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Income Tax Appellate Tribunal, “DB”, BENCH AMRITSAR
Before: SHRI N.K. CHOUDHRY, JM & DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A.L. Saini:
The captioned appeal filed by the assessee, pertaining to assessment year 2011- 12, is directed against the order passed by the Commissioner of Income Tax (Appeals)-2, Jalandhar [in short ‘CIT(A)’], which in turn arises out of an assessment order passed by the Assessing Officer u/s 147/143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 27.12.2016.
Grounds of appeal raised by the assessee are as follows:
“1. That on the facts & circumstances of the case, Learned Commissioner of Income Tax (Appeals) [‘CIT(A)’], has grossly erred in holding that assessing officer has rightly assumed jurisdiction over the case and proceedings u/s 148 of the Act have been validly initiated by the assessing officer. 2. That on the facts and circumstances of the case, Learned Commissioner of Income Tax (Appeals) has grossly erred in holding that provisions of section 50C of the Act have
ITA No.426/ASR/2018 Assessment Year: 2011-12 Shri Jasbir Singh. rightly been invoked since existence of memorandum of understanding prior to 01.10.2009 could not be proved with irrefutable evidence.
That both assessing officer and learned CIT(A) have grossly erred in law in failing to appreciate that in light of the facts of the case, the deeming provisions of section 50C were not attracted.
That both assessing officer and learned CIT(A) have grossly erred in law in failing to appreciate the "scope” and “Domain” of pre amended section 50C of the Act as it was then so available on the statue.
That on the facts and circumstances of the case, Learned Commissioner of Income Tax (Appeals) has grossly erred in holding that capital gain is to be worked out by taking sale consideration of property at Rs. 2,03,00,000/- as determined by Departmental Valuation Officer as against actual sale consideration of Rs. 1,21,00,000/-.
That various objections filed towards valuation determined by departmental Valuation Officer have been brushed aside by the learned CIT(A).
That the Appellant requests for leave to add or amend the grounds of appeal before the appeal is heard or disposed off.”
The brief facts qua the issue are that return of income declaring total income of Rs. 11,79,410/- was filed by the assessee on 30.09.2011 which was processed u/s 143(1) of the I.T Act, 1961 on 11.11.2011. Later on, the assessee’s case was reopened u/s 147/148 of the Income Tax Act, 1961 after recording the reasons. In response to notice u/s 148 of the I.T Act,1961, the assessee filed his return of income on 12.04.2016 declaring total income of Rs.11,79,140/-. During the course of assessment proceedings, the counsel of the assessee raised his objection against the initiation of proceedings u/s 147 of the I.T Act, 1961. The objection raised by the assessee was duly disposed of by the assessing officer. The assessee had sold an immoveable property measuring 28 Marlas, 24 sq. ft. situated at 296, Lajpat Nagar, Jalandhar vide registered sale deed No. 6,300 dated 20.10.2010. The property was sold to M/s Sirjon construction Pvt. Ltd through its director Sh. Rishikesh Upadyaya S/o Sh. Girish Ram Upadyaya R/o 10, Green Field Kapurthala Road, Jalandhar. The property was sold for Rs.1,21,00,000/- whereas value as per stamp duty valuation was to the tune of Rs.3,46,00,000/-. Therefore, AO made addition on account of undisclosed long term capital gain(LTCG) to the tune of Rs.2,25,00,000/- (Rs.3,46,00,000- Rs.1,21,00,000).
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Aggrieved by the stand so taken by the ld. AO, the assessee carried the matter in appeal before the ld. CIT(A) who has dismissed the assessee’s technical ground of re- opening u/s 147/148 of the Act and held that the AO has discharged his duty before initiating the re-opening proceedings u/s 147 of the Act. However, the ld. CIT(A) also adjudicated the assessee’s appeal on merits observing the following:
“5.17 I have perused the comments made by the appellant in response to the valuation report of the DVO and find that primary focus is on the circle rate which has been adopted for the purposes of valuation of the property. The appellant has contended that circle rate which is being adopted by the stamp valuation authority has recently been reduced substantially and therefore, it is stated that lower value may be adopted for the purposes of taking deemed sale consideration of the property.
5.18 Having considered the submissions made in this regard, I find that provisions of section 50C (2) of the IT Act do provide for making a reference to the valuation Officer, where it is contended that value adopted by the stamp valuation authority is higher than the fair market value of the property as on the date of transfer, Further, provisions of subsection (3) of section 50C of the IT Act also provide that where the value ascertained under subsection(2) exceeds life value adopted by the stamp valuation authority, then the value so adopted by such authority shall be taken as the full value of consideration received as a result of transfer. In this case, the stamp valuation authority had adopted the value of the property as per circle rate and as against this DVO has valued the property at Rs, 2,03,00,000 which is less than the stamp duly value. Therefore, the benefit of this reduction in deemed sale consideration has to be given to the appellant as provided under the provisions of section 50C (2) of the IT Act. The AO is being directed to re-compute the quantum of long term capital gains on sale of property by taking the sale consideration at Rs.2,03,00,000 and workout the amount of capital gains accordingly.” 5. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. The solitary grievance of the assessee in this appeal is that reopening of assessment by assessing officer u/s 147 of the Act is bad in law and therefore it should be quashed.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. The main grievance of the assessee is against the action of the AO in reopening assessment completed u/s. 143(1) of the Act. According to Ld. Counsel for the assessee, the AO without application of mind after receipt of information from ITO (hq.) (tech) O/o Pr.
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Commissioner of Income Tax-1 Jalandhar, has simply reopened the assessment. According to Ld. Counsel, before the AO decides to reopen the assessment, he has to satisfy the condition precedent to assume jurisdiction and for that he took our attention to the expression used in sec. 147 of the Act which states that AO should have ‘reason to believe’ escapement of income. According to ld. Counsel, even after there is a foundation based on information is there, still there must be some reasons warrant holding a belief that income chargeable to tax has escaped assessment, which expression used by Parliament is stronger than the expression ‘satisfied’ and in the present case such requirement as contemplated by law has not been met in the ‘reason recorded’ by the AO before venturing to re-open the assessment which vitiates the re-opening itself. According to Ld. Counsel, even if the information given by the ITO (hq.) (tech)O/o Pr. Commissioner of Income Tax-1 Jalandhar,is adverse against the assessee, at the most it may trigger “reason to suspect”; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. For the said proposition, the Ld. AR drew our attention to following case laws:
i).PCIT Vs. Meenakshi Overseas Ltd. 395 ITR 677(Del.) (referred to para 19 till para 37).
ii).DCIT Vs. Greal Wall Marketing Pvt. Ltd. ITA No.660/Kol/2011 (referred to page 10 para 11)
iii).Shri Raj Kumar Goel Vs. ITO ITA No.1028/Kol/2017 (referred to page 5-8 para 11)
(iv).Classic Flour & Food Processing Pvt. Ltd. Vs. CIT ITA Nos. 764 to 766/Kol/2014 (page 7 para 12 to 16)
v).PCIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) page 4 para 12 to 14) vi).KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 (referred to page 3 para 8-11)
vii).PCIT Vs. Tupperware India Pvt. Ltd. (2016) 236 Taxman 494 (referred to page 3 para 6 and 9)
viii).DCIT Vs. National Bank for Agriculture and Rural Development ITA No.4964/Mum/2014 (referred to page 10- 13 para 12)
We note that the coordinate bench of this Tribunal in ITA No. 660/Kol/2011 for 4 | P a g e
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AY 2002-03 in the case of DCIT Vs. Great Wall Marketing (P) Ltd. vide order dated 03.02.2016 has held as under:
“9. We have given a careful consideration of the submissions made by the learned counsel for the assessee. It is clear from the reasons recorded by the AO that the AO acted only on the basis of a letter received from Investigation Wing, New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which dates and through which mode the bogus entries were made by the assessee. The reasons recorded which are extracted in the earlier part of the order does not show, what was the information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non-existent and not creditworthy. On identical facts the Hon'ble Delhi High Court in the case of CIT vs Insecticides (India) Ltd (supra) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. The Hon'ble Delhi High Court has also come to the conclusion that the reasons recorded did not disclose the AO's mind regarding escapement of income. The Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon’ble Delhi High Court. Following the said decision we hold that initiation of re-assessment proceedings is not valid. On this ground, the assessment is liable to be annulled.”
