TAHERA ABIDA GHORI ,HYDERABAD vs. DUPUTY COMMISSIONER OF INCOME TAX -2,INTERNATIONAL TAXATION , HYDERABAD

Facts in brief are that the assessee is an individual and an NRI and according to learned Assessing Officer the assessee has not filed her return of income. Subsequently, learned Assessing Officer recorded the following reasons for reopening of the assessment:

Accordingly, the notice u/s 148 of the Act was issued to the assessee, in response to which, the assessee filed her return of income on 15.03.2014 declaring total income of Rs.2,33,170/-. Subsequently, learned Assessing Officer issued statutory notices u/s 143(2) and 142(1) of the Act calling for certain information from the assessee. The AR of the assessee appeared before learned Assessing Officer from time to time and filed the requisite details.

During the course of assessment proceedings, learned Assessing Officer confronted the letter addressed by Shri Konda Laxmaiah to the ACIT, Circle 9(1) Hyderabad stating that the sale proceeds of agricultural land amounting to Rs.4,43,37,500/- were received through cheques and deposited in his Savings Bank Account and an amount of Rs.9,87,500/- was paid to the vendor Smt. Tahera Abida. An amount of Rs.1.00 crore was paid through cheque and the balance through cash on various dates as mentioned in the copies of the receipts given on the stamp paper. Learned Assessing Officer also confronted the affidavit given by Shri Fakruddin Alias Arif confirming cash and cheque payment of Rs.4,28,16,500/- by Shri Konda Laxmaiah to Shri Shaik Fakruddin alias Arif, the GPA holder of the assessee. Accordingly, learned Assessing Officer asked the assessee to explain as to why the amount of Rs.4,28,16,500/- should not be treated as income of the assessee and brought to tax.

Assessee replied that she has not received any such amount other than the amount mentioned in the sale deed. Learned Assessing Officer thereafter issued summons u/s 131 to Shri Konda Laxmaiah who in response to the said summon appeared before learned Assessing Officer and gave his statement stating that he has received only some commission and the entire money was given to the assessee Smt. Tahera Abida. Learned Assessing Officer also issued summons to one Shri V. Srisailam, who in response to the said summon, appeared before learned Assessing Officer and gave a statement. In view of Page 3 of 19

Learned Assessing Officer also rejected the explanation given by the assessee that the land is agricultural and accordingly computed the Long-Term Capital Gains at Rs.4,39,53,353/- by recording the following:

Before the learned CIT (A), the assessee apart from challenging the addition on merit challenged the validity of reopening of the assessment on the ground that the reopening of the case was based on the statement by a third party before the Investigation Wing and not supported by any evidence or proof. Further, there was inordinate delay in issuance of notice u/s 148 of the Act to the assessee as well as supply of reasons. It was argued that the Page 6 of 19

However, the learned CIT (A) was not satisfied with the arguments advanced by the assessee. After calling for a remand report from learned Assessing Officer and rejoinder of the assessee to such remand report, he upheld the validity of the re-assessment as well as the addition on merit.

Learned AR strongly objected to the order of the learned CIT (A) in upholding the validity of the re-assessment proceedings as well as the addition on merit.

So far as the validity of the re-assessement proceeding is concerned, learned AR drew the attention of the Bench to Para 7.10 of the order of the learned CIT (A) where the learned CIT (A) has observed as under:

Referring to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Videsh Sanchar Nigam Ltd reported in (2012) 340 ITR 66 (Bom.) and the decision in the case of CIT vs. trend Electronics (2015) 379 ITR 456 (Bom) and various other decisions filed in the paper book, learned AR submitted that when the reasons were not supplied to the assessee before completion of the assessment or when there is inordinate delay in supply of the reasons despite asking for the same, such re-assessement proceedings are invalid in the eyes of law.

Learned AR further submitted that the reasons for reopening of the assessment is based on wrong appreciation of facts. Referring to the Paper Book filed, learned AR submitted that the assessee has filed her original return of income on 1.08.2008. The assessee filed revised return of income on 27.02.2009 which was processed u/s 143(1) of the I.T. Act. Despite such original return and revised return, learned Assessing Officer in the reasons has recorded that the assessee has not filed her return of income. Therefore, the ITA-IT No 777 of 2020 reopening of the assessment on wrong appreciation of facts is not in accordance with law. For the above proposition, he relied on the decision of the Delhi Bench of the Tribunal in the case of Hafizuddin Hazi vs. Income Tax Officer in dated 16th Feb. 2022.

So far as the merit of the case is concerned, learned AR submitted that the addition was based merely on the basis of statement of one Mr. Konda Laxmaiah who stated to have given the money to the assessee without any proof. He submitted that once the assessee has sold the property to Shri Konda Laxamaiah giving of on money after purchase of the property is beyond imagination. He submitted that once the property is duly registered, the purchaser will never pay on-money that too after 5 months from the date of sale. Referring to the sworn statement of Shri Shaik Fakruddin Arif u/s 131 of the I.T. Act, 1961 on 27.03.2015, learned AR drew the attention of the Bench to his reply to question No.7 to 11 which are as under:

He submitted that once the witness of the Revenue has denied to have issued any receipt on behalf of the assessee to Shri Konda Laxamaiah, no addition should have been made in the hands of the assessee. He accordingly submitted that the reopening is bad in law and the addition made by learned Assessing Officer and sustained by the learned CIT (A) is without any basis.

The learned DR, on the other hand, heavily relied on the order of the learned CIT (A) both legally and factually. So far as the validity of the re- Page 12 of 19

So far as the argument of learned AR that reopening was based on wrong facts that the assessee has not filed her return of income whereas the assessee has filed such return of income is concerned, the learned DR submitted that escapment of income is proved and is in fact brought on record by the assessee hereself by not admitting the Long-Term Capital Gain in the original as well as in the revised return. She submitted that a mistake as to whether or not a return has been filed by the assessee is clerical in nature and it does not alter the fact that the income has escaped assessment. She Page 13 of 19

So far as the argument of learned AR that the land so sold was agricultural land and no capital gain is attracted is concerned, the learned DR drew the attention of the Bench to the ratio laid down by the Hon'ble Supreme Court in the case of Ms.Sarifabibi Mohd. Ibrahim vs. CIT reported in 204 ITR 631 and drew the attention of the Bench to the 13 parameters laid down in the said decision. She accordingly submitted that the land is not agricultural in nature.

So far as the merit of the case is concerned, the learned DR heavily relied on the order of learned Assessing Officer as well as the order of the learned CIT (A) and submitted that the learned CIT (A) has given justifiable reasons while upholding the addition made by learned Assessing Officer. Therefore, the grounds raised by the assessee should be dismissed.

We find the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd vs Income Tax Officer And Ors on 25 November, 2002 reported in (2003) 1(SCC) 72 has held that where a notice u/s 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires to seek the reasons for issuance of notice, learned Assessing Officer is bound to furnish the reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file the objection to the issuance of notice and learned Assessing Officer is bound to dispose of the same by passing a speaking order. However, in the instant case, despite the assessee filing the return of income in response to notice u/s 148 and thereafter asking for the reasons, we find that such reasons were provided to the assessee only on 30.03.2015 i.e. one day prior to the completion of the assessment on 31.3.2015. Thus, learned Assessing Officer has not followed the mandatory requirements as laid down by the ITA-IT No 777 of 2020 Hon'ble Supreme Court cited (Supra). Therefore, the re-assessement proceedings are liable to be quashed.

Further, there is one more reason why the re-assessement proceedings cannot be held to be in accordance with law. As stated earlier, the original return of income was filed manually on 1.8.2008 which was subsequently revised on 27.02.2009. The return was processed u/s 143(1)(a) vide intimation dated 19.03.2010 copy of which is placed at page 6 of the Paper Book. However, the reasons recorded by learned Assessing Officer which has already been reproduced earlier, states that the assessee Smt. Tahera Abida has not filed her return of income for the A.Y 2008-09. Thus, learned Assessing Officer without verifying the return already filed by the assessee and which has already been processed u/s 143(1)(a) recorded that the assessee has not filed her return of income and accordingly re-opened the assessment.

We find identical issue had come up before the Delhi Bench of the Tribunal in the case of Hafizuddin Hazi vs. Income Tax Officer (Supra) where the Tribunal after considering the various arguments advanced by both sides and relying on various decisions of Hon'ble Delhi High Court and Hon'ble Gujarat High Court quashed the re-assessment proceedings by observing as under: “19. We have heard the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied by ld. Counsel for the assessee. We find, the assessee, in the instant case, had filed the original return of income on 31.10.2006 declaring the total income at Rs.10,87,058/- which was processed accordingly. We find, the AO reopened the assessment on the ground that the assessee has purchased residential property amounting to Rs.31,50,000/- and the same is not verifiable from the return of income filed for the AY 2006-07 and the assessee has not furnished the return of income. The reasons of such reopening has already been reproduced in the preceding paragraph. From the above, it is clear that the reopening was made on the ground that the assessee has not filed the return of income and, therefore, the income to the extent of Rs.31,50,000/- has ITA-IT No 777 of 2020

Wrong recording of fact by the learned Assessing Officer, strengthens the argument of the learned AR that proper care and caution is not taken at the time of re-opening of the assessment. Apart from this, there is no dispute that the assessee requested for reasons on 16.04.2014, but the learned Assessing Officer furnished the same on 30.03.2015 while he passed the assessment order on 31.03.2015, thereby not allowing sufficient time for the assessee to file the objections to the reasons for re-opening. In terms of the decision of the Hon’ble Apex Court in the case of GKN Driveshafts (India) Ltd., vs. DCIT [2003] 259 ITR 19 (SC), the assessee was denied an opportunity to file the objections to the reasons and get them disposed-of by way of speaking order. It is a valuable right recognized by the Hon’ble Apex Court and to that extent, the assessee’s case is prejudiced. For denial of this right of the assessee, as has been held by the Hon’ble Bombay High Court in the cases of ITA-IT No 777 of 2020 Videsh Sanchar Nigam Limited and Trend Electronics (supra), the assessment is bad and nonest in the eye of law.

Thus, viewing from any angle, we are of the considered opinion that the assessment order is not legally sustainable. We, therefore, quash the re- assessment proceedings initiated by learned Assessing Officer. Since the assessee succeeds on the legal ground of validity of re-assessement proceedings the other grounds challenging the addition on merit, being academic in nature, are not adjudicated.

In the result, appeal filed by the assessee is allowed.