SH. BABU LAL MEENA,JAIPUR vs. INCOME TAX OFFICER, JAIPUR

PER VIJAY PAL RAO, JM

3. The recorded reasons on 28.03.2014 by ITO ward 6(1) which consequentially led to the assessment on 31.03.2015 were inherently bad in law as they don't lead to formation of belief but only speak of transaction of land in village kukas, Tehsil Amer, being not verifiable and in stating that land was a capital asset u/s 2(14) of the act, even though this assertion of land being a capital asset, was neither apparent nor established then, at the time of recording of reasons. 4. The A.O. erred in fact and in law by treating the land as capital asset u/s 2(14)(iii)(b) even when it was located more than 8 km from boundary of Jaipur Municipal Council (JMC), as per CBDT notification no. 9447 dated 06.01.1994. 5. The A.O. erred in ignoring the fact that transaction in this land was not covered by section 50(c) of the act and thereby in making an addition of 3,20,48,000/-. 6. The A.O. erred in arbitrarily rejecting the report of the Patwari dated 28.02.2015 about location of the transacted land and in coaxing a report Tehsildar on from 31.03.2015 on e-mail, which was not only qualified but also based on invalid presumption and was never confronted to the assessee. 7. The AO erred in invoking provisions of sec 50C in respect of the transaction in land on 27/09/06, when there was no difference in consideration disclosed and adopted for purpose of stamp duty and making an addition of RS 7,84,000/-. 8. The AO erred in arbitrarily reducing the amount of RS thirty lakh from cost of acquisition of the land. 9. The CIT(A) erred in arbitrarily ignoring the detailed submissions of the assessee and rejoinders, filed in response to the remand reports of the AO, dated 11/01/2017, 27/01/2017,16/06/2017,and 25/08/2017, even while reproducing these in the appellate order, and in passing a non-speaking order. 10. The CIT(A) erred in arbitrarily, rejecting the evidentiary letter of the Dy commissioner of Jaipur municipal council dated 26/02/2016 and instead by relying on the qualified, presumption laden and unconfronted letter of the Tehsildar dated 31/03/2005.

2.1 The Ground No. 1 and 2 are regarding validity of assessment order passed u/s 143(3) read with section 147 of the Act for want of jurisdiction of the AO who has initiated the proceedings u/s 148 of the Act as well as for want of satisfaction of the AO who has finally passed the assessment order.

2.2 The ld.AR of the assessee has submitted that the reasons were recorded for reopening of the assessment by the ITO, Ward- 6(1), Jaipur on 28-03-2018. Accordingly, the notice u/s 148 was issued by the ITO, Ward-6(1), Jaipur of the Act on 29-03-2014. Thereafter the case was transferred to ITO, Ward-5(4), Jaipur vide letter dated 7-8-2014 who had finally passed the reassessment order dated 31-03-2015. Thus the ld.AR of the assessee contended that the reasons recorded on 29-03- 2014 was by non-jurisdiction ITO Ward- 6(1), Jaipur who had unduly retained the assessment record of the assessee for a long period whereas the jurisdiction to frame the assessment was with ITO Ward- 5(4), Jaipur but he had not recorded the reasons. Therefore, the initiation of reassessment and framing of assessment are bad in law. The ld.AR of the assessee relied on the decision of Hon'ble Delhi High Court in the case of Krown Agro Foods Pvt.Ltd. vs ACIT 375 ITR 460. Therefore, the ld.AR of the submitted that reassessment is void ab-initio for want of jurisdiction of the AO who had initiated the proceedings u/s 147/148 of the Act.

2.3 On the other hand, the ld. DR submitted that assessee has not raised any objection of jurisdiction either before the AO during the assessment proceeding or before the ld. CIT(A). Therefore, this issue is not considered by any of the authorities below and also not adjudicated upon by the ld. CIT(A). The ld. DR further submitted that the assessee has even not filed any application seeking the permission of the Tribunal to file the additional evidence. Once no such objection or ground was raised by the assessee before the authorities below then without explaining the reasons and seeking the permission from the Tribunal, the assessee cannot be allowed such an additional ground. Thus, he contended that the ground raised by the assessee should not be admitted.

In support of his contention, the ld. DR relied on the decision of ITAT Agra Bench in the case of Smt. Archana Pandey vs ITO, (2013) 34 Taxmann.com 88/144 ITD 218. He further submitted that even as per the provisions of Section 124 of the Act, the assessee cannot raise an objection of the jurisdiction of the AO after one month from the date of notice issued by the AO u/s 148, 143(2) or 142(1) of the Act. Therefore, the jurisdiction of the AO cannot be challenged after expiry of the said period as provided u/s 124 of the Act. In support of his contention, he relied on the decision of Hon'ble Delhi High Court in the case of Abhishek Jain vs ITO, Ward- 55, New Delhi, (2018) 94 taxmann.com