The Hon’ble Bombay High Court in Pr.CIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) it has been held as under:
“10. Besides, the submissions made on behalf of the Revenue that in view of the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), the Assessing Officer is entitled to re-open the Assessment for whatever reasons and the same cannot be subjected to jurisdictional review, is preposterous. First of all, taking out a word or sentence from the entire judgment, divorced from the context and relying upon it, is not permissible (see CIT v. Sun Engg. Works (P) Ltd. [l992] 64 Taxman 442/198 ITR 297 (SC). It may be useful to reproduce the context in which the sentence in Rajesh Jhaveri Stock Brokers (P) Ltd.'s case (supra) being relied upon by the Revenue to support its case, was made. The context, is as under:
"The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitutions. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed to confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to, income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions precedent to be satisfied
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before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices."
Therefore, the sentence being relied upon was made in the context of the change in law that under the amended provision 'reason to believe' that in case of escaped assessment, is sufficient to re-open the assessment. This unlike the earlier provision of Section 147(a) of the Act which required two conditions i.e. failure to disclose fully and truly all facts necessary for assessment and reason to believe that income has escaped assessment Thus, the observations being relied upon must be read in the context in which it rendered. On so reading the submission, will not survive.
Further, a reading of the entire decision, it is clear that the reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned counsel is ignoring the fact that the words ‘whatever reasons’ is qualified by the words ‘having reasons to believe that income has escaped assessment’. The words whatever reasons only means any tangible material which would on application of the facts on record lead to reasonable belief that income chargeable, to tax has escaped, assessment This material which, forms the basis, is not restricted, but the material must lead to the formation of reason to believe that income chargeable to tax has escaped Assessment Mere obtaining, of material by itself does not result in reason to believe that income has escaped assessment. In fact, this would be evident from the fact that in para 16 of the decision in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), it is observed that the word 'reason' in the 'reason to believe' would mean cause or justification. Therefore, it can only be the basis of forming the belief. However, the belief must be independently formed in the context of the material obtained that there is an escapement of income. Otherwise, no meaning is being given to the words 'to believe' as found in Section 147 of the Act. Therefore, the words 'whatever reasons' in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), only means whatever the material, the reasons recorded must indicate the reasons to believe that income has, escaped assessment. This is so as reasons as recorded alone give the Assessing Officer power to re-open an assessment, if it reveals/indicate, reasons to believe that income chargeable to tax has escaped assessment.
The re-opening of an Assessment is an exercise of extra-ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening. Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. Lakhmani Merwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirements are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer.
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In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does- not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment.
Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction.
Therefore, in the above facts, the view taken by the impugned order of the Tribunal cannot be found fault with. This view of the Tribunal is in accordance with the settled position in law.
Therefore, the question; as framed does not give rise to any substantial question of law. Thus, not entertained."
Having taken into consideration the aforesaid judicial precedents and other case laws cited before us by both the parties, in order to appreciate the legal ground raised before us, we need to look into the reasons recorded by the AO before proposing to reopen the assessment, which is reproduced as under.
“In this case an information was received from the ITO (Hq.)(Tech.) O/o Pr. Commissioner of Income Tax-I, Jalandhar. This case was selected under code 007. As per information received the sale deed is Rs. 1,21,00,000/- whereas stamp duty had been paid on Rs.3,46,00,000/- and paid additional stamp duty of Rs. 18,36,000/-. To circumvent the law assessee had filed an unregister copy of agreements dated 04.09.2009 and 02.04.2010 as per these agreements the land was transferred to Sirjan Construction Pvt. Ltd. for sum of Rs.1,21,00,000/-. It appears that these agreements are an afterthought and moreover have no legal sanctions. In this case escapement of an amount of Rs.2,25,00,000/-, as per section 48 read with section 50C of the income tax Act, 1961. The section 50C has been amended by the Finance Act 2009 with effect from 01.10.2009 is read as under:- “Where the consideration received of accruing as a result of transfer by an assessee of a capital asset, being land or both is less than the value adopted or assessed (or assessable) by any authority of a State Government (hereafter in this section referred to as the “stamp valuation authority” for the purpose of payment of stamp duty in respect of such transfer, the value so adopted or assessed (or assessable) shall, for the purpose of section-48, be deemed to be the full value of the consideration received or accruing as a result of such transfer. It show that the actual sale of consideration. The total consideration of Rs.3,46,00,000/- The seller of the property have not disclosed the true sale consideration. The total consideration of Rs.3,46,00,000/- including of the amount of Rs. 18,36,000/- has been paid additional stamp duty by the assessee has escaped assessment. The assessee had filed his income tax return for the assessment year 2011-12 declaring income at Rs.11,79,140/- Out of which he has shown LTCG of
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ITA No.426/ASR/2018 Assessment Year: 2011-12 Shri Jasbir Singh. Rs. 10,38,634/- only. Therefore, the source of making such huge investment is not explained. I, therefore, have reasons to believe that the difference of sale deed Rs.1,21,00,000/- and the value of Rs.3,46,00,000/ -on which stamp duty had been charged comes to Rs. 2,25,00,000/-, for the assessment year 2011-12 is to be determined as per provisions of section 50C of the income tax Act, has escaped assessment within the meaning of clause (b) to Explanation 2 of the section 147 of the income tax Act, 1961. In order to bring the said income and also any other income chargeable to tax, which comes into notice subsequently in the course of the assessment proceeding within the ambit of taxation, it is fit case to issue notice u/s 148 of the income tax Act, 1961." 10. After having perused reasons recorded by the AO before reopening and when the validity of the order u/s. 147 of the Act depends upon the AO assuming jurisdiction as contemplated by law to make an order of assessment u/s. 147 of the Act and for that it is necessary that the conditions laid down in the said section viz., AO should record “reason to believe” that the income chargeable to tax for that assessment year has escaped assessment. If this condition is not satisfied at the first place, then it cannot be said that AO has validly assumed jurisdiction u/s. 147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO to reopen the assessment it can be said that AO on the basis of whatever material before it, had reasons which he had indicated in his “reasons recorded” which warrant holding a belief that income chargeable to tax has escaped assessment. The reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed while adjudicating the legal issue of AO’s usurpation of jurisdiction u/s. 147 of the Act. From the reasons already set out above and from the gist of the reasons recorded by the AO, we understand that the AO received information from ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar. After getting the information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar, the AO should apply his mind and to examine based on this information that income has escaped assessment. In this case AO has not applied his mind and it is a borrowed satisfaction only. The relevant para of the reasons recorded is reproduced below for ready reference:
“In this case an information was received from the ITO (Hq.)(Tech.) O/o Pr. Commissioner of Income Tax-I, Jalandhar. This case was selected under code 007. As per information received the sale deed is Rs. 1,21,00,000/- whereas stamp duty had been paid on Rs.3,46,00,000/- and paid additional stamp duty of Rs. 18,36,000/-.
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ITA No.426/ASR/2018 Assessment Year: 2011-12 Shri Jasbir Singh. We note that reasons recorded by AO are only on the basis of information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar. Based on this information the AO ought to have conducted further enquiry to examine whether there is tangible material which suggests that income has escaped assessment, which he has not done, therefore based of the borrowed satisfaction he has reopened the assessment. The reasons should be recorded standalone basis and not on the basis of borrowed satisfaction.
It should be remembered that reasons should not be recorded based on surmise and guess work. The AO in his reasons recorded stated as follows:
“To circumvent the law assessee had filed an unregister copy of agreements dated 04.09.2009 and 02.04.2010 as per these agreements the land was transferred to Sirjan Construction Pvt. Ltd. for sum of Rs.1,21,00,000/-. It appears that these agreements are an afterthought and moreover have no legal sanctions.”
The AO has failed to state in his reasons that how and why these agreements are an afterthought and do not have legal sanctions.
It is clearly evident from the reasons recorded by the Assessing Officer that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or to conduct further enquiry or to examine certain particulars furnished by the assessee in the return of income. Therefore, it is abundantly clear from the reasons recorded that these are based on information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax -1 Jalandhar. Therefore, it is clear that there is no independent application of mind by AO. If the AO decides to reopen the assessment, he has to satisfy the condition precedent to assume jurisdiction. In the assessee`s case the information was received from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax -1 Jalandhar, and even if the information given by the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar, is adverse against the assessee, at the most it may trigger “reason to suspect”; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of
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ITA No.426/ASR/2018 Assessment Year: 2011-12 Shri Jasbir Singh. income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. The reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed while adjudicating the legal issue of AO’s usurpation of jurisdiction u/s. 147 of the Act.
We note that the information given by the ITO(hq.) (tech) O/o Pr. Commissioner, can only be a basis to ignite/trigger “reason to suspect” for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. No quantification of income escaping assessment has been spelt out by the AO in the reasons recorded for justifying reopening u/s. 147 of the Act. It has to be kept in mind that merely on an allegations leveled by the ITO(hq.) (tech) O/o Pr. Commissioner, can only raise suspicion in the mind of the AO which is not the sufficient/requirement of law for reopening of assessment. The ‘reasons to believe’ is not synonymous to ‘reason to suspect’. ‘Reason to suspect’ based on an information can trigger an enquiry to find out whether there is any substance or material to substantiate that there is merit in the information adduced by the ITO(hq.) (tech) O/o Pr. Commissioner, and thereafter the AO has to take an independent decision to re-open or not. And the AO should not act on dictate of any other authority (like in this case information given by the ITO(hq.) (tech) O/o Pr. Commissioner), because then it would be borrowed satisfaction.
In such a scenario, when the AO was in receipt of the information from ITO(hq.) (tech) O/o Pr. Commissioner, he ought to have made enquiries to unravel the truth. It has to be remembered that information is not synonymous to truth. The AO failed to quantify the escapement of income in the reasons recorded. The AO is a quasi judicial authority empowered to reopen the completed assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax which is the jurisdictional fact and sine qua non to assume jurisdiction to reopen a completed assessment. It must be kept in mind that reasons to believe postulates foundation based on information and belief based on reason. Even if there is foundation based on 10 | P a g e
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information there must be some reason warrant holding the belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon’ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) held that the expression “reason to believe” occurring in Section 147 “is stronger” than the expression “if satisfied” and such requirement has to be met by the AO in the reasons recorded before usurping the jurisdiction u/s. 147 of the Act. It must be kept in mind that information adverse against the assessee may trigger “reason to suspect” then the AO is duty bound to make reasonable enquiry to collect material which would make him belief that there is in fact an escapement of income which requirement of law has not been fulfilled in this case by the AO.
We note that reasons recorded by the assessing officer has been partly deleted by the ld CIT(A), which is evident from his findings, which is reproduced below:
“5.17 I have perused the comments made by the appellant in response to the valuation report of the DVO and find that primary focus is on the circle rate which has been adopted for the purposes of valuation of the property. The appellant has contended that circle rate which is being adopted by the stamp valuation authority has recently been reduced substantially and therefore, it is stated that lower value may be adopted for the purposes of taking deemed sale consideration of the property.
5.18 Having considered the submissions made in this regard, I find that provisions of section 50C (2) of the IT Act do provide for making a reference to the valuation Officer, where it is contended that value adopted by the stamp valuation authority is higher than the fair market value of the property as on the date of transfer, Further, provisions of subsection (3) of section 50C of the IT Act also provide that where the value ascertained under subsection(2) exceeds life value adopted by the stamp valuation authority, then the value so adopted by such authority shall be taken as the full value of consideration received as a result of transfer. In this case, the stamp valuation authority had adopted the value of the property as per circle rate and as against this DVO has valued the property at Rs, 2,03,00,000 which is less than the stamp duly value. Therefore, the benefit of this reduction in deemed sale consideration has to be given to the appellant as provided under the provisions of section 50C (2) of the IT Act. The AO is being directed to re-compute the quantum of long term capital gains on sale of property by taking the sale consideration at Rs.2,03,00,000 and workout the amount of capital gains accordingly.”
We note that aggrieved by the order of AO, the assessee filed appeal before CIT(A), who directed the Assessing Officer to refer the matter to DVO. DVO estimated fair market value of property at Rs. 2,03,00,000/- as against circle rate of Rs. 3,46,00,000/- Therefore Ld. CIT(A) directed the AO to compute the Long Term Capital gain by
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taking sale consideration at Rs. 2,03,00,000/- as against actual sale consideration of Rs. 1,21,00,000/-, whereas AO determined the sale consideration in the reasons recorded by him at Rs. 3,46,00,000/-.That is, as per reasons recorded by AO the income was escaped assessment to the tune of Rs.2,25,00,000/- (Rs.3,46,00,000- Rs.1,21,00,000). However, ld CIT(A) reduced it to Rs.2,03,00,000/-, this clearly shows that there is non application of mind by assessing officer, while recording the reasons, which makes the reopening bad in law. For that ld. Counsel relies on the judgment of Hon`ble Bombay High Court in the case of Jet Airways (I) limited 331 ITR 236 (Bom), wherein it was held as follow:
“21. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was issued under s. 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the AO could not make an assessment or reassessment on another issue which came to his notice during the proceedings. This interpretation will no longer hold the field after the insertion of Expln. 3 by the Finance Act (No. 2) of 2009. However, Expln. 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of s. 147. An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.”
The reasons recorded by AO does not stand the test as laid by plethora of judicial precedence as discussed above which is necessary to assume jurisdiction u/s 147 of the Act, therefore, in the light of the aforesaid facts and circumstances of the case as discussed, we find that the reasons recorded by the AO to justify reopening the assessment u/s. 147 fails and, therefore, the very assumption of jurisdiction to reassess
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the assessee fails and therefore, we quash the reopening and consequent reassessment order framed by him.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 16.01.2020.
Sd/- Sd/- (N.K. CHOUDHRY) (A.L.SAINI) "या�यकसद�य / JUDICIAL MEMBER लेखासद�य / ACCOUNTANT MEMBER AmritsarAmritsar #दनांक/ Date: 16/01/2020 (BCG, PS) Copy of the order forwarded to: 1. Shri Jasbir Singh C/o Surinder Mahajan & Associates, Chartered Accountants, 74, Vijay Nagar, Jalandhar-144 001 (Punjab). 2. Income Tax Officer, Ward-1(2), Jalandhar (Punjab). 3. C.I.T(A)-2, Jalandhar 4. C.I.T.- concerned. 5. The Sr. DR, I.T.A.T., Amritsar.
True Order By Order
Assistant Registrar ITAT, Amritsar Bench
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