SEEMA SWAMI,GURGAON vs. ITO, HARYANA

PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.737/Del/2015 for AY 2008-09, arises out of the order of the Commissioner of Income Tax (Appeals), Rohtak [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 264/13-14 dated 27.11.2014 against the order of assessment passed u/s 143(3)/ 147 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 18.03.2013 by the Assessing Officer, ACIT, Rohtak (hereinafter referred to as ‘ld. AO’). 2. The original grounds and additional grounds raised by the assessee are only challenging the validity of assumption of Juri iction under Smt Seema Swami Section 147 of the Act by the Learned AO apart from challenging the non- service of notice under Section 143(2) of the Act in the reassessment proceedings and taxability of capital gains on sale of land which was stated to be agricultural land by the assessee. 3. We have heard the rival submissions and perused the materials available on record. Shri Manoj Kumar Swamy was a Chartered Accountant employed in IHHR Hospitality Pvt. Ltd. as Chief Financial Officer (CFO). The return of income for the Assessment Year 2008-09 was filed by Shri Manoj Kumar Swamy on 30-7-2008 declaring taxable income of Rs. 91,51,280/- comprising income from salary of Rs. 37,20,000, short term capital gains on sale and purchase of shares of Rs. 55,21,010/- and income from other sources. Since Sri Manoj Kumar Swamy expired on 15- 4-2009, the scrutiny proceedings were initiated in the name of Smt Seema Swamy (assessee herein) as wife and legal heir of late Sri Manoj Kumar Swamy. The assessment was completed under section 143(3) of the Act on 28-12-2010 determining total income at Rs 93,36,570/- after making addition on account of insufficient drawings of Rs 1,80,000/- and interest income of Rs 5,294/-. This assessment was accepted by the assessee by not preferring any appeal. Later this assessment was sought to be reopened by the Learned AO vide issuance of notice under section 148 of the Act on 13-5-2011 in the name of Seema Swami as legal heir of Later Sri Manoj Kumar Swami. The assessee vide letter dated 17-06-2011 stated that the income determined originally under section 143(3) of the Act on 28-12-2010 be treated as income declared in response to notice issued under section 148 of the Act. The assessee in the said letter also sought for reasons recorded for reopening the assessment. The same was supplied to the assessee by the Learned AO as under:- Smt Seema Swami 4. On perusal of the aforesaid reasons, it could be noticed that the learned AO had merely stated the fact of assessee purchasing the agricultural land and selling the same for certain sums which has resulted in a gain of Rs 6.80 crores which in his opinion, is a taxable receipt which had escaped assessment. It is pertinent to note that the assessment has been already completed under section 143(3) of the Act in the instant case. Even though the reopening in the instant case has been made within Smt Seema Swami 4 years from the end of the relevant assessment year, still the existence of a tangible material with the learned AO which would have a live link to form a belief that income of the assessee had escaped assessment should be present. On perusal of the aforesaid reasons, there is absolutely no mention about the source of information from which the learned AO had indeed come to know that there was an agricultural land purchased by the assessee, there was a sale of agricultural land made by the assessee and there was a gain of Rs 6.80 crores in the said transaction. There is not even a mention that whether this agricultural land is situated within the prescribed municipal limits so as to fall within the definition of capital asset under section 2(14) of the Act and consequential sale of that would be liable for capital gains. Further the source of information from which the learned AO had gathered these data is also not mentioned in the said reasons. Hence it could be safely concluded that the reasons recorded by the Learned AO for reopening the assessment has been done without having any tangible material before him at the time of recording the reasons. Hence the absence of a tangible material having live link to form a belief that income of the assessee had escaped assessment would become fatal to the entire reassessment proceedings per se. This aspect was rightly argued by the learned AO before us and we are in agreement with the same. 5. Further the Learned AO has to speak through his reasons wherein his mind is clearly reflected even on a prima facie basis that he forms a belief that income of the assessee had escaped assessment. He cannot make addition or subtraction to the recorded reasons and try to justify the reasons based on subsequent evidences found. All the enquiries, if any, should have been carried out by the Learned AO before arriving at the formation of belief that income of the assessee had escaped assessment Smt Seema Swami warranting reopening under section 147 of the Act. Reliance in this regard has been rightly placed by the Learned AR on the decision of Hon’ble Bombay High Court in the case of Hindustan Lever Limited vs R B Wadkar reported in 268 ITR 332 (Bom) wherein it was held as under:- “20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.

(emphasis supplied by us)

