G.M. FINANCE AND TRADING CO, V. DCIT CEN CIR 23(1),

MA 482/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 9052 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 10 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 31-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 20-09-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K G KUTTY
• Keywords: Reopening of assessment; Depreciation; Tangible material; Fair market value; Difference of opinion; Valuation report; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, G, MUMBAI BEFORE S/SHRI R.S. SYAL A.M. AND DINESH KUMAR AGARW AL, JM M.A. NOS. 481 & 482/MUM/2011 ARISING OUT OF ITA NOS. 718 & 719/MUM/2011 (ASSESSMENT YEARS 2004-05 & 2005-06) G.M. FINANCE & TRADING CO., ITM COMPOUND, BBD GATE, LBS MARG, VIKHROLI (WEST), MUMBAI 400 073. PAN: AAAFG1367J DY. COMMISSIONER OF INCOME TAX CIRCLE 23(1), MUMBAI 400 020. APPLICANT V/S RESPONDENT DATE OF HEARING : 24- 8-2012 DATE OF PRONOUNCEMENT : 31-8-2012 APPLICANT BY : SHRI SA LIL KAPOOR & SHRI VIKAS JAIN RESPONDENT BY : SHRI K.G. KUTTY O R D E R PER DINESH KUMAR AGARWAL (JM) THESE TWO MISC. APPLICATIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE CONSOLIDATED ORDER PASSED BY THE TRIBUNAL IN IT A NO. 718 AND 719/MUM/2011 DTD. 17-6-2011 FOR THE ASSESSMENT YEAR S 2004-05 AND 2005-06. SINCE THE FACTS ARE IDENTICAL AND ISSUES I NVOLVED ARE COMMON, BOTH THESE MISC. APPLICATIONS ARE DISPOSED OF BY THIS CO MMON ORDER FOR THE SAKE OF CONVENIENCE. 2. IN THE MISC. APPLICATION DTD. NIL THE ASSESSEE, IN THE ORDER OF THE TRIBUNAL, HAS POINTED OUT THAT THERE ARE FOLLOWING MISTAKES APPARENT FROM RECORD:- MA NOS. 481 & 482/MUM/2011 2 (I) THE LD. A.O. HAS NOT RECORDED VALID REASONS TO ISSUE NOTICE UNDER SECTION 148(1) OF THE ACT, AS THE SAME ARE NOT BASED ON ANY TANGIBLE MATERIAL. (II) THE REASONS, AS PROVIDED TO THE APPLICANT COMPLIED AT PAGE 33 OF THE PAPER BOOK SUGGEST THAT THE NOTICE IS ISSUED TO RE-VERIFY THE MARKET VALUE OF THE PROPERTY AS ON 01-04-1981. THUS, THE NOTICE UNDER SECTION 148(1) IS ISSUED MERELY ON CHANGE OF OPINION IS NOT JUSTIFIED. (III) ON MERITS, THE APPLICANT HAS CONTENDED THAT THE SAL E INSTANCES CONSIDERED BY THE LD. A.O. ARE NOT COMPARABLE TO THE FACTS OF THE APPLICANTS CASE AS THE LAND IN QUESTION WAS NON-AGRICULTURAL LAND BEING US ED AS INDUSTRIAL UNIT AND THE SALE INSTANCES CONSIDERED FOR COMPARISON ARE OF SMALL RESIDENTIAL UNITS. IT WAS, THEREFORE, PRAYED THAT THE ABOVE MISTAKE BE RECTIFIED OR THE ORDER MAY BE RECALLED. 3. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE, AT THE OUTSET, SUBMITS THAT THE REASONS SUPPLIED TO THE ASSESSEE A PPEARING AT PAGE 33 OF THE ASSESSEES PAPER BOOK WERE DIFFERENT FROM THE R EASONS REPRODUCED BY THE TRIBUNAL AT PAGE 3 OF THE TRIBUNAL ORDER. HE FURTH ER SUBMITS THAT THE TRIBUNAL HAS RELIED ON THE REASONS WHICH WERE NEVER COMMUNICATED TO THE ASSESSEE AND IT CONSTITUTES A MISTAKE APPARENT FROM THE RECORD. HE FURTHER SUBMITS THAT SINCE THERE IS A VARIATION IN THE REAS ONS GIVEN TO THE ASSESSEE AND THE REASONS REPRODUCED BY THE TRIBUNAL IN ITS O RDER (SUPRA), THE NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT, 1961 (THE ACT ) AS WELL AS PROCEEDING SUBSEQUENT THERETO ARE LIABLE TO BE QUASHED AND FOR THIS PROPOSITION RELIANCE WAS ALSO PLACED IN HARYANA ACRYLIC MANUFACTURING CO . VS. CIT AND ANOTHER (2009) 308 ITR 38 (DELHI) AND ALSO THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN PRASHANT S. JOSHI VS. ITO AND ANOTHER (20 10) 324 ITR 154 (BOM). HE FURTHER SUBMITS THAT DURING THE COURSE OF ASSESS MENT PROCEEDING THE ASSESSEE HAS DISCLOSED ALL THE PARTICULARS OF ITS I NCOME AND THE A.O. AFTER CONSIDERING THE SAME HAS PASSED THE REGULAR ASSESSM ENT ORDER U/S 143(3) OF MA NOS. 481 & 482/MUM/2011 3 THE ACT, THEREFORE, IT IS A CASE OF CHANGE OF OPINI ON AND, HENCE, ON THIS ACCOUNT ALSO THE PROCEEDING INITIATED U/S 148 OF TH E ACT ARE LIABLE TO BE QUASHED. ON THE ISSUE OF MARKET VALUE AS ON 1-4-19 81, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE PLOT OF LAND SOLD BY THE ASSESSEE IS SITUATED IN AN INDUSTRIAL AREA AND THE SAME WAS BEING EXPLOITED BY THE ASSESSEE FOR THE PURPOSE OF WAREHOUSING IN 1970S AND 1980S. THE LAN D WAS A COMMERCIAL LAND. THUS, THE COMPARABLE CITED BY THE DEPARTMENT ARE NOT APPROPRIATE AS THE SAME WERE RESIDENTIAL PLOTS AND SMALL IN SIZE. IT IS VERY IMPORTANT TO NOTE THAT THE PLOT OF LAND SOLD WAS COMMANDING HIGHER PR ICE AS THE SAME WAS A LAND WHICH CAN BE COMMERCIALLY EXPLOITED ON 1-4-198 1. THE POTENTIAL TO BE USED FOR DEVELOPING RESIDENTIAL COMPLEXES WAS AN AT TRIBUTE, WHICH THE LAND GOT IT, AROUND 2000. THUS, THE FINDING OF THE TRIBU NAL WITH RESPECT TO THE VALUATION IS NOT ON THE BASIS OF THE CONTENTIONS RA ISED BY THE ASSESSEE. THE SAME LAND WAS BEING COMMERCIALLY EXPLOITED BY THE A SSESSEE FOR WAREHOUSING AS MENTIONED IN THE LETTER WRITTEN BY THE DIT, THAN E WHICH HAS BEEN REPRODUCED BY THE LD. CIT(A) IN HIS ORDER DATED 27- 12-2010. THE LAND IN QUESTION WAS BEING PUT TO COMMERCIAL EXPLOITATION. HENCE, THE SAME CANNOT BE COMPARED TO A SMALL RESIDENTIAL PLOT SITUATED IN A VILLAGE. SINCE THE LAND IN QUESTION WAS A COMMERCIAL PROPERTY IN 1981 AND T HE VALUE HAS TO BE DETERMINED AS PER THE FACTS/CIRCUMSTANCES EXISTING AS ON 1-4-1981 AND NOT ON ANY LATER DATE. THE FINDING GIVEN BY THE TRIBUN AL ON THE ABOVE FACTS CONSTITUTES A MISTAKE APPARENT ON RECORD WHICH HAS CREPT IN THE ORDER. HE, THEREFORE, SUBMITS THAT SINCE THE ABOVE MISTAKES AR E APPARENT FROM RECORD, THE SAME MAY BE RECTIFIED AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED IN HONDA SIEL POWER PRODUCTS LTD. VS. CIT (2 007) 295 ITR 466 (SC). MA NOS. 481 & 482/MUM/2011 4 4. ON THE OTHER HAND, THE LD. D.R. SUBMITS THAT THE TRIBUNAL AFTER CONSIDERING THE REASONS FURNISHED BY THE D.R. AT TH E TIME OF HEARING HAS PASSED A REASONED ORDER. THE ASSESSEE WANTS TO REV IEW THE SAME WHICH IS NOT PERMISSIBLE IN LAW AND, HENCE, THERE IS NO MIST AKE IN THE ORDER OF THE TRIBUNAL WHICH MAY BE RECTIFIED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND T HAT THE FACTS ARE NOT IN DISPUTE. ACCORDING TO THE ASSESSEE THE A.O. HAS GI VEN REASONS FOR RE-OPENING OF THE ASSESSMENT VIDE LETTER DTD. 29-9-2009 APPEAR ING AT PAGE 33 OF THE ASSESSEES PAPER BOOK AND THE SAME ARE REPRODUCED A S UNDER:- OFFICE OF THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 23(1), C-10, IST FLOOR, R. NO. 108 PRATYALSHA KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI. NO. DCIT CIR. 23(1)/2009-10 DT. 29.9.2009 M/S G.M. FINANCE & TRADING CO., ITM COMPOUND, LBS MRG, VIKHROLI (W), MUMBAI -83. SUB:- ASSESSMENT U/S 143(3) R.W.S. 147 OF THE I.T. ACT A.YRS. 2004-05 & 2005-06 REG. .. PLEASE REFER TO THE NOTICE U/S 148 ISSUED TO YOU IN RESPECT OF THE ABOVE A.YRS. AND THE LETTER RECEIVED FROM BHARAT PARIKH & CO. C.AS., REQUESTING ME TO INFORM THE REASONS FOR REOPENING O F ASSESSMENT U/S 148. PLEASE NOTE THAT ASSESSMENTS IN RESPECT OF A. YRS. 2004-05 & 2005-06 HAVE BEEN REOPENED TO VERIFY THE COST AS ON 1.4.81 OF LAND IN BALKUM SOLD BY YOU TO M/S SIDHI REAL ESTATE DEVELOP ERS. THE MATTER HAS BEEN REFERRED TO DISTRICT VALUATION OFFICER-1, PIRAMAL CHAMBERS, PAREL AND D.V.O. -1 VIDE HIS LETTER DT. 19-9-2009 H AS INTIMATED THAT DOCUMENTS REQUIRED BY HIM HAVE NOT BEEN SUBMITTED B Y YOU. YOU ARE REQUESTED TO CO-OPERATE WITH THE D.V.O. 1 TO COMP LETE THE FORMALITIES. UNLESS THE FORMALITIES ARE COMPLETED THE PROCEEDING S FOR ASSESSMENT CANNOT BE TAKEN UP. PLEASE ALSO SUBMIT A COPY OF R ETURN OF INCOME FILED BY YOU ENCLOSING THEREWITH ALL