAVE ALSO BEEN REPRODUC ED IN THE ASSESSMENT ORDER. PAGE 5 OF 17 ITA NO.81 4/BANG/2011 5 2.8. THIS IS A CASE WHERE THE ORIGINAL ASSESSMENT H AD BEEN MADE U/S 143(1) AND NOT U/S 143(3) AND REOPENI NG THEREOF BY ISSUE OF A NOTICE U/S 148 DATED 11/5/2009 DELIVERED ON THE APPELLANT ON 9/7/2009 IS WITHIN 4 YEARS FROM THE END OF THE ASSESSMENT YEAR IN WHICH THE INTIMATION U/S 143(1) WAS SENT TO THE APPELLANT. T HE REOPENING AND ASSUMPTION OF JURISDICTION THEREOF IS , THEREFORE, IN ORDER. THE ACTION OF THE AO IN INITI ATING PROCEEDINGS U/S 147 OF THE ACT BY ISSUE OF A NOTICE U/S 148 OF THE ACT IS VALID AND, THEREFORE, UPHELD. (II) BRINGING TO TAX A SUM OF RS.2.87 CRORES BY WAY OF L TCG: 5.1 AFTER DUE CONSIDERATION OF THE ASSESSEES SUB MISSION AS WELL AS DETAILING THE SEQUENCE OF EVENTS WHICH TOOK PLACE F ROM THE PURCHASE OF LANDS AT ITTAMADU TILL THE EXECUTION OF A DEED OF R ETIREMENT-CUM- RECONSTITUTION OF THE FIRM DATED 22.5.2004 AND ALSO THE REASONING OF THE AO IN REJECTING THE ASSESSEES CONTENTIONS AS RECORDED IN HER ORDER, THE CIT (A) HAD CONFIRMED THE STAND OF THE AO IN BRINGING TO TA X THE SUM OF RS.2.87 CRORES AS LTCG IN THE HANDS OF THE ASSESSEE. THE R ELEVANT PORTIONS OF THE OBSERVATIONS OF THE CIT (A) ARE EXTRACTED HEREUNDER : 3.3. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE APPELLANT AND PERUSED THE FACTS OF THE CASE AS BORN E OUT BY THE ASSESSMENT RECORDS AS ALSO THE ASSESSMENT ORDER . THE FACTS THAT EMERGE ARE: (I) THE APPELLANT WAS OWNER OF PROPERTY BEARING SURVEY NO.43, ITTEMEDU VILLAGE, UTTARAHALLI, BANGALORE SOU TH; (II) PAYMENT FOR THIS TRANSFER WAS RECEIVED BY THE APPELLANT FROM 13.6.03 TO 30.9.04 AS PER 3.2 (XII) ABOVE; (III) THE APPELLANTS CLAIM THAT THIS AMOUNT HAD BEEN TRANSFERRED TO M/S.HIGHLAND ENTERPRISES AS CAPITAL CONTRIBUTION ON 23.12.1988 AND RECEIVED BACK BY HER ON PAGE 6 OF 17 ITA NO.81 4/BANG/2011 6 22.5.2004 FOLLOWING HER RETIREMENT THERE-FROM AND RECONSTITUTION OF THE FIRM, IS NOT ACCEPTABLE; (IV) THERE IS NO PROOF OF ALLEGED PARTNERSHIP HAVING BEE N CONSTITUTED AS ON 23.12.1988 AS CLAIMED. NO ORIGIN AL DEED WAS PRODUCED AT THE TIME OF ASSESSMENT PROCEEDINGS OR DURING THE APPEAL PROCEEDINGS BY THE APPELLANT OR HER HUSBAND; (V) NO BANK ACCOUNT IN THE NAME OF SUCH ALLEGED FIRM WA S OPENED SINCE ITS ALLEGED FORMATION ON 23.12.1988 SHOWING THEREBY THAT NO BUSINESS WAS CARRIED OUT OR INTENDED TO BE CARRIED OUT; (VI) THE ALLEGED PARTNERSHIP FIRM HAS BEEN REGISTERED ON LY ON 23.7.2003 AT AROUND THE TIME WHEN THE TRANSFER HAD TAKEN PLACE AND THE PAYMENTS HAD BEEN RECEIVED; (VII) THE VALUE OF ALLEGED CAPITAL CONTRIBUTION OF RS.2.2 CRORES WORTH OF LAND ON 23.12.1988 IS TOTALLY WRONG. AS POINTED OUT BY THE AO, IF THE SAME HAD ACTUALLY TAKEN PLACE ON 23.12.1988, THE COULD AT BEST HAVE B EEN RS.38000/- (OR RS.80500/- IF COST INFLATION INDEX A S ON 1.4.1981 IS TAKEN INTO CONSIDERATION) AND NOT RS.2. 2 CRORES. THIS ONLY SHOWS THAT THIS HAS BEEN FRAMED O NLY AT THE TIME OF REGISTRATION OF THE DEED WHEN THE S AID TRANSACTION WAS ENVISAGED AND NOT IN 1998 (SIC) 198 8 AS CLAIMED BY THE APPELLANT AND FOR THE SOLE PURPOSE O F AVOIDING TAX ON CAPITAL GAINS BY THE ARRANGEMENT; (VIII) THE APPELLANT HAS ALSO FILED A CRIMINAL COMPLAINT I N THE COURT OF CHIEF METROPOLITAN MAGISTRATE BRINGING OUT THAT THE PARTNERSHIP DEED WAS FARCE VIDE PCR NO.135/06 DATED 8/1/2007. THIS IS EVIDENT FROM THE AOS ASSESSMENT ORDER DATED 19/12/2007 IN THE CASE OF THE APPELLANTS HUSBAND (SHRI V.S. BALASUBRAMANYAM) VIDE PAGE 9 PARA 9 WHICH READS AS UNDER: 9.IT IS CLEAR..WITH ACCUSED NO.1 TO 4. (IX) THE APPELLANTS ARGUMENT THAT IN CIVIL MISC. PETITI ON NO.34/2007 DT.13.11.2007 THE HONBLE HIGH COURT OF PAGE 7 OF 17 ITA NO.81 4/BANG/2011 7 KARNATAKA HAD UPHELD THE EXISTENCE OF THE PARTNERSH IP DEED CANNOT BE ACCEPTED BECAUSE THE HONBLE HIGH COURT HAS ONLY BROUGHT OUT THAT THERE IS NO CLAUSE PROVIDING FOR ARBITRATION IN THE EVENT OF ANY DISPUT E ARISING BETWEEN THE PARTIES CONCERNED. IT IS, THEREFORE, CLEAR THAT THE HONBLE HIGH COURT DID NO T DEAL WITH THE ISSUE OF PARTNERSHIP DEED BEING IN EXISTENCE. THEREFORE, NOTHING MORE CAN BE READ INT O THE ORDER OF THE HONBLE HIGH COURT AS IT IS NOT A FINDING ON THE EXISTENCE OF PARTNERSHIP DEED, THE I SSUE NEVER HAVING BEEN BROUGHT BEFORE THE HONBLE HIGH COURT. IN FACT, THE CIVIL COURT HAS FINALLY APPOINT ED AN ARBITRATOR TO SETTLE THE DISPUTE. (X) THE REGISTRATION OF THE SAID PARTNERSHIP DEED ALMOS T COINCIDES WITH THE TRANSACTION OF SALE OF PROPERTY H ELD BY THE APPELLANT (I.E., THE DATE OF RECEIPT OF CHEQU E); (XI) ALSO, THE PAYMENT HAD BEEN RECEIVED FROM SHRI SRIHAR I BY MEANS OF PAY ORDERS [PLEASE SEE CHART IN PARA 3.2(XII)(SUPRA) FOR DETAILS OF PAYMENTS RECEIVED]. 3.4. IN VIEW OF THESE FACTS WHICH EMERGE FROM THE RECORDS AVAILABLE, I AM IN AGREEMENT WITH THE FINDI NGS OF THE AO THAT THE FORMATION OF THE PARTNERSHIP AND IT S RECONSTITUTION ARE MERELY TOOLS TO AVOID PAYMENT OF T AX AND NOT A PARTNERSHIP FIRM IN REALITY. 3.5. THE SUM OF RS.2.2 CRORES RECEIVED BY THE APPELL ANT IS TAXABLE AS CAPITAL GAINS. THE AO HAS RIGHTLY DONE S O AFTER GIVING THE BENEFIT OF INDEXATION. 