SHRI SHUJAAT ALI KHAN,JAIPUR vs. INCOME TAX OFFICER, WARD-6-1, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 170/JP/2019 fu/kZkj.k o"kZ@Assessment Years : 2008-09 cuke Sh. Shujaat Ali Khan The ITO, Vs. 2/304 Geeta Mandir, Jawahar Nagar, Ward-6(1), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AQZPK 1866 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Vinod Kumar Gupta (CA) jktLo dh vksj ls@ Revenue by : Smt. Monisha Chaudhory (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 15/12/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 05/01/2021 vkns'k@ ORDER PER: VIKRAM SINGH YADAV, A.M.

The assessee has filed the present appeal against the order of ld. CIT(A)-II, Jaipur dated 19.11.2018 pertaining to assessment year 2008- 09 wherein the assessee has taken the following grounds of appeal:- “1. The impugned addition and disallowances made in the order u/s 147/143(3) of the act dated 02.02.2016 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence, the same kindly be deleted. 2.Rs.7,17,286/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the addition of Rs. 7,17,286/- made on account of STCG. The addition so made & confirmed by the ld. CIT(A), is contrary to the provisions of law and facts hence, kindly be deleted in full. 2 Sh. Shujaat Ali Khan vs. ITO

3. The ld. AO further erred in law as well as on the facts of the case in charging interest u/s 234A, 234B & 234C of the Act. The interest so charged, being contrary to the provisions of law and facts, kindly be deleted in full.”

2. Briefly the facts of the case are that the case of assessee was reopened U/s 147 of the Act and notice U/s 148 was issued on 25.03.2015, in response to which ROI was filed on 16.06.2015 declaring total income of Rs.1,04,500/- as income from commission. The case was reopened on the ground of alleged sale of immovable property by the assessee for sale consideration of Rs. 7,00,000/-, the value of which was adopted at Rs.7,17,826/- by stamp valuing authority. The assessment U/s 143(3) r.w.s 147 was completed after making addition of Rs. 7,71,826/- being alleged undisclosed short term capital gain on alleged sale of immovable property after invoking Section 50C of the Act. The assessee preferred an appeal before the ld.CIT(A), which was decided by ld. CIT(A) vide order dated 19.11.2018 sustaining the findings of the AO and addition made U/s 148 of the Act. Against the said order of the ld CIT(A), the assessee is in appeal before us.

The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act.

“2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Assessee challenged the reopening proceedings. Assessing officer has information that assessee received sale consideration for transfer of property and same was not disclosed in return of income. Therefore, I upheld the action of Assessing Officer in reopening the case. This ground of appeal is dismissed.”

11. We have heard the rival contentions and perused the material available on record. It is a settled legal proposition that the satisfaction of the Assessing Officer for assumption of jurisdiction U/s 147 of the Act should be discernable from the reasons so recorded and the reasons alone should be considered for determining whether the Assessing Officer is in possession of the material/information basis which he has formed the reasonable belief that the income of the assessee has escaped assessment for the impugned assessment year. For assumption of jurisdiction u/s 147, the Assessing Officer must form a prima facie view on the basis of tangible material in his possession that there is an escapement of income, the opinion so formed may be subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion, the reasons recorded and/or the documents available on record must show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding 8 Sh. Shujaat Ali Khan vs. ITO escapement of income and the reasons are required to be read as they were recorded by the Assessing officer. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons that the income chargeable to tax has escaped assessment. In the present case, the reasons recorded by the Assessing officer before issuance of notice u/s 148 read as under:-

As per information available on record, during the period under consideration, the assessee has sold immovable property for consideration of Rs. 7,00,000/- which has been valued at Rs. 7,17,286/- for the purpose of charging stamp duty. On verification of record, it has been found that the assessee has not filed the return of income. Thus the assessee has failed to disclose fully and truly all material facts necessary for his assessment. Therefore, I have the reason to believe that the above income of Rs. 7,17,286/-, which is chargeable to tax has escaped assessment.