2.4 We have considered the rival submissions as well as relevant material available on record. The assessee is an individual and has not filed the return of income u/s 139 of the Act. As per the information received by the AO, it was found that the assessee has sold a piece of land on 16-11-2006 for a consideration of Rs. 1.10 crores. The said land was valued by the Sub-Registrar for the purpose of stamp duty at Rs. 3,81,64,000/-. The AO i.e. ITO, Ward- 6(1), Jaipur issued notice u/s 148 of the Act on 29-03-2014. It is pertinent to note that the assessee has never filed the return of income, therefore, the notice issued u/s 148 of the Act by ITO, Ward- 6(1) is based on the PAN data base. The jurisdiction of the AO cannot be disputed by the assessee when the said ITO was having jurisdiction over the PAN of the assessee. The subsequent transfer of the case was due to transfer of PAN of the assessee on the basis of different categories and their occupation/ profession. Thus once the assessee's PAN was with the jurisdiction of the ITO, Ward- 6(1) of the Act at the time of issuing notice u/s 148 of the Act then he was having proper jurisdiction to initiate the proceedings u/s 148 of the Act. Subsequently, the details of the assessee came to the knowledge of the AO who proposed to transfer the PAN of the assessee to ITO,Ward- 5(4), Jaipur. Thus it is not a case of having no jurisdiction by the ITO, Ward- 6(1), Jaipur at the time of issuing notice u/s 148 of the Act. Since the assessee had never filed the return of income and the PAN was lying with the said ITO, Ward- 6(1), Jaipur then subsequent proposal of the ITO to the ld. CIT concerned for transfer of the PAN of the assessee to ITO, Ward- 5(4) would not amount to transfer of the case without jurisdiction. Further the assessee has not raised the issue of jurisdiction either before the AO or before the ld. CIT(A) except some objections were raised in the arguments before the ld. CIT(A).

Therefore, the said objections not raised in the grounds of appeal before the ld. CIT(A) were not adjudicated by the ld. CIT(A). Now the assessee has raised this issue of validity of initiation of proceedings u/s 147/148 of the Act for want of jurisdiction of ITO, Ward- 6(1), Jaipur. Since this objection was raised before the authorities below, therefore, the same was neither considered nor adjudicated upon by any of the authorities below. Further this requires a verification of the concerned records regarding the order of the ld. CIT for transferring the PAN or the case of the assessee from ITO, Ward- 6(1), Jaipur to ITO , Ward- 5(4), Jaipur.

Accordingly, in the facts and circumstances of the case, this issue is set aside to the record of the ld. CIT(A) for adjudication of the ground as raised by the assessee regarding the jurisdiction of the ITO, Ward- 6(1) for initiating proceedings u/s 147/148 of the Act and consequently reassessment order framed by the ITO Ward- 5(4), Jaipur.

3.1 The Ground No. 3 of the assessee is regarding validity of reopening on the ground of borrowed satisfaction.

3.2 The ld.AR of the assessee has raised this issue specifically on the ground that in the reasons recorded, the ITO Ward- 6(1),Jaipur stated that transaction is not verifiable on account of not filing the return of income. The ld.AR thus contended that mere failure to file the return of income cannot be a reason to believe the escapement of income. Further the ITO had not quantified that the income has escaped assessment at the time of recording the reasons. The ld.AR of the assessee submitted that assessment reopened by ITO based on borrowed satisfaction is not valid and liable to be quashed.

3.3 On the other hand, the ld. DR submitted that the assessee has not raised this objection either before the AO or before the ld. CIT(A).

Further once the assessee has not filed the return of income then the case of the assessee falls in explanation 2 to section 147 of the Act which provides that in case the assessee has not filed any return of income then it will be deemed that income assessable to tax has escaped assessment.

3.4 We have considered the rival submissions as well as materials available on record. There is no dispute that the assessee has not raised any ground challenging the validity of the reopening the assessment either before the AO or before the ld. CIT(A). Even before Tribunal, the assessee has not raised this ground as an additional ground. Therefore, in the facts and circumstances of the case, we set aside this issue to the record of the ld. CIT(A) to consider and adjudicate the same alongwith Ground No. 1 and 2 as set aside by us. Needless to say that the assessee be given appropriate opportunity of hearing of appeal before passing the fresh order. Thus the Ground No. 3 of the assessee is allowed for Statistical purposes.

4.1 The Ground Nos. 4 to 10 of the assessee are regarding the treating the land in question as capital asset and consequential assessment of capital gains in terms of section 50C of the Act as well as disallowing the cost of improvement as claimed by the assessee.

4.2 We have heard the rival submissions and considered the materials available on record. The AO has considered the report of Tehsildar to hold that the land is within 8KM from the Municipal limits whereas the ld.AR has also relied on the record in support of the claim that distance from Municipal Limit to land is beyond 8KM. It is pertinent to note that as per simple and plain language of Section 2(14)(iii)(b), the distance from Municipal Limit to the area in which the land is situated has to be considered and not the distance from municipal limit to the land in question. The language of the provision is plain and unambiguous and therefore, the issue requires a proper verification of this fact of distance from the municipal limit to the area in which the land is situated.

Further, where the land is sold for non-agricultural purposes then in view of the decision of this Tribunal dated 6-11-2018 in the case of ACIT vs Sunil Bansal relied on by the ld. DR which has been confirmed by the Hon'ble Jurisdictional High Court, it would not be considered an agricultural land for the purpose of definition of capital asset u/s 2(14) of the Act. Therefore, all these aspects of the matter requires to be verified and examined before adjudication of the issue on merits regarding the assessment of capitals in the hands of the assessee. As regards the claim of cost of improvement, if it is supported by some documentary evidence or sale deed itself manifest some improvement by the assessee after he has purchased the land then the cost of said improvement has to be allowed. It is pertinent to note that there are sale deeds being the deeds of purchase by the assessee and another is deed of sale whereby assessee has sold the land and from comparison of the particulars of the land in these two documents, it can be ascertained whether the assessee has done any improvement work on the land in question. Accordingly, the matter is set aside to the record of the ld. CIT(A) to re-adjudicate the same in the light of the above observation and verification of necessary facts.

Order pronounced in the open court on 13 /12/2019.