3.6. THE ONLY NEW ARGUMENT AND FACT BROUGHT ON RECOR D BY THE APPELLANT IS THE JUDGMENT OF THE HONBLE H.C OF KARNATAKA IN CIVIL MISC. PETITION NO.34/2002 DATED 13/11/2007 BETWEEN THE APPELLANT AND HER HUSBAND SH RI V.S. BALASUBRAMANYAM ON THE ONE HAND AS PETITIONERS AND K.L. SRIHARI AND OTHERS ON THE OTHER HAND AS RESPON DENTS WHEREIN IT IS HELD THAT THE ALLEGED PARTNERSHIP DEE D DOES NOT PROVIDE FOR THE APPOINTMENT OF ARBITRATOR IN TH E PAGE 8 OF 17 ITA NO.81 4/BANG/2011 8 EVENT OF ANY DISPUTE ARISING BETWEEN THE PARTIES CONCERNED; 3.7. I HAVE ALREADY DISCUSSED AT PARA 3.3. (IX)(SUP RA) THAT THIS JUDGMENT DOES NOT MEAN THAT THE HIGH COURT HAS HELD THAT THE PARTNERSHIP IS VALID OR GENUINE AS TH IS ISSUE WAS NOT BEFORE THE HONBLE HIGH COURT; 3.8. AS PER S. 6 OF THE INDIAN PARTNERSHIP ACT, TH ERE SHALL BE A PROVISION FOR SHARE OF PROFIT IN A PARTN ERSHIP DEED. HOWEVER, IN THE PRESENT CASE, THE SHARE OF CONTRIBUTION VIS--VIS THE SHARE OF PROFIT OF THE P ARTNERS WAS AS UNDER: NAME OF THE PARTNER SHARE OF CONTRIBUTION PROFIT SHARING RATIO SHRI V.S BALASUBRA- MANYAM SMT.KALAVATHI 50% 50% 100% 3% M/S. L.K. TRUST 0% 97% 3.9. THIS IS TOTALLY AGAINST THE REQUIREMENTS OF A PARTNERSHIP FIRM AS ENVISAGED IN THE INDIAN PARTNER SHIP ACT AND, THEREFORE, NOT VALID . 5.2 WITH REGARD TO THE ASSESSEES CONTENTION THAT SINCE AN AMOUNT OF RS.2.85 CRORES WAS RECEIVED ON RETIREMENT FROM T HE PARTNERSHIP FIRM, IT IS NOT EXIGIBLE TO CAPITAL GAINS TAX, THE CIT (A) H AD OBSERVED THAT THE AO EXAMINED THE ASSESSEES CONTENTIONS AND CONSIDERED THAT THE AMOUNT WAS TAXABLE U/S 45 OF THE ACT. THE CIT (A) HAD, BY EXTR ACTING THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF KARTHIKEYA V. S ARABHAI SIDDANTHA BAHI V. CIT (156 ITR 509) AT LENGTH, OBSERVED THUS: 3.11. IN VIEW OF THE FACTS OF THE PRESENT CASE, TH E FORMATION OF THE PARTNERSHIP ITSELF IS NOT GENUINE IN AS MUCH AS THE APPELLANT AND HER HUSBAND, SHRI V.S. PAGE 9 OF 17 ITA NO.81 4/BANG/2011 9 BALASUBRAMANYAM, AS PARTNERS WHO CONTRIBUTED THEIR LANDS AS THEIR CAPITAL WERE ENTITLED TO ONLY 3 PER C ENT SHARE IN THE PROFIT/LOSS OF THE FIRM WHEREAS THE OT HER PARTNER VIZ., M/S. L.K. TRUST WAS ENTITLED TO 97 PE R CENT OF THE PROFITS WITHOUT CONTRIBUTING ANY CAPITAL EIT HER MOVABLE OR IMMOVABLE. THE APPELLANT DID NOT FILE T HE ORIGINAL PARTNERSHIP DEED EVEN AT THE APPELLATE STA GE IN SPITE OF BEING ASKED TO DO SO. IT IS ALSO SEEN FRO M THE RECORDS THAT THE SAID FIRM HAS NOT FILED RETURNS OF INCOME EVER SINCE ITS INCEPTION AND THAT IT HAD NOT OPENED ANY BANK ACCOUNT. BESIDES, EVEN THOUGH THE FIRM WAS ALLEGEDLY FORMED ON 23.12.1988, IT WAS REGISTERED WI TH THE REGISTRAR OF FIRMS ON 23.7.2003 I.E., NEARLY 15 YEARS AFTER ITS ALLEGED FORMATION. THE APPELLANT HERSELF HAS QUESTIONED THE GENUINENESS OF THE PARTNERSHIP FIRM IN THE COMPLAINT LODGED BY HER WITH THE CHIEF METROPOLI TAN MAGISTRATE, BANGALORE. ALL THESE GO TO CLEARLY SHOW THAT THE PARTNERSHIP WAS NOT GENUINE. I AM, THEREFORE, INCLINED TO AGREE WITH THE VIEW OF THE AO THAT THE MANNER IN WHICH THE PROPERTY WAS TRANSFERRED TO THE FIRM AND THE APPELLANT TAKING RETIREMENT FROM THE PARTNERSHIP FIRM INDICATED THAT THE APPELLANT WANTE D TO AVOID THE PAYMENT OF TAX ON THE CAPITAL GAINS ARISIN G FROM SUCH TRANSFER OF THE SAID PROPERTY AS THE AO HAS EXPOSED THE FRAUD INTENDED BY THE APPELLANT AND COME TO THE CORRECT CONCLUSION IN THIS REGARD. IN OTHER WO RDS, THE ENTIRE SCHEME WAS SHAM IN NATURE AS HELD BY THE HONBLE SUPREME COURT IN THE CASE CITED ABOVE. 3.12. SUBSEQUENT TO THE SO CALLED RETIREMENT-CUM- RECONSTITUTION OF THE PARTNERSHIP DEED, THE AFORESA ID LAND WAS TRANSFERRED TO M/S. PRESTIGE ESTATE PROJEC T PVT. LTD VIDE AGREEMENT DATED 23.12.2005 BY M/S. HIGHLAN D ENTERPRISES REPRESENTED BY ITS PARTNERS VIZ., M/S. L .K. TRUST, SRI K.L. SRIHARI AND SRI K.L.A. PADMANABHASA . NOWHERE IN THE AGREEMENT, HAVE THE APPELLANT AND HE R HUSBAND SHRI V.S. BALASUBRAMANYAM BEEN MADE PARTIES TO THE TRANSFER OF THE PROPERTY. IN VIEW OF THE FACT T HAT PAGE 10 OF 17 ITA NO.8 14/BANG/2011 10 THE TRANSFER HAS BEEN EFFECTED BY AGREEMENT DATED 22.5.2004, THE APPELLANT AND HER HUSBAND HAVE RECEI VED THEIR RESPECTIVE SHARES DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR IN QUESTION. BESIDES, IT IS SEEN FR OM THE RECORDS THAT THE VALUE OF THE PROPERTY IN QUESTION W AS TAKEN AT RS.2 CRORES AS ON 31.3.1989 ARTIFICIALLY AN D WITHOUT ANY BASIS AND SINCE THE FIRM HAS NOT FILED I TS RETURNS, THERE IS NO SCOPE FOR THE DEPARTMENT TO ASCERTAIN THE CORRECTNESS OF THE VALUE ADOPTED BY TH E APPELLANT. 3.13. IN VIEW OF THE FOREGOING, THE ACTION OF THE A O IN BRINGING TO TAX THE SUM OF RS.2,87,60,000/- AS LONG -TERM CAPITAL GAINS IS CONFIRMED. 6. AGGRIEVED, THE ASSESSEE HAS COME UP WITH THE P RESENT APPEAL. 7. DURING THE COURSE OF HEARING, THE LEARNED AR P LEADED THAT THE SUBMISSIONS MADE IN THE CASE OF THE ASSESSEES HUSB AND SHRI V.S. BALASUBRAMANYAM [ITA NO.189/B/10] HOLD GOOD IN RESP ECT OF BRINGING TO TAX RS.2.87 CRORES BY WAY OF LTCG IN THE HANDS OF THE PRE SENT ASSESSEE AS THE ISSUE IS IDENTICAL IN BOTH THE CASES. 7.1 WITH REGARD TO THE RE-OPENING OF THE ASSESSME NT IN THE PRESENT ASSESSEES CASE, IT WAS SUBMITTED THAT THE REASONS RECORDED BY THE AO DO NOT SHOW THAT THERE WAS REASON TO BELIEVE THAT INCO ME HAS ESCAPED ASSESSMENT. IT WAS, FURTHER, SUBMITTED THAT THOUGH THE ASSESSEE HAD SOUGHT FOR REASONS RECORDED BY LETTERS DATED 16.2.20 10 AND AGAIN ON 17.3.2010, THE AO HAD CONCLUDED THE ASSESSMENT WITH OUT GIVING A COPY OF THE REASONS RECORDED AND, THEREFORE, THE ASSESSEE C OULD NOT FILE ANY OBJECTIONS BEFORE THE AO. WHEN THE CIT (A)S ATTEN TION WAS DRAWN TO THE PAGE 11 OF 17 ITA NO.8 14/BANG/2011 11 FACT THAT THE RE-OPENING OF THE ASSESSMENT WAS UNJU STIFIED, IT WAS SUBMITTED, THE CIT (A) REJECTED THE ASSESSEES PLEA QUOTING THE RULING OF THE SUPREME COURT IN THE CASE OF RAJESH JHAVERY STOC K BROKERS P. LTD CITED SUPRA. 7.2 REPUDIATING THE CIT (A)S CLAIM THAT THE AO H AD COMMUNICATED THE REASONS BY THE LETTERS DATED 3.2.2010 AND 4.3.20 10, THE ASSESSEE SUBMITTED THAT BOTH THE LETTERS OF THE AO REFERRED ABOVE SPOKE OF THE TRANSACTION WITH SRIHARI KHODAY AND THERE WAS NOTHIN G TO INDICATE THAT THE SAME WAS THE REASON FOR RE-OPENING OF THE ASSESSMEN T. WITHOUT PREJUDICE, IT WAS SUBMITTED THAT ON A CURSORY PERUSAL OF THE RE ASONS, IT BECOMES CLEAR THAT THE REASONS RECORDED PORTRAYS ONLY A REASON TO SUSPECT AND NOT A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. IT WAS, FURTHER, SUBMITTED THAT THE RECORDING IN THE REASON THAT THE ASSESSEE APPEARS TO HAVE NOT DISCLOSED THIS TRANSACTION BELIES THE CLAI M THAT THERE WERE OBJECTIVE REASONS TO SUPPORT THE SUBJECTIVE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IT WAS FURTHER CLAIMED THAT THE AO WAS NOT CLEAR AS TO WHETHER THE ASSESSEE HAD DISCLOSED THE TRANSACTION OR NOT AND, THEREFORE, THERE WERE NO JUSTIFIABLE REASONS RECORDED BY THE AO TO HOLD THAT INCOME HAD ESCAPED ASSESSMENT. STRONG RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (A) CALCUTTA DISCOUNT CO. LTD 41 ITR 181 (SC); (B) LAKHMANI MEWALDAS 103 ITR 437 (SC); (C) GAMGASARAN 130 ITR 1; & (D) CHHUGMAL RAJPAL - 79 ITR 603 (SC). PAGE 12 OF 17 ITA NO.8 14/BANG/2011 12 7.3 IN CONCLUSION, IT WAS SUBMITTED THAT THE RE-O PENING OF THE ASSESSMENT WAS TOTALLY UNJUSTIFIED AND, ACCORDINGLY, PRAYED THAT THE SAME REQUIRES TO BE CANCELLED. 8. ON THE OTHER HAND, THE LEARNED DR SUBMITTED TH AT THE CIT (A) WAS FULLY JUSTIFIED IN REJECTING THE ASSESSEES CLAI M WITH REGARD TO THE REOPENING OF THE ASSESSMENT BY THE AO. IN RESPECT O F ASSESSING THE CAPITAL GAINS IN THE HANDS OF THE ASSESSEE, THE LEARNED DR PRAYED THAT THE SUBMISSION MADE IN THE CASE OF THE ASSESSEES HUSBA ND [SHRI V.S.BALASUBRAMANYAM] BE CONSIDERED IN THE CASE OF T HE PRESENT ASSESSEE ALSO AS THE ISSUE INVOLVED IN BOTH THE CASES IS ID ENTICAL. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS, PERUSED THE RELEVANT MATERIALS ON RECORD AND ALSO THE CASE LAWS ON WHICH THE LEARNED AR HAD PLACED STRONG RELIANCE. THE ISSUES RAISED BY TH E ASSESSEE ARE DEALT WITH CHRONOLOGICALLY AS UNDER: (I) RE-OPENING OF THE ASSESSMENT U/S 147 OF THE ACT ; 9.1 THE PRIME CONTENTION OF THE ASSESSEE WAS THAT THE REASSESSMENT CONCLUDED U/S 143(3) R.W.S 147 OF THE ACT WAS BAD IN LAW FOR WANT OF REQUISITE JURISDICTION ETC. IN THIS CONNEC TION, WE WOULD LIKE TO POINT OUT THAT IN THE PRESENT CASE; NO ASSESSMENT ORDER U /S 143(3) OF THE ACT WAS PASSED. HOWEVER, THE RETURN OF INCOME FILED BY THE ASSESSEE WAS, INITIALLY, PROCESSED U/S 143(1) OF THE ACT. AS PER THE SAID SECTION, THE ROLE OF THE AO IS CONFINED AS MUCH AS THAT WHEN A RETURN IS MADE U/S 139 OR IN RESPONSE TO A NOTICE U/S 142(1) OF THE ACT, SUCH RE TURN SHALL BE PROCESSED IN THE FOLLOWING MANNER: PAGE 13 OF 17 ITA NO.8 14/BANG/2011 13 (A) THE TOTAL INCOME OR LOSS SHALL BE COMPUTED AFTER MA KING THE FOLLOWING ADJUSTMENTS, NAMELY: (I) ANY ARITHMETICAL ERROR IN THE RETURN; OR (II) AN INCORRECT CLAIM, IF SUCH INCORRECT CLAIM IS APPA RENT FROM ANY INFORMATION IN THE RETURN; (B) THE TAX AND INTEREST, IF ANY SHALL BE COMPUTED ON T HE BASIS OF TOTAL INCOME COMPUTED UNDER CLAUSE (A); (C) THE SUM PAYABLE BY, OR THE AMOUNT OF REFUND DUE .OR INTEREST; (D) AN INTIMATION SHALL BE PREPARED OR GENERATED AND SENT..; AND (E) THE AMOUNT OF DUE. 9.2 THUS, IN THE INSTANT CASE THE AO HAD NO OCCAS ION TO EXAMINE AND TO FORM AN OPINION ON THE ASSESSABILITY OR OTHERWISE OF LONG TERM CAPITAL GAINS ARISING OUT OF THE TRANSFER OF THE SUBJECT PR OPERTY. HOWEVER, ON RECEIPT OF A SPECIFIC AND CREDIBLE INFORMATION FROM HIS COUNTER-PART TO THE EFFECT THAT ON IDENTICAL FACTS, THE ASSESSMENT IN THE CASE OF THE ASSESSEES SPOUSE [ SHRI V.S. BALASUBRAMANYAM] HAD RESULTED IN TAXING THE CONSIDERATION ARISING FROM TRANSFER OF THE PROPERTY OWNED BY HIM UNDER THE HEAD LONG TERM CAPITAL GAINS, THE AO HAD REASON T O BELIEVE THAT IN THE ASSESSEES CASE TOO, THE CONSIDERATION RECEIVED BY H ER FROM THE TRANSFER OF HER PROPERTY WAS ALSO LIABLE TO BE TAXED UNDER THE HEAD LONG TERM CAPITAL GAINS WHICH HAD ESCAPED ASSESSMENT IN LIEU OF NON- DISCLOSURE OF SUCH RECEIPT IN HER RETURN OF INCOME SO FURNISHED. 9.3 AFTER DULY RECORDING THE REASONS U/S 147 OF TH E ACT FOR THE ESCAPEMENT OF SUCH LONG TERM CAPITAL GAINS FOR ASSE SSMENT, HE HAD ISSUED A NOTICE U/S 148 OF THE ACT. AT THIS JUNCTURE, WE WO ULD INTEND TO RECALL THE CONTENTIONS OF THE ASSESSEE THAT THE REASSESSMENT M ADE WAS BAD IN LAW AND PAGE 14 OF 17 ITA NO.8 14/BANG/2011 14 REQUIRES TO BE CANCELLED HAVING REGARD TO THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS CITED (SUPRA) ETC., 9.4 IN THE CASE OF GKN DRIVESHAFTS, THE SUBSTANCE OF THE RULING OF THE HONBLE SUPREME COURT WAS THAT REASONS FOR ISSUING THE IMPUGNED NOTICES HAVE BEEN DISCLOSED AND THAT THE PETITIONER CAN RAISE OBJECTIONS BEFORE THE AO AND THE AO HAS TO DISPOSE OF THE OBJE CTION, IF FILED BY THE PETITIONER. HOWEVER, IN THE PRESENT CASE, ON RECEIPT OF NOTIC ES U/S 143(2) AND 142(1) DATED 3.2.2010, THE ASSESSEE SOUGHT FOR THE REASONS RECORDED IN WRITING FOR REOPENING THE CASE. ACCORDING TO THE A O, THE REASONS RECORDED FOR REOPENING OF THE CASE WAS COMMUNICATED TO THE A SSESSEE. IN RESPONSE, THE ASSESSEE HAD FURNISHED A DETAILED REPLY ON 17.3. 2010 IN WHICH SHE HAD STATED THAT 1. I HAVE ORIGINALLY FILED MY RETURN OF INCOME ON 29.07.2005 REPORTING AN INCOME OF RS.1,38,320/- WHI CH CONSISTED OF INCOME FROM HOUSE PROPERTY AND INCOME FROM OTHER SOURCES AND NO INCOME FROM CAPITAL GAINS WAS REPORTED BY ME AS NO CAPITAL GAINS IN FACT AND LAW A ROSE TO ME LIABLE TO TAX IN MY HANDS. LATER, THERE WAS A NOTICE ISSUED TO ME U/S 148 OF THE ACT DATED 11.5.2009 AND IN RESPONSE TO THE SAID NOTICE, I HAVE SUBMITTED MY LET TER DATED 24.7.2009 THAT I HAD ALREADY FILED MY RETURN ON 29.7.2005. I HAD ALSO ENCLOSED ALONG WITH THE SAID LETTER THE COPY OF THE RETURN FILED BY ME EARLIER. 2. LATER, ON CERTAIN CLARIFICATION, I HAVE SUBMITT ED BY ME LETTER DATED 16/2/2010 FILED IN YOUR OFFICE ON 17/2/ 2010 THAT THE RETURN FILED BY ME EARLIER ON 24.7.2009 COU LD BE TAKEN AS ONE FILED IN RESPONSE TO NOTICE ISSUED U/S 148 OF THE ACT WHICH RETURN IS NOTHING BUT THE RETURN FILE D BY ME EARLIER ON 29.7.2005 AND THIS RETURN COULD BE PAGE 15 OF 17 ITA NO.8 14/BANG/2011 15 CONSIDERED AS ONE FILED UNDER PROTEST AND I HAVE ALSO SOUGHT THE REASONS RECORDED IN WRITING BEFORE ISSUA NCE OF NOTICE U/S 148 OF THE ACT. 9.5 IN THIS CONNECTION, WE WOULD LIKE TO EMPHASIZ E THAT THERE WAS NO TRACE OF ANY OBJECTION WORTH THE NAME FOR THE REA SONS RECORDED FOR REOPENING OF THE ASSESSMENT WHEREAS THE ASSESSEE HA D, IN FACT, FURNISHED THE DETAILS AS CALLED FOR AND INSISTED THAT THE RETURN FILED BY ME EARLIER ON 24.7.2009 COULD BE TAKEN AS ONE FILED IN RESPONSE T O NOTICE ISSUED U/S 148 OF THE ACT WHICH RETURN IS NOTHING BUT THE RETURN FILE D BY ME EARLIER ON 29.7.2005 9.6 CONSIDERING THE ABOVE STATE OF AFFAIRS, WE AR E OF THE FIRM VIEW THAT SINCE THE ASSESSEE HAD NOT OBJECTED TO THE ISS UANCE OF NOTICE U/S 148 OF THE ACT, THE RULING OF THE HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFTS (SUPRA) CANNOT COME TO HER RESCUE. AT THE SAME TIME, IT IS MORE APPROPRIATE TO RECALL THE RULING OF THE HONBLE APE X COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS (P) LTD (SUPRA ). THE HONBLE COURT, AFTER DULY TAKING COGNIZANCE OF VARIOUS DECISIONS RE NDERED BY IT EARLIER, CONSTRUED THE WORDS REASON TO BELIEVE IN S. 147 O F THE ACT AND RULED THAT SEC. 147 AUTHORIZES AND PERMITS THE A O TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX, IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAP ED ASSESSMENT. THE WORD REASON IN THE PHRASE REASO N TO BELIEVE WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCO ME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON T O BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOUL D PAGE 16 OF 17 ITA NO.8 14/BANG/2011 16 HAVE FULLY ASCERTAINED THE FACT BY LEGAL EVIDENCE OR CONCLUSION. THE SCOPE AND EFFECT OF S. 147 AS SUBS TITUTED W.E.F 1 ST APRIL, 1989 AS ALSO SS. 148 TO 152 ARE SUBSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY S TOOD PRIOR TO SUCH SUBSTITUTION. UNDER THE OLD PROVISIO NS OF S. 147 SEPARATE CLS. (A) AND (B) LAID DOWN THE CIRCUMS TANCES UNDER WHICH INCOME ESCAPING ASSESSMENT FOR THE PAST ASSESSMENT YEARS COULD BE ASSESSED OR REASSESSED. T O CONFER JURISDICTION UNDER S. 147(A), TWO CONDITIONS WERE REQUIRED TO BE SATISFIED, FIRSTLY, THE AO MUST HAVE REASON TO BELIEVE THAT INCOME PROFITS OR GAIN CHARG EABLE TO INCOME-TAX HAVE ESCAPED ASSESSMENT AND SECONDLY H E MUST ALSO HAVE REASON TO BELIEVE THAT SUCH ESCAPEME NT HAS OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY A LL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR. BOTH THESE CONDITIONS WERE CONDITIONS PRECEDENT TO BE SATISFIED BEFORE THE A O COULD HAVE JURISDICTION TO ISSUE NOTICE U/S 148 RWS. 147(A). BUT UNDER SUBSTITUTED S. 147 EXISTENCE OF ONLY THE FIRST CONDITION SUFFICES. IN OTHER WORDS, IF THE AO FOR WHATEVER REASON HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, IT CONF ERS JURISDICTION TO REOPEN THE ASSESSMENT.. [PARAS 17,18 & 20] 9.7 IN CONSONANCE WITH THE RATIO LAID DOWN BY THE HONBLE SUPREME COURT REFERRED ABOVE, WE ARE OF THE FIRM VIEW THAT THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE STAND OF THE AO ON THIS POINT. ACCORDINGLY, THIS GROUND IS DECIDED AGAINST THE ASSESSEE. (II) BRINGING TO TAX A SUM OF RS.2.87 CRORES BY WAY OF L TCG: 9.8 AT THE OUTSET, WE WOULD LIKE TO REITERATE THA T AN IDENTICAL ISSUE TO THAT OF THE PRESENT ONE HAS BEEN ELABORATELY DEAL T WITH BY THIS BENCH IN THE CASE OF THE ASSESSEES HUSBAND SHRI V. S. BALAS UBRAMANYAM [ ITA PAGE 17 OF 17 ITA NO.8 14/BANG/2011 17 NO.189/B/10 OF EVEN DATE]. THE FINDINGS RECORDED T HEREIN HOLD GOOD FOR THE PRESENT CASE ALSO; AS ADMITTEDLY, THE ISSUE RAISED BY THE ASSESSEE IS AKIN TO THE ISSUE CONSIDERED IN THE CASE OF THE ASSESSEES HUSBAND. ACCORDINGLY, THIS ISSUE GOES AGAINST THE ASSESSEE. IN ESSENCE, THE CIT (A) WAS JUSTIFIED IN UPHOLDING THE STAND OF THE AO IN BRINGING TO TAX THE SUM OF RS.2.87 CRORES AS LTCG IN THE HANDS OF THE ASSESSEE. 10. IN THE RESULT, THE ASSESSEES APPEAL IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER, 2012 SD/- SD/- (JASON P BOAZ) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNE D. 4. THE CIT(A) CONCERNED. 5. DR 6. GF MSP/ BY ORDER SENIOR PRIVATE SECRETARY, ITAT, BANGALORE.