12. On perusal of the reasons so recorded, we find that the Assessing officer had received certain information that the assessee had sold an immoveable property for consideration of Rs 7 lacs and which has been valued at Rs 7.17 lacs for the purposes of charging stamp duty. The nature and source of such information is not discernable from the reasons so recorded nor the specific of the immovable property in terms of location, size, purchaser, etc has been stated, therefore, the question that has been raised before us is about the tangible nature of such information and material in possession of the AO and the nexus thereof with formation of belief that the income has escaped assessment. It has been contended by the ld AR that the information so referred in the reasons recorded is only the CIB report received by the Assessing officer, a fact which is corroborated by the Assessing officer where he had subsequently issued a notice u/s 133(6) 9 Sh. Shujaat Ali Khan vs. ITO to Sub-Registrar-2 to obtain copy of the sale deed. It is an admitted fact that the said notice u/s 133(6) was issued on 3.08.2015 subsequent to recording of reasons by the AO on 25.03.2015. Therefore, we find that as on the date of recording of reasons by the AO, only piece of information in possession of the AO was the CIB report that the assessee has sold certain immoveable property and the AO was not even having a copy of the sale deed or the specifics of the immoveable property, which to our mind, raises a question mark on the tangible nature of such information in terms of whether it is real or actual rather than imaginary and whether it actually relates to the assessee or not. Where the AO still wishes to rely on the report of CIB, given that such report is more of a generic report and not containing exact specifics of of immoveable property and other particulars of the transaction, it is expected that the AO on receipt of such report should carry out further examination before arriving at the prima facie view that income has escaped assessment and the matter is fit for issuance of notice u/s 148 of the Act. Such examination is required to be carried out before issuance of notice u/s 148 as the same is required for the Assessing officer to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by the AO and infact, only after recording of the reasons, he has sought copy of the sale deed from the Sub-Registrar where the assessee has been shown as power of attorney holder of the owner of the immoveable property which again raises a question mark on the tangible nature of the CIB report. We therefore find that the AO has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of reasons and therefore, it is a 10 Sh. Shujaat Ali Khan vs. ITO case where the proceedings are vitiated for want of tangible material in possession of the AO and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped assessment. The reasons thus recorded and/or the documents available on record, therefore, don’t show a link/nexus and relevancy to the opinion formed by the Assessing Officer regarding escapement of income. Further, even though the reopening in the present case was after the expiry of four years from the end of the relevant A.Y 2008-09, given that there was no original return of income filed by the assessee and consequent assessment, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment in terms of proviso to section 147 of the Act which is not applicable in the instant case. Similar view has been taken by the Coordinate Bench in case of Balaji Healthcare Pvt Ltd (supra) wherein the relevant findings read as under:

“20…………………………………….Further, it is noted that after recording of the reasons, the Assessing officer has subsequently written a letter on 30.08.2013 to ACIT, New Delhi requesting for copy of statements of Surendra Kumar Jain,Virendra Kumar Jain at whose premises the search was conducted and P C Agarwal, so called mediator in these transactions. Given that search proceedings in respect of these two persons have formed the basis for the present reassessment proceedings in the hands of the assessee, it was essential to at least examine the statements of these three persons and seized material if any found during the course of search which in any ways indicate that these two persons have carried out certain transactions with the assessee and prima facie these transactions are suspected to be accommodation entries and not actual transactions. However, there is nothing in the reasons so recorded that the Assessing officer has gone through the statements so recorded during the course of search and the seized material to show prima facie 11 Sh. Shujaat Ali Khan vs. ITO linkage of assessee’s undisclosed income being routed back in form of share capital. This shows that the Assessing officer has merely gone by the report of the DIT, Investigation Wing and the said report even didn’t have the statements of these persons which either find mention in the report or as enclosures when the same was forwarded to the Assessing officer. Therefore, it transpires that there is no further examination which has been carried out by the Assessing officer. The fact that the assessee has filed its return of income u/s 139(1) was very much in the knowledge of the Assessing officer and the latter could have verified the transactions with the reported transactions in the financial statements and could have asked for more information to establish the necessary nexus, however nothing of that sort has been done by the Assessing officer and he has merely gone by the report of DIT, Investigation Wing. It is true that the Assessing officer can rely on the report of DIT, Investigation Wing but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination and analysis in order to establish the nexus between the material and formation of belief that income has escaped assessment and in absence thereof, the assumption of jurisdiction u/s 147 has no legal basis and resultant reassessment proceedings deserve to be set-aside. Our viewis fortified by the decision of the Hon’ble Delhi High Court in case of Meenakshi Overseas Pvt. Ltd. (supra) wherein it was held as under:-

“19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material.

“36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.

Subsequently, the Hon’ble Delhi High Court in case of RMG Polyvinyl Ltd. (supra) has held as under:-

12.Recently, in its decision dated 26th May, 2017 in Pr. CIT v.Meenakshi Overseas, this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions one after the other" and that the satisfaction arrived at by the AO was 15 Sh. Shujaat Ali Khan vs. ITO a "borrowed satisfaction" and at best "a reproduction of the conclusion in the investigation report."

13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had.”

In light of above discussions and in the entirety of facts and circumstances of the case, the assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings does not satisfy the requirement of law and is hereby set-aside. In the result, ground no. 1 of the assessee’s appeal is allowed.”

taken by the assessee have become academic and are thus dismissed as infructuous.

16. Sh. Shujaat Ali Khan vs. ITO In the result, the appeal of the assessee is allowed.