THE DOCUMENTS IN RESPECT OF A.Y. 05-06. MA NOS. 481 & 482/MUM/2011 5 SD/- (LEELA RAMCHANDRAN) DY. COMMISSIONER OF INCOME-TAX CIR. 23(1), MUMBAI. COPY TO : BHARAT PARIKH & CO. CAS C-412, KAILASH ESPLANADE, OPP. SHREYAS CINEMA, LBS MARG, GHATKOPAR (W), MUMBAI WITH A REQUEST TO GET THE MATTER SETTLED A T AN EARLY DATE.. 6. HOWEVER, AT THE TIME OF HEARING OF THE APPEAL I. E. ON 13-4-2011 THE LD. DR HAS FILED A COPY OF ORDER SHEET OF THE REASONS R ECORDED WHICH IS ALSO REPRODUCED AS UNDER:- O R D E R S H E E T 17-3-2009 GM FINANCE & TRADING CO. REASONS FOR REOPENING OF ASSESSMENTS UNDER SECTION 147 ASSESSMENT YEARS 2004-05 SAND 2005-06 INFORMATION HAS BEEN RECEIVED, FROM ADIT (INVESTI GATION) - 2 THANE, THAT M/S G M FINANCE & TRADING CO., HAS EN TERED INTO AN AGREEMENT WITH M/S SIDDHI REAL ESTATE DEVELOPERS ON 30.4.2003 AND 31.3.2004 FOR TOTAL CONSIDERATION OF RS 2,56,70,000 AND RS 2,50,00,000 RESPECTIVELY. THE LO NG TERM CAPITAL GAINS OFFERED IN THE YEAR 2004-05 IS RS 46, 48,295. IT IS SEEN THAT THE VALUATION DONE BY THE ASSESSEE AS ON 1.4.81 IS VERY HIGH. AS PER CIRCULAR ISSUED BY THE ASSISTANT DIREC TOR, TOWN PLANNING, THE VALUE OF 1 SQUARE FEET LAND IS 40% O F RS 3.21 I.E. RS 1.28 PER SQUARE FEET. THE NET CAPITAL GAINS CHAR GEABLE TO TAX, AS PER STAMP DUTY READY RECKONER METHOD, AND COMPAR ATIVE SALE INSTANCE METHOD IS MUCH MORE THAN WHAT IS DISCLOSED IN THE RETURN OF INCOME. I HAVE, THEREFORE, REASON TO BELI EVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. OFFICE TO ISSUE NOTICE UNDER SECTION 148. SD/- DC 23(1) FROM THE READING OF THE ABOVE LETTER OF THE A.O. DT D. 29-9-2009 (SUPRA) AND THE COPY OF REASONS RECORDED ON 17-3-2009 (SUPRA) W E FIND THAT THE LETTER DTD. 29-9-2009 IS MERELY AN INFORMATION THAT THE ASSESSM ENTS IN RESPECT OF ASSESSMENT YEARS 2004-05 AND 2005-06 HAVE BEEN REOP ENED TO VERIFY THE MA NOS. 481 & 482/MUM/2011 6 COST OF THE LAND AS ON 1-4-1981 SOLD BY THE ASSESSE E. THE ASSESSEE WAS FURTHER INFORMED THAT THE MATTER OF VALUATION HAS B EEN REFERRED TO DVO AND THE ASSESSEE WAS ASKED TO CO-OPERATE WITH THE DVO. THE ASSESSEE WAS ALSO ASKED TO SUBMIT A COPY OF RETURN OF INCOME ENCLOSIN G THERE WITH ALL THE DOCUMENTS IN RESPECT OF A.Y. 2005-06. WHEREAS THE ORDER SHEET ENTRY DTD. 17-3-2009 IS THE ACTUAL COPY OF THE REASONS RECORDE D BY THE A.O. THERE IS NO DISPUTE THAT THE SAID COPY OF THE REASON I.E. DTD. 17-3-2009 WAS FILED BY THE LD. DR AT THE TIME OF HEARING I.E. ON 13-4-2011 AND AT THAT STAGE THE LD. COUNSEL FOR THE ASSESSEE DID NOT DISPUTE THAT THE C OPY OF THE REASONS NOW FURNISHED BY THE DEPARTMENT IS DIFFERENT FROM THE R EASONS GIVEN TO THE ASSESSEE VIDE LETTER DTD. 29-9-2009. IT IS ALSO NOT THE CASE OF THE ASSESSEE THAT THE REASONS FURNISHED BY THE REVENUE AT THE TI ME OF HEARING ARE NOT GENUINE OR CANNOT BE CONSIDERED AT THIS STAGE OR NO OPPORTUNITY WAS PROVIDED. 7. IN HARYANA ACRYLIC MANUFACTURING CO. (SUPRA) IT HAS BEEN HELD (HEADNOTE) : PAGE 40 :- HELD, ALLOWING THE PETITION, (I) THAT THE REASONS RECORDED DID NOT INDICATE THE FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSME NT FOR THE ASSESSMENT YEAR 1998-99. WHILE IN THE REASONS SUPPLIED TO THE PETITIONER THERE WAS NO MENTION OF THE ALLEGATION THAT THERE WAS A FAILU RE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS, IN THE REASONS SHOWN IN THE SAID FORM TO THE COUNTER-AFFIDAVIT THE RE WAS A SPECIFIC ALLEGATION THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATIN G TO ACCOMMODATION ENTRIES RAISED FROM ONE OF THE COMPANIES TO THE EXT ENT OF RS. 5 LAKHS. THUS, ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST TAKING ACTION AFTER THE SAID FOUR YEAR PERIOD REMAI NED UNFULFILLED. CONSEQUENTLY, THE NOTICE UNDER SECTION 148 BASED ON THE RECORDED REASONS SUPPLIED TO THE PETITIONER AS WELL AS THE C ONSEQUENT ORDER WERE WITHOUT JURISDICTION AS NO ACTION UNDER SECTION 147 COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD. MA NOS. 481 & 482/MUM/2011 7 (II) THAT ON THE FACTS THE REASONS WHICH WERE SUPP LIED TO THE PETITIONER WERE DIFFERENT FROM THE REASONS PURPORTE DLY RECORDED IN THE FORM ATTACHED TO THE COUNTER-AFFIDAVIT. THE PETITIO NER TOOK THE SPECIFIC PLEA THAT IN THE ABSENCE OF ANY ALLEGATION THAT THE PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT, THE ASSESSING OFFICER HAD NO JURISDICTION TO ISSUE THE NOTICE UNDER SECTION 148 AND INITIATE ACTION UNDER SECTION 147 A FTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IF THE AUT HORITIES HAD REGARDED THE REASONS NOTED IN THE SAID FORM TO BE T HE ACTUAL REASONS, IT WOULD HAVE BEEN VERY EASY FOR THE ASSESSING OFFICER TO HAVE COUNTERED THIS OBJECTION BY SIMPLY REFERRING TO THE REASONS N OTED IN THE FORM AND SAYING THAT THE ALLEGATION OF FAILURE TO DISCLOSE W AS VERY MUCH THERE. EVEN ASSUMING THAT THE ACTUAL REASONS WERE THOSE AS NOTED IN THE SAID FORM, IT WAS OBVIOUS THAT THE REASONS WERE NEVER CO MMUNICATED TO THE PETITIONER AND IT WAS ONLY FOR THE FIRST TIME IN TH E COURSE OF THE WRIT PETITION THAT THOSE REASONS HAD SURFACED. THEREFORE , THE NOTICE UNDER SECTION 148 AS WELL AS ALL THE PROCEEDINGS SUBSEQUE NT THERETO WERE LIABLE TO BE QUASHED. 8. IN PRASHANT S. JOSHI (SUPRA) IT HAS BEEN HELD (HEAD NOTE): PAGE 155 :- HELD, ALLOWING THE PETITIONS, THAT THE REVENUE HAD SOUGHT TO URGE THAT THE AMOUNT RECEIVED BY THE PETITIONER WAS CHAR GEABLE TO TAX UNDER CLAUSES (IV) / (V) OF SECTION 28. THE QUESTION AS T O WHETHER THERE WAS REASON TO BELIEVE, WITHIN THE MEANING OF SECTION 14 7 THAT INCOME HAS ESCAPED ASSESSMENT, MUST BE DETERMINED WITH REFEREN CE TO THE REASONS RECORDED BY THE ASSESSING OFFICER. THE REASONS WHIC H ARE RECORDED COULD NOT BE SUPPLEMENTED BY AFFIDAVITS. IN ANY CAS E EX FACIE SECTION 28(IV) DOES NOT APPLY TO THE BENEFITS WHICH ARE PAI D IN CASH OR MONEY. A PAYMENT MADE TO A PARTNER IN REALISATION OF HIS S HARE IN THE NET VALUE OF THE ASSETS UPON HIS RETIREMENT FROM A FIRM , DOES NOT FALL UNDER CLAUSE (V) OF SECTION 28. THERE WAS ABSOLUTELY NO B ASIS FOR THE ASSESSING OFFICER TO FORM A BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF THE SU BSTANTIVE PROVISIONS OF SECTION 147. THE NOTICES WERE NOT VAL ID AND WERE LIABLE TO BE QUASHED. 9. IN HONDA SIEL POWER PRODUCTS LTD. (SUPRA) IT HAS BE EN HELD (HEADNOTE): PAGE 467 :- HELD, REVERSING THE DECISION OF THE HIGH COURT, TH AT IN ALLOWING THE RECTIFICATION APPLICATION THE TRIBUNAL GAVE A FINDI NG THAT THE EARLIER DECISION OF A CO-ORDINATE BENCH WAS CITED BEFORE IT BUT THROUGH OVERSIGHT IT HAD MISSED THE JUDGMENT WHILE DISMISSI NG THE APPEAL FILED BY THE ASSESSEE ON THE QUESTION OF ADMISSIBILITY/AL LOWABILITY OF THE CLAIM OF THE ASSESSEE FOR ENHANCED DEPRECIATION UND ER SECTION 43A. ONE OF THE IMPORTANT REASONS FOR GIVING THE POWER O F RECTIFICATION TO THE TRIBUNAL UNDER SECTION 254(2) WAS TO SEE THAT NO PR EJUDICE WAS CAUSED TO EITHER OF THE PARTIES APPEARING BEFORE IT. THE R ULE OF PRECEDENT WAS AN IMPORTANT ASPECT OF CERTAINTY IN THE RULE OF LAW , AND PREJUDICE HAD RESULTED TO THE ASSESSEE SINCE THE PRECEDENT HAD NO T BEEN CONSIDERED MA NOS. 481 & 482/MUM/2011 8 BY THE TRIBUNAL. THE TRIBUNAL WAS JUSTIFIED IN RECT IFYING THE MISTAKE ON RECORD. 10. THERE IS NO QUARREL WITH THE PRINCIPLES ENUNCIA TED IN THE AFORESAID DECISIONS. HOWEVER, IN THE CASE BEFORE US THE LETT ER DTD. 29-9-2009 IS MERELY AN INFORMATION FOR REOPENING OF THE ASSESSMENTS AND FROM ANY ANGLE IT CANNOT BE SAID THAT THE SAME IS THE COPY OF REASONS RECORDED BY THE A.O. INASMUCH AS IT DOES NOT CONTAIN THE DATE OF THE REA SONS RECORDED BY THE A.O., RATHER THE A.O. VIDE SAID LETTER HAS GIVEN CERTAIN DIRECTIONS TO THE ASSESSEE TO MAKE COMPLIANCE. WE FURTHER FIND THAT THE TRIBUNAL IN THE IMPUGNED ORDER WHILE DEALING WITH THE ASSESSEES GROUND OF VALIDIT Y OF THE REOPENING OF THE ASSESSMENT HAS ALSO CONSIDERED THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN PRASHANT S. JOSHI (SUPRA) CITED BY TH E LD. COUNSEL FOR THE ASSESSEE WHILE ARGUING THE PRESENT M.A. AND THE TRI BUNAL HAS HELD VIDE PARA 5 OF THE ORDER (SUPRA) AS UNDER:- 5. WE FIND THAT HONBLE BOMBAY HIGH COURT, IN TH E CASE OF HINDUSTAN LEVER LTD. VS. R.B. WADKAR 268 ITR 332, HAS, INTER ALIA, OBSERVED THAT '.IT IS NEEDLESS TO MENTION THAT THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORD ED BY THE AO. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. NO ADDI TIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN ON THE BASIS OF REASONS NOT RECORDED. IT IS FOR THE AO TO DISCLOSE AND OPEN HIS MIND THROUGH THE REASONS RECORDED BY H IM. HE HAS TO SPEAK THROUGH THE REASONS.' THEIR LORDSHIPS ADDE D THAT 'THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHO ULD NOT KEEP THE ASSESSEE GUESSING FOR REASONS. REASONS PROVIDE LINK BETWEEN CONCLUSION AND THE EVIDENCE.'. HONBLE SUPREME COU RT, IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD 320 ITR 561 , HAS OBSERVED THAT 'REASONS MUST HAVE A LIVE LINK WITH FORMATION OF BELIEF'. HONBLE BOMBAY HIGH COURT, IN THE CASE OF PRASHANT S. JOSHI VS. ITO 324 ITR 154 HAS OBSERVED : 'THE AO MUST HAVE RE ASONS TO BELIEVE THAT SUCH IS THE CASE (I.E. ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR A PARTICULAR YEAR) BEFORE HE PROCEEDS TO ISSUE NOTICE UNDER S. 147' AND THAT 'THE REASONS WHICH ARE RECORDED BY THE AO ARE THE ONLY REASONS WHICH CAN B E CONSIDERED WHEN FORMATION OF BELIEF IS IMPUGNED'. IN VIEW OF T HE LAW SO UNAMBIGUOUSLY SETTLED BY THE BINDING JUDICIAL PRECE DENTS, LEARNED CIT(A) WAS CLEARLY IN ERROR IN REFERRING TO THE LETTER RECEIVED BY THE ASSESSING OFFICER FROM THE ASSISTAN T DIRECTOR OF MA NOS. 481 & 482/MUM/2011 9 INCOME TAX (INVESTIGATION), THANE, AND PROCEEDING T O DECIDE THE CORRECTNESS OF REOPENING THE ASSESSMENT ON THE BASI S OF THE SAID LETTER AND ANNEXURES THERETO. TO THIS EXTENT, THE CIT(A) WAS CLEARLY IN ERROR, BUT, EVEN VIEWED IN THE LIGHT OF THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, THE CONCLUS IONS CANNOT BE ANY DIFFERENT. THESE REASONS SHOW THAT, AS PER INFORMATION RECEIVED BY THE ASSESSING OFFICER, WHATEVER BE ITS WORTH, THE VALUATION OF LAND BY THE ASSESSEE IS VERY HIGH INAS MUCH AS PER CIRCULAR ISSUED BY THE ASSISTANT DIRECTOR (TOWN PLA NNING) IS RS 1.28 PER SQUARE FEET. IT WAS ON THIS BASIS THAT TH E ASSESSING OFFICER CAME TO CONCLUDE THAT NET CAPITAL GAIN CHAR GEABLE TO TAX AS PER STAMP DUTY READY RECKONER METHOD AND COMPAR ABLE SALES METHOD IS MUCH MORE THAN WHAT IS DISCLOSED IN THE R ETURN OF INCOME, AND, ACCORDINGLY, THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AT THE STAGE OF EXAMINING THE REASONS OF REOPENING THE ASSESSMENT, WE ARE NOT TO EXAMINE THE ADEQUACY OF REASONS AND TO GO INTO THE QUESTION WHETHER THES E REASONS, BY ITSELF, WOULD BE REASON ENOUGH TO SUCCESSFULLY MAKE THE RESULTANT ADDITIONS, BUT ALL THAT IS TO BE SEEN IS THAT, ON THESE REASONS, THERE IS A LIVE LINK AND NEXUS TO THE INCO ME ESCAPING ASSESSMENT. UNDOUBTEDLY, THE BELIEF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATION AL, AND IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. HOWEVER, WHAT IS I MPORTANT TO BEAR IN MIND IS THAT WHILE ADJUDICATING UPON CHALLE NGE TO REASSESSMENT PROCEEDINGS, ONE CANNOT INVESTIGATE IN TO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE W EIGHED WITH THE ASSESSING OFFICER IN COMING TO THE BELIEF, THOU GH ONE CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS REQ UIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UND ER SECTION 147. VIEWED IN THIS PERSPECTIVE, AND HAVING REGARD TO TH E FACT THAT THE INFORMATION COMING IN THE POSSESSION OF THE ASSESSI NG OFFICER, AS HE NOTED IN THE REASONS OF REOPENING THE ASSESSMENT , CLEARLY SHOWED THAT VALUE OF PROPERTY AS ON 1.4.1981 IS VER Y HIGH VIS-- VIS THE CIRCULAR ISSUED BY THE ASSISTANT DIRECTOR ( TOWN PLANNING), THE ASSESSING OFFICER INDEED HAD SUFFICIENT REASONS TO REOPEN THE IMPUGNED ASSESSMENTS. THE REASONS DID EXIST, EVEN T HOUGH ONE COULD POSSIBLY SAY THAT THESE REASONS PER SE WERE N OT SUFFICIENT TO MAKE LEGALLY SUSTAINABLE ADDITIONS TO RETURNED C APITAL GAINS, AND ADEQUACY OF THESE REASONS COULD NOT BE CALLED I NTO QUESTION AT THE STAGE OF EXAMINING VALIDITY OF REASSESSMENT PROCEEDINGS. AS HONBLER SUPREME COURT HAS OBSERVED, IN THE CASE OF CIT VS KELVINATOR OF INDIA LTD (SUPRA), AN ASSESSMENT CAN NOT BE REOPENED MERELY BECAUSE OF A CHANGE OF OPINION BUT .. AFTER 1ST APRIL, 1989, AO HAS POWER TO REOPEN, PROVIDED T HERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT . IT CANNOT, THEREFORE, BE SAID THAT EVEN WHEN ASSESSING OFFICER IS IN RECE IPT OF SOME TANGIBLE MATERIAL, WHICH PRIMA FACIE INDICATES THAT INCOME HAS ESCAPED ASSESSMENT, THE REASSESSMENT PROCEEDINGS CA NNOT BE RESORTED TO. IT IS NOT A CASE OF CHANGE OF OPINION SIMPLICTOR . THE ASSESSING OFFICER CAME TO BE IN POSSESSION OF SPECI FIC INFORMATION ABOUT CIRCULAR ISSUED BY THE ASSISTANT DIRECTOR MA NOS. 481 & 482/MUM/2011 10 (TOWN PLANNING) AND COMPARABLE INSTANCES OF SALES, WHICH PRIMA FACIE INDICATED THAT THE ASSESSEE HAS ADOPTED EXCES SIVE VALUE OF LAND AS ON 1.4.1981, AND IT WAS ON THIS BASIS THAT HE HAD REASONS TO BELIEVE THAT THE INCOME HAS ESCAPED ASSE SSMENT. THE QUESTION WHETHER THE INFORMATION SO RECEIVED BY THE ASSESSING OFFICER WAS SUFFICIENT TO MAKE THE RESULTANT ADDITI ONS OF INCOME ESCAPING ASSESSMENT COULD NOT BE EXAMINED AT THE TH RESHOLD ITSELF. THAT WOULD BE EXAMINING ADEQUACY OF REASONS SOMETHING THE APPELLATE AUTHORITY ARE NOT PERMITTED TO EXAMIN E UNDER THE SCHEME OF THE ACT. AS OBSERVED BY HONBLE SUPREME COURT, IN THE CASE OF ITO VS LAKHMANI MEWAL DAS (103 ITR 43 7), ONCE THERE EXIST REASONABLE GROUNDS FOR THE INCOME TAX O FFICER TO FORM THE ABOVE BELIEF (THAT THE INCOME HAS ESCAPED ASSESSMENT ) , THAT WOULD BE SUFFICIENT TO CLOTHE HIM WITH JURISDI CTION TO ISSUE NOTICE. WHETHER THE GROUNDS ARE ADEQUATE OR N OT IS NOT A MATTER FOR COURT TO INVESTIGATE. THE SUFFICIENCY OF GROUNDS WHICH INDUCE THE INCOME TAX OFFICER TO ACT IS NOT A JUSTICIABLE ISSUE . LEARNED COUNSEL HAS ARGUED AT LENGTH AS TO HOW THE RATES GIVEN IN THE CIRCULAR ISSUED BY THE A DDITIONAL DIRECTOR (TOWN PLANNING) COULD NOT BE APPLIED ON TH E FACTS OF THIS CASE AND AS TO HOW THERE HAVE BEEN SIGNIFICANT VARI ANCES IN THE NATURE OF LAND TAKEN AS COMPARABLE INSTANCES, BUT A LL THESE FINE POINTS NEED NOT BE EXAMINED AT THIS STAGE. WE WILL DEAL WITH THESE ASPECTS WHILE EXAMINING MERITS OF THE ADDITIO NS MADE ON THE BASIS OF THE MATERIAL IN POSSESSION OF THE ASSE SSING OFFICER, BUT ALL THESE ARGUMENTS, IN OUR HUMBLE UNDERSTANDIN G, ARE NOT RELEVANT AT THE POINT OF TIME WHEN EXISTENCE OF REA SONS FOR REOPENING THE ASSESSMENT IS BEING EXAMINED. IT IS A LSO IMPORTANT TO BEAR IN MIND THE FACT THAT BOTH THE IMPUGNED REA SSESSMENTS WERE BEING MADE WITHIN FOUR YEARS FROM THE END OF T HE RELEVANT ASSESSMENT YEARS, AND, THEREFORE, IT IS NOT REALLY NECESSARY THAT THERE HAS TO BE A LAPSE ON THE PART OF THE ASSESSEE , IN DISCLOSING ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT OF INCOME, BEFORE THE ASSESSMENTS CAN BE REOPENED. A LOT OF EMPHASIS IS THEN PLACED ON THE FACT THAT NO NEW FACTS HAVE COME TO T HE KNOWLEDGE OF THE ASSESSING OFFICER INASMUCH AS CIRCLE RATES E MPLOYED BY THE STATE GOVERNMENT WERE ALWAYS ON RECORD, BUT THE N THE REASONS RECORDED BY THE ASSESSING OFFICER CLEARLY R EFER TO THE CIRCULAR ISSUED BY THE ASSISTANT DIRECTOR (TOWN PLA NNING) SETTING OUT THE BASIS ON WHICH VALUATION OF LAND WORKS OUT TO RS 1.28 PER SQUARE FEET, AND NEITHER WE CAN GO INTO THE COR RECTNESS OF THE STAND SO TAKEN BY THE ASSESSING OFFICER, NOR THERE IS ANYTHING ON RECORD TO SHOW THAT THE ASSESSING OFFICER, IN THE C OURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, HAD THE BENEFIT OF EXAMINING THE MATTER IN THE LIGHT OF THE SAID CIRCULAR. THE OBJECTIONS TAKEN BY THE ASSESSEE ARE THUS NOT SUSTAINABLE IN LAW. 11. FROM THE ABOVE WE FIND THAT THE TRIBUNAL HAS CO NSIDERED ALL THE ASPECTS OF THE MATTER, THEREFORE, THERE IS NO MISTA KE APPARENT FROM THE RECORD WHICH MAY BE RECTIFIED. MA NOS. 481 & 482/MUM/2011 11 12. AS REGARDS THE ISSUE OF MARKET VALUE AS ON 1-4- 1981 WE FIND THAT THE TRIBUNAL AFTER CONSIDERING THE ENTIRE FACTS, MATERI AL AND PLEA OF THE PARTIES HAS HELD VIDE PARA 10 OF ITS ORDER AS UNDER;- 10. WE FIND THAT THERE IS NO BASIS WHATSOEVER, WOR TH ANY SIGNIFICANCE, FOR THE VALUE ADOPTED BY THE REGISTERED VALUER; EVE N BY HIS OWN ADMISSION IN SO MANY WORDS, THE VALUE IS ADOPTED ON LY ON THE BASIS OF LOCAL ENQUIRY AND PAST EXPERIENCE. UNDER THESE CI RCUMSTANCES, AUTHORITIES BELOW WERE QUITE JUSTIFIED IN ESTIMATIN G THE FAIR MARKET VALUE ON THE BASIS OF SOME COGENT AND REASONABLE MA TERIAL. INTERESTINGLY, THE ASSESSEE HAS REJECTED THE VALUAT ION AS PER COMPARABLE INSTANCES ON THE GROUND THAT THE PLOT SI ZE IN THOSE CASES IS VERY SMALL, BUT THEN COMPARED TO A HUGE PIECE OF LA ND RUNNING INTO ACRES USED FOR DEVELOPMENT OF RESIDENTIAL COMPLEXES , SUCH A SMALL SIZE WILL ANYDAY BE HIGHER IN VALUE. A SMALL PIECE OF LA ND, LEAVE ASIDE ANY CONSTRUCTION ON IT, IN A LIVEABLE AREA IS BOUND TO BE COSTLIER THAN THE LAND RATE OF A HUGE PLOT ON WHICH DEVELOPMENT WORK IS TO BE CARRIED OUT, ROADS AND COMMON UTILITY AREAS TO BE MARKET AN D DEVELOPMENT WORK TO BE CARRIED OUT. THE ARGUMENT OF THE ASSESSE E THAT SINCE PLOT SIZE IN THE PRESENT CASE IS BIGGER, IT IS BOUND TO FETCH HIGHER VALUE MAY HOLD GOOD TO THE EXTENT WHEN BOTH THE PLOTS ARE MEA NT FOR CONSTRUCTION OF HOUSES, THE BIGGER SIZE PLOT MAY GET HIGHER PRIC E. HOWEVER, IN THE PRESENT CASE, THE BIGGER SIZE PLOT IS NOT FOR BUILD ING A HOUSE BUT FOR PERHAPS BUILDING AN ENTIRE HOUSING PROJECT WHICH ES SENTIALLY IMPLIES A SUBSTANTIAL PORTION OF PLOT SIZE GOING TO THE COMMO N AREAS SUCH AS ROADS AND COMMON FACILITIES, AND HUGE COSTS OF DEVE LOPMENTS TO BE INCURRED TO MAKE THE REMAINING SE1LBIE AREAS ACTUAL LY OF USE FOR BUILDING THE HOUSE. IF ANYTHING, THE BIG SIZE PLOTS , AND MORE OF WHEN IT IS AS BIG AS MORE THAN SEVEN ACRES IN THE PRESENT C ASE, HAVE LESSER USABLE AREA AND HUGE INTERNAL DEVELOPMENT COSTS INV OLVED, AND, THEREFORE, THESE PLOTS ARE BOUND TO FETCH LOWER RAT E PER SQUARE FEET VIS- -VIS THE SMALL SIZE HOUSING PLOTS. A PLOT FOR HOUS E IS BOUND TO GET HIGHER PRICE, ON PER SQUARE FEET BASIS, THAN A PLOT FOR HOUSING DEVELOPMENT PROJECT. THE OBJECTION TAKEN BY THE ASS ESSEE IS THUS DEVOID OF ANY LEGALLY SUSTAINABLE BASIS. AS REGARDS THE POINT THAT ELECTRICITY CONNECTION WAS NOT PROVIDED IN THE COMP ARABLE SALE INSTANCE, THIS ASPECT OF THE MATTER IS ANYWAY IRREL EVANT BECAUSE IT DOES NOT ESSENTIALLY MEAN THAT ELECTRICITY WAS NOT AVAIL ABLE IN THAT AREA. EVEN IN THE PLOT SOLD BY THE ASSESSEE, ALL THESE DE VELOPMENTS WERE TO TAKE PLACE. IN ANY EVENT, EVEN THOUGH THE ASSESSEE HAS MADE ALL SUCH FINE POINTS ABOUT THE SHORTCOMINGS IN SALE INSTANCE S, NO DOCUMENTS HAVE BEEN CITED BEFORE US TO SUBSTANTIATE FACTUAL C ONTENTIONS EMBEDDED IN THESE CONTENTIONS. THE ROADSIDE FRONTAG E OF THE PLOT IS FOR THE HOUSING COMPLEX PER SE BUT NOT THE HOUSING UNIT S AS SUCH AND, THEREFORE, MERELY BECAUSE A SIDE OF THE PLOT TOUCHE S UPON THE MAIN ROAD, ENTIRE PLOT OF SEVEN ACRES PLUS WILL NOT FETC H A HIGHER PRICE VIS-- VIS PRICE FETCHED BY A PLOT, HOWSOEVER SMALL, IN SO MEWHAT INTERIOR AREA. IN ANY EVENT, LEARNED CIT(A) HAS ADOPTED THE HIGHES T RATE FETCHED BY THE COMPARABLE SALE INSTANCES. WE HAVE ALSO NOTED T HAT NO SPECIFIC OBJECTIONS ARE RAISED TO THE METHODOLOGY OF ADJUSTM ENT AS RECOMMENDED BY THE ADDITIONAL DIRECTOR (TOWN PLANNI NG) BY TAKING MA NOS. 481 & 482/MUM/2011 12 67% OF 1989 VALUE AS VALUE AS ON 1.4.19 81. IN ANY EVENT, THE ONUS OF DEMONSTRATING THE FAIR MARKET VALUE AS ON 1.4.1981 IS ON THE ASSESSEE, AND ONCE HE FAILS TO DISCHARGE THE ONUS IN A REASON ABLE MANNER, THE ASSESSING OFFICER HAS TO ADOPT SOME REASONABLE BASI S TO ESTIMATE THE SAID VALUE. IN THE ABSENCE OF ANY OTHER MATERIAL AN D IN VIEW OF THE FACT THAT THE VALUATION REPORT IS DEVOID OF ANY RATIONAL BASIS, IN OUR CONSIDERED VIEW, THE VALUATION APPROVED BY THE ASSE SSING OFFICER, AS MODIFIED BY THE CIT(A), IS QUITE REASONABLE AND JUS TIFIED. THE VALUATION IS ON THE BASIS OF COMPARABLE SALE INSTANCES, ADOPT ING THE HIGHEST PER SQUARE FEET VALUE FETCHED BY ANY COMPARABLE INSTANC E, AND ADJUSTED IN ACCORDANCE WITH THE METHOD RECOMMENDED BY THE ASSIS TANT DIRECTOR (TOWN PLANNING), TO WHICH NO OBJECTION WAS TAKEN BY THE ASSESSEE ANYWAY. IN ANY CASE, THAT WAS THE ONLY POSSIBLE COU RSE OF ACTION, FOR ESTIMATING THE VALUE OF LAND AS ON 14.1981. IN OUR CONSIDERED VIEW, THE VALUATION SO ADOPTED IN THE COMPUTATION OF TAXABLE CAPITAL GAINS DOES NOT, THEREFORE, CALL FOR ANY FURTHER ADJUSTMENT AT THE INSTANCE OF THE ASSESSEE. WE ACCORDINGLY APPROVE AND CONFIRM THE SA ME. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE ONLY ISSUE ON MERITS IS THE RATE AT WHICH FAIR MARKET VALUE, AS ON 1.4.1981 OF LAND IS TO BE ADOPTED. THE RATE FOR ADOPTING FAIR MARKET VALUE AS ON 1.4.81 FO R BOTH THE ASSESSMENT YEARS IS THE SAME, AND ASSESSEES GRIEVA NCE ON MERITS, FOR BOTH THE ASSESSMENT YEARS, HAS TO BE REJECTED. GROU ND NO. 2 IS THUS ALSO DISMISSED FOR BOTH THE YEARS. 13. FROM THE ABOVE IT IS VERY CLEAR THAT THE TRIBUN AL AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDE AND THE MATERIAL AVAILAB LE ON RECORD HAS PASSED A REASONED ORDER, THEREFORE, THERE IS NO MISTAKE APPA RENT FROM THE RECORD. 14. A MISTAKE WHICH REQUIRES TO BE ESTABLISHED BY A RGUMENTS AND A LONG DRAWN PROCESS OF REASONING ON POINTS CANNOT BE CONS IDERED AS A MISTAKE APPARENT FROM RECORD. THIS VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE HONBLE SUPREME COURT IN T.S. BALRAM, ITO VS. VOLKA RT BROTHERS AND OTHERS (1971) 82 ITR 50 (SC) WHEREIN IT HAS BEEN OBSERVED AS UNDER:- A MISTAKE APPARENT ON THE RECORD MUST BE AN OBVIOU S AND PATENT MISTAKE AND NOT SOMETHING WHICH CAN BE ESTABLISHED BY A LONG DRAWN PROCESS OF REASONING ON POINTS ON WHICH THERE MAY B E CONCEIVABLY TWO OPINIONS. A DECISION ON A DEBATABLE POINT OF LAW IS NOT A MISTAKE APPARENT FROM THE RECORD. 15. IN VIEW OF THE ABOVE, WE ARE OF THE VIEW THAT T HERE IS NO MISTAKE APPARENT FROM THE RECORD WHICH COULD BE RECTIFIED U NDER THE SCHEME OF MA NOS. 481 & 482/MUM/2011 13 SECTION 254(2) OF THE ACT AND ACCORDINGLY, THE MISC . APPLICATIONS FILED BY THE ASSESSEE ARE REJECTED. 16. IN THE RESULT, THE MISC. APPLICATIONS FILED BY THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31-08-2012. SD/- SD/- (R.S. SYAL) (DINESH KUMAR AGARWAL) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 31-08-2012. RK.: COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT , CONCERNED, MUMBAI 4. CIT(A) CONCERNED, MUMBAI 5. DR D BENCH 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI