MADHU GOYAL, RAIPUR,RAIPUR V. INCOME TAX OFFICER, WARD-2(1), RAIPUR, RAIPUR

ITA 496/RPR/2024

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The case involves Smt. Madhu Goyal, who appealed against the reassessment order for the assessment year 2014-15, which was confirmed by the CIT(Appeals)/NFAC. The reassessment was based on alleged non-disclosure of a capital gain transaction in her return of income, which the A.O claimed led to an escapement of income. The Tribunal examined the 'reasons to believe' provided by the A.O and found them to be incorrect and arbitrary, as the appellant had indeed disclosed the long-term capital gain from the sale of shares, claiming exemption under section 10(38) of the IT Act. The Tribunal's decision emphasized the necessity of correct and rational 'reasons to believe' for initiating reassessment proceedings under sections 147/148 of the IT Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 298575 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Other Referred Cases: GKN Driveshafts (India) Ltd vs. ITO, State of Uttar Pradesh Vs. Aryaverth Chawal Udyog
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: SAKSHI GOPAL AGRAWAL
• Keywords: Reassessment proceedings; Cost of acquisition; Earning of tax free income; Reason to believe; Tangible material
• Section: 143(3); 143(2); 68; 20

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी पाथ[ सारथी चौधरȣ, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं./ITA No.496/RPR/2024 Ǔनधा[रण वष[ /Assessment Year : 2014-15 Smt. Madhu Goyal D-36, Wallfort City, Bhatagaon, Raipur-492 001 (C.G) PAN: AEYPG1038E .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer, Ward-4(1), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Sakshi Gopal Agrawal, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 17.04.2025 घोषणा कȧ तारȣख / Date of Pronouncement : 17.04.2025 2 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)/NFAC, Delhi dated 02.09.2024 for the assessment year 2014-15 as per the following grounds of appeal on record: “1. That on the facts and circumstances in law, the Ld. CIT(A), NFAC has erred in confirming the order of the A.O passed u/s.143(3) r.w.s. 147 r.w.s 144B of IT Act in absence of condition precedent for the assumption of jurisdiction, the order passed by A.O is bad in law, void ab initio and liable to be quashed on account of following defects:- i. That the reasons to believe was formed merely on basis of report of investigation wing without conducting any independent enquiry thus failing to form his own formation of believe. ii. That reasons to believe was based on wrong facts that the transaction of sale of share was not disclosed in ROI but in fact the appellant had very well shown long term capital gain on sale of shares and claimed the same to be exempt u/s.10(38) of IT Act. iii. That in reasons no tangible material is narrated or described so as to form valid believe u/s.148 of IT Act. iv. That mere DIT information is mentioned in reasons recorded which is nowhere corroborated by any independent material. 2. That on the fact and circumstances of case of Appellant the order passed u/s.143(3) r.w.s. 147 r.w.s. 144B of IT Act is bad in law as the ld. A.O Failed to follow the procedure for assessment u/s.148 as laid down by Supreme Court in case of GKN Driveshafts (India) Ltd and also the procedure laid down u/s.144B of IT Act. 3. That the Ld. CIT(A), NFAC erred in confirming addition of Rs.9,27,878/- made by A.O by invoking the provision of section 68 of IT Act on account of long term capital gain claimed as exempt by Appellant u/s.10(38). The addition 3 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 made by A.O and sustained by CIT(A), NFAC is arbitrary, baseless and not justified. 4. That the Ld. CIT(A), NFAC erred in confirming addition of Rs.9,27,878/- made by A.O by invoking the provision of section 68 of IT Act on account of long term capital gain derived from sale of listed equity shares without appreciating that the same script i.e. shares of M/s.Tilak Ventures Pvt. Ltd. are held to be genuine share by various court and also there is no allegation for appellants involvement in price rigging. Thus the addition made by A.O and sustained by CIT(A), NFAC is arbitrary, baseless and not justified. 5. That, assessee reserves the right to add, amend, alter or withdraw any ground/grounds of appeal at the time of hearing.” 2. Also, the assessee has assailed the additional grounds of appeal which reads as under: “1. \"Without prejudice to the grounds taken in Form no. 36, in the facts and in law, assessment order passed u/s. 143(3) rws 147 rws 144B dt. 08/09/2021 by Learned Assessing Officer, NFAC is illegal and bad in law void-ab-initio and liable to be quashed as the reason to believe was formed merely on basis of report of investigation wing without conducting any independent enquiry thus failing to form his own formation of believe and was based on wrong facts that the transaction of sale of share was not disclosed in ROI but in fact the appellant had disclosed the same as long term capital gain on sale of shares and claimed to be exempt u/s 10(38) of IT Act. Furthermore the Appellant had raised her objection before the Id. AO on 13/01/2020 and informed him that the impugned transaction was being shown as exempt income under schedule El serial no. 3 of ITR. However the Id. AO does not deal with the factual position asserted by the Appellant and once again reiterated the same wrong facts in Para 3.1 of his disposal of objection order dtd. 18.02.2021. 2. \"That on the facts and circumstances of case, the order passed u/s.143(3) rws 147 rws 144B dt. 08/09/2021 by Learned Assessing Officer, NFAC is bad in law and void-ab- initio as mandatory notice u/s 143(2) was being issued on 2Z/12/2019 i.e. prior to disposal of objection vide order dtd.18/02/2021.\" 4 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 3. In this case, the addition has been made by the A.O u/s. 68 of the Income Tax Act, 1961 (for short ‘the Act’) denying the deduction claimed u/s.10(38) of the Act. The same was confirmed by the Ld. CIT(Appeals)/NFAC. 4. The Ld. Counsel for the assessee has raised legal grounds as well as grounds on merits. It was submitted by the Ld. Counsel that if the legal ground is adjudicated and answered in favour of the assessee then all other grounds on merits/any other legal ground, if any becomes academic in nature. In the said legal ground, it is contended by the Ld. Counsel that the A.O has not arrived at any satisfaction forming the “reasons to believe” for invoking the reassessment proceedings u/s.147/148 of the Act. The entire reasons recorded are based on wrong facts. 5. The Ld. Counsel in this regard appraised the bench that in the reasons recorded by the A.O it is invalid and without satisfaction to invoke proceedings u/s. 147/148 of the Act. The reasons recorded by the A.O has been annexed at Page 19 & 20 of the paper book. For the sake of clarity, the same are extracted as follows: 5 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 6 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 Referring to Para-2 of the aforesaid, the Ld. Counsel submitted that as per the findings of the A.O in the return of income the assessee has not shown transaction pertaining to the capital gain for A.Y.2014-15. In this regard, the Ld. Counsel demonstrated from the return of income annexed at Page 112 of the Paper book in column of “exempt income”, the assessee has shown LTCG from transactions on which securities transaction taxes has been paid and the taxes thereon mentioned is Rs.8,84,938/-. That further, 7 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 in the computation of income at Page 115 of the paper book in column “details of exempt income”, the assessee has also mentioned capital gain ( STT) as per annexure u/s. 10(38) of the Act, wherein the amount is also matching at Rs.8,84,938/-. 6. Per contra, the Ld. Sr. DR has produced a report of the A.O wherein the A.O has mentioned that the assessee has not disclosed in the return of income the amount of Rs.9,27,878/- which is the amount received by the assessee from M/s. Tilak Venture Ltd. and therefore, as per the contention of the Ld. Sr. DR, the “reasons to believe” are well founded for reassessment proceedings since there is escapement of income. 7. The Ld. Counsel for the assessee countering the afore-stated contention submitted that the return of income does not have any provision to directly reflect the amount which has been received by the assessee i.e. 9,27,878/-. The provision of exempt income only has to be reflected and therefore, the amount that has been received from M/s.Tilak Venture Ltd. Rs.9,27,878/- has to be deducted from the cost of acquisition of Rs.37,350/- and the outcome is Rs.8,90,528/- [Rs.9,27,878/-(-) Rs.37,350/-]. This aspect has already been disclosed in the return of income within the column of “exempt income”. These facts could not be refuted by the Ld. Sr. DR. 8 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 8. I have carefully considered the submission of the parties herein, analyzed the facts and circumstances in this case. The legal ground that has been raised by the Ld. Counsel for the assessee that the A.O while invoking the provisions of Section 147/148 of the Act has not arrived at requisite satisfaction. Rather, there was no satisfaction at all in his mind and applicability so to form the “reasons to believe” that any income or part of income has escaped assessment. In this regard, the Ld. Counsel has demonstrated through the “reasons to believe” that the A.O has mentioned at Para 2 that in the return of income for A.Y.2014-15, the assessee has not shown the transaction of capital gain. However, it has already been demonstrated by the Ld. Counsel of the assessee that in the return of income filed in Column “exempt income”, the assessee has shown LTCG transaction on which securities transaction taxes has been paid of Rs.8,84,938/-. Similarly, in the computation of income also in column “details exempt income”, it has been shown the capital gain (STT) a/w. annexure u/s. 10(38) of the Act totaling Rs.8,84,938/- which matches with the amount shown in the return of income. In this regard, the observation of the A.O is incorrect, arbitrary and perverse. The mandate of law is that while invoking reassessment proceedings, the A.O should be absolutely clear in his mind that there are “reasons to believe” that the income or part of income of the assessee has escaped 9 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 assessment. In this case, the A.O has formed his reasons based on wrong facts. Resultantly, the order passed u/s. 147/148 becomes null and void. 9. The “reasons to believe” for escapement of income is the foundation stone for proceedings u/ss.147/148 of the Act. The “reasons to believe” should be based on material available with the A.O. The “reason to believe” is different from “reason to suspect”. The A.O should have some “reasons to believe” that income has escaped assessment. Reason is the capacity of consciously applying logic by drawing conclusions from new or existing information, with the aim of seeking the truth. “Reason to believe” means a situation where a person has sufficient cause to believe that something is true or false, but not otherwise. The Hon’ble Supreme Court in the case of State of Uttar Pradesh Vs. Aryaverth Chawal Udyog, [2015] 17 SCC 324 has held that the “reasons to believe” on which the assessing authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. 10. Reverting to the facts and circumstances of the present case, in the “reasons to believe” itself, there is incorrect finding by the A.O regarding non-disclosure of capital gain transactions by the assessee. That as per the aforesaid examination such transaction of capital gain has already been disclosed by the assessee. Further, the Ld. Sr. DR has also agreed that there is no provision in the return of income for showing the total 10 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 income of receipts by the assessee. Rather, the total receipts have to be deducted from the cost of acquisition and the net amount has to be disclosed in the “exempt income” column which the assessee in this case has complied with. Therefore, the very basis for “reasons to believe” recorded by the A.O becomes irrelevant, incorrect and arbitrary. Accordingly, I hold that the “reasons to believe” recorded by the A.O for reassessment proceedings are void-ab-initio. Resultantly, all the subsequent proceedings becomes non-est in the eyes of law. In other words, since the “reasons to believe” has been held void ab initio, therefore, the reassessment order passed by the A.O u/s.147/148 of the Act does not have any legal sanctity to survive, hence, it is quashed. Therefore, the subsequent order passed by the Ld. CIT(Appeals)/NFAC becomes non-est as per law. 11. That even without going into the merits of the case, this legal ground is answered in favour of the assessee and against the revenue. Accordingly, all other grounds on merits as well as other legal ground, if any becomes academic in nature. 12. As per the above terms, the appeal of the assessee stands allowed. 11 Smt. Madhu Goyal Vs. ITO, Ward-4(1), Raipur (C.G.) ITA No.496/RPR/2024 13. In the result, appeal of the assessee is allowed. Order pronounced in open court on 17th day of April, 2025. Sd/- (PARTHA SARATHI CHAUDHURY) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर / Raipur; Ǒदनांक / Dated : 17th April, 2025. SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The Pr. CIT-1, Raipur (C.G.) 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “एक-सदèय” बɅच, रायपुर / DR, ITAT, “SMC” Bench, Raipur. 5. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur "