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Income Tax Appellate Tribunal, SMC BENCH, MUMBAI
Vesave Mangela Macchimar Samaj Sarvadya Sahakari Housing. The Assessee had not shown any income under the head capital gains in the return of income and therefore, Assessing Officer formed belief that income had escaped assessment and reassessment proceedings were initiated. Admittedly, the property was sold for consideration less than stamp duty value and therefore, the Assessing Officer was justified in making addition on account of capital gains by resorting to the provisions of Section 50C of the Act. Therefore, it was submitted that the order passed by the CIT(A) confirming the action of Assessing Officer should be upheld.
We have considered the rival submissions and perused the material 8. on record. The validity of the reassessment proceedings would have to be examined on the touchstone of the reasons recorded in writing which read as under:
“2. Information has been received from the office of the Pr.CIT-24, Mumbai vide letter dated Pr. CIT-24(HQ)/Verification & Information/2016-17 dated 03.05.2016 that the assessee has entered in to following transaction Registration Address of the Transaction Stamp xx No. Property sold amount Duty Paid 11798/2010 (1) CTS No. 1376 30,98,500 1,37,475 xx Flat No. 704/B, 7th Flr, Vesave Mangela Macchimar Samaj Sarvadya Sahakari Housing
The information has been analysed vis-à-vis the return of income filed by the assessee. It is seen that, the assessee has shown mere income of Rs 1,49,680/- for the year, further even though the assessee has sold flat no income under the head capital gains has been offered. Thus the income element with respect to the above high value transactions remains undisclosed and the same is required to be considered in computing total income of the assessee. 5. Basis of forming reason to believe. In this case, the assessee has sold the property for aggregate consideration of Rs.30,98,500/- however, the assessee has field return of Income and no income under head capital gains/business income has been shown, which is not in consistency with the information received in the case of the assessee. Thus, the income element in respect of above transactions remains undisclosed and the same are required to be considered in computing total income of the assessee. On the basis of this tangible information available on record, it is evidently clear that the total Income of the assessee had escaped assessment. In view of the above and by reason of the failure on the part of the assessee to disclose fully & truly all material facts necessary thereto in his return of Income. I have reasons to believe that the income to the extent of Rs 30,98,500/- chargeable to tax in the hands of the assessee has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961 A notice u/s 148 rws 147 of the Act, is being proposed to be issued to assess such income and also any other income chargeable to tax which has escaped assessment, which comes to my notice subsequently in the course of assessment proceedings for AY 2011-12 6. Applicability of the provisions of section 147/151 to the fact of the case- In this case return of income was filed for the year under consideration accordingly, however, no assessment was made and the only requirement to initiate proceedings u/s 147 is to reason to believe which has been recorded in Para 5 above. 7. In view of the above, I have reason to believe that in the case of the assessee, income chargeable to tax of Rs. 30,98,500/- has escaped assessment for AY 2011-12 within the meaning of sec. 147 of the I.T. Act and therefore, it is a fit case for issue of notice u/s 148 of the IT. Act, 1961 because of the failure on the part of the assessee to disclose the fact truly and fully in its return of income 8. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has to be obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act. Accordingly, administrative approval for reopening the case u/s 148 may kindly be accorded.” (Emphasis Supplied)
The reasons recorded state that the Appellant has sold the property 9. „for aggregate consideration of INR 30,98,500/-„. This is factually incorrect, as a perusal of the AIR Transaction Statement shows that the property has been sold for INR 20,00,000/-. Thus, the basis on which the Assessing Officer has proceeded to initiate reassessment proceedings in factually incorrect. This also shows non-application on mind by the Assessing Officer as explained hereafter. If we take that the Assessing Officer was of the view, that the property was sold for the aggregate consideration of INR 30,98,500/-, then the stamp duty value of INR 30,97,500/- reflected in the AIR Transaction Statement was below the consideration amount and therefore, the transaction for sale of property could not have been reflected in the AIR transaction statement in the list of transactions where the stamp value assessed was more than the declared sale value. We are alive to the possibility of the Assessing Officer making a typographical mistake while recording reasons. However, on perusal of paragraph 1 of the Assessment Order, dated 19.12.2018, we find that the Assessing Officer has reiterated that the specific information was received from Principal Commissioner of Income Tax -24, Mumbai, that the property has been sold for the aggregate consideration of INR 30,98,500/-. Thus, clearly the reassessment proceedings have been initiated only on the basis of letter dated 03.05.2016, received form Principal Commissioner of Income Tax -24, Mumbai, without any application on mind to the AIR Transaction Information available with the Assessing Officer and verification. Further, in our view, merely on the basis of the information stated in the reasons recorded, the Assessing Officer could not have formed the belief that „income to the extent of INR 30,98,500/- chargeable to the tax in the hands of the Assessee has escaped assessment‟. In paragraph 5 of the reasons recorded the Assessing Officer, despite observing, that the „income element in respect of above transactions remains undisclosed‟, concludes that the income to extent of INR 30,98,500/- has escaped assessment. There is no link between the material available and formation of the aforesaid belief by the Assessing Officer. The reasons recorded also do not make any reference of Section 50C of the Act - possibly because the Assessing Officer proceeded on incorrect understanding that the property has been sold for INR 30,98,500/-. Be that as it may, we are of the view that the reassessment proceedings initiated on the basis of incorrect understanding of the primary facts and without application on mind to the material/information available with the Assessing Officer cannot survive. Our view draws strength from the judgment of the Hon’ble Delhi High Court in the case of Oriental Insurance Co. v. CIT [2015] 378 ITR 421 which was followed by the Mumbai Bench of the Tribunal in the case of ABB Switzerland Ltd Vs. ADIT (IT) -1 (1), Mumbai: [2016] 73 taxmann.com 166 (Mumbai)[15-06-2016].
In view of the above, reassessment proceedings are quashed and 10. the Assessment Order, dated 19/12/2018, passed under Section 143(3) read with Section 147 of the Act for the Assessment Year 2010-11 is set aside as being bad in law. In view of the aforesaid, Ground No. 1, 2 and 4 raised by the Appellant are allowed whereas Ground No. 3, 5, 6, 7 and 8 are dismissed as being infructuous.
In result, the appeal preferred by the Assessee is allowed. 11.
Order pronounced on 19.05.2023.