SHABANA KHAN,JABALPUR vs. PR-1, JABALPUR. COMMISSIONER OF INCOME TAX, JABALPUR
What did the Tribunal hold?
The Tribunal held that the reassessment proceedings were initiated without a valid basis, as the assessees had not sold any land. Since the very foundation of the reassessment was flawed, the revisionary powers under section 263 could not be validly exercised.
What were the facts?
The Assessing Officer (AO) initiated reassessment proceedings under section 147 based on information that the assessees sold land for Rs. 50 lacs, but no capital gains were returned. The assessees clarified they had not sold any land, and the AO accepted their returned income. Subsequently, the Principal Commissioner (Pr. CIT) invoked section 263, stating the AO failed to inquire into the source of investment in land.
What were the issues?
Whether revisionary proceedings under Section 263 are valid when the reassessment proceedings themselves were initiated on a mistaken premise and lacked a valid basis?
Which sections of the Income-tax Act were involved?
Section 147,Section 143(3),Section 263,Section 148(2),Section 50C
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Cases cited in this judgment(5)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- GKN Driveshafts (India) Ltd. v. ITO1,349 citing259 ITR 19 · 2003 · SC · Read judgment
- CIT v. Sun Engineering Works (P) Ltd.814 citing198 ITR 297 · 1992 · SC · Read judgment
- CIT v. Jet Airways (I) Ltd.694 citing331 ITR 236 · 2011 · HC
- 254 ITR 657 (Del); Hardillia Chemicals Ltd. v. CIT172 citing75 ITR 373 · 1970 · SC
- Inder Kumar Bachani (HUF) v. ITO37 citing99 ITD 621 · 2006 · ITAT
Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SHRI SANJAY ARORA, HON‟BLE & SHRI MANOMOHAN DAS, HONBLE
Heard together (2 matters)
Read from the judgment's own cause title. This page is filed under one of them.
& 29/JAB/2022 (AY: 2012-13) Kadeer Khan & Anr. v. Pr. CIT 4.1 The Revenue‟s case, valid in principle, is misplaced in the facts and circumstances of the case, being, rather, de hors the same. The basis for the reassessment proceedings is the reason/s to believe non-returning and, thus, escapement of income by way of capital gains from tax. The assessees having admittedly not sold any land during the relevant year, it removes the very basis of the reassessment proceedings. The information giving rise to the reason to believe escapement of income is found wrong as a fact, and there has been thus no valid assumption of jurisdiction to assess. This is in fact primarily the reason for the Apex Court instituting a procedure in GKN Driveshafts (India) (P.) Ltd. v. ITO [2002] 259 ITR 19 (SC), requiring an assessee to object to the reason/s recorded, which the AO is supposed to meet per a speaking order before proceeding further in the matter of assessment. The whole idea is to weed out such without basis cases at the threshold, for which the assesses would otherwise be required to move the Hon‟ble High Court under it‟s writ jurisdiction. Considering the assessee‟s reply before the AO, disclosing the correct facts, as the assessee‟s objection to the issue of notice u/s. 148(1), the AO was constrained not to proceed ahead with the assessment. It is for this reason that despite Explanation 3 to s. 147, which enables assessment of incomes other than qua which the reassessment proceedings had been initiated, with the law in the matter having been already sufficiently clarified (V. Jaganmohan Rao v. CIT [1970] 75 ITR 373 (SC); CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 297 (SC)), the Hon‟ble Courts have, as in CIT v. Jet Airways (I) Ltd. [2011] 331 ITR 236 (Bom), held that the same does not override the necessity of conditions set out in the substantive part of sec. 147.
4.2 We are conscious, we may clarify, that all that is necessary at the stage of the initiation of proceedings, is a honest, prima facie belief, and the sufficiency and the correctness of the materials is not a thing to be considered at that stage, and neither is the reason to believe conclusive of the matter, which is to be decided in the ensuing assessment proceedings on merits after hearing the assessee. So, & 29/JAB/2022 (AY: 2012-13) Kadeer Khan & Anr. v. Pr. CIT however, the question is: What is the material before the AO which led him to believe escapement of income from tax due to non-returning of capital gain on the sale of land (for Rs. 50 lacs) by the assessee/s during the relevant year in the instant case? That is, it is a case of no reason at all, striking at the root of the assumption of jurisdiction to assess. Rather, as Shri Usrethe would point out during hearing, the AO was not in the possession of sale (purchase) deed at the time of recording the reason to believe and issue of notice u/s. 148(1) on 30/03/2019 inasmuch as the letter seeking information regarding, as the AO states in his order (para 1): „sold of immovable property‟, was issued by him to the Sub- Registrar only on 16/04/2019, i.e., 17 days later. A reason to believe escapement of income from tax is a jurisdictional issue, which accordingly the law provides for being recorded (u/s. 148(2)) and, further, approval in certain circumstances by a higher ranking authority (s.151), which approval was thus clearly granted mechanically in the instant case/s, again invalidating it as well as the ensuing proceedings (CIT v. S. Goyanka Lime & Chemicals Ltd. [2005] 231 Taxman 73 (MP)). 4.3 Further, true, the instant are revision proceedings, separate and distinct from the reassessment proceedings, which can be said to have attained finality, and which cannot be lightly, if at all, disturbed (CIT v. Mtt. Ar. S. Ar. Arunachalam Chettiar [1953] 23 ITR 180 (SC); Hindustan Coca Cola Beverage (P.) Ltd. v. CIT [2007] 293 ITR 226 (SC); CIT vs. D & H Secheron Electrodes Ltd. [2008] 301 ITR 20 (MP)). A non-appeal, as explained by the Apex Court in Mela Ram & Sons vs. CIT [1956] 29 ITR 607 (SC), gives a valuable right to the other side. So, however, in our view, the present case would be covered by the principle of law enshrined in the legal maxim “sublato fundamento cadit opus”, i.e., when the cause (foundation) is removed, the effect (consequent action) ceases. As explained by the Apex Court in Kiran Singh vs. Chaman Paswan [1954] AIR 1954 SC 340, an order passed by an authority without jurisdiction is a nullity, and its invalidity can be challenged whenever and wherever it is sought to be enforced or relied 4 | P a g e & 29/JAB/2022 (AY: 2012-13) Kadeer Khan & Anr. v. Pr. CIT upon. It is this principle, it may be noted, that prevailed with the Tribunal in the cases cited by the assessee, as indeed with the Hon'ble High Court in Keshab Narayanan Banerjee vs. CIT [1998] 101 Taxman 512 (Cal). It is to be noted that in the present case there was no occasion for the assessees to challenge the assessment proceedings inasmuch as there was acceptance of the returned income. The assessee‟s challenge to the reassessment proceedings in the instant, collateral proceedings is thus valid.
We, in view of the foregoing, uphold the challenge to the revision of the assessments under reference and, further, hold the impugned revision/s as bad in law. The assessee/s succeeds. We decide accordingly.
In the result, the assessee‟s appeals are allowed. Order pronounced in open Court on June 15, 2022 sd/- sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Date: 15/06/2022 vr/- Copy to:
1. 1. The Appellants: a) Shri Kadeer Khan b) Shabana Khan both r/o 28/1, Adarsh Nagar Colony, Behind Vimal Nursing Home, Adhartal, Jabalpur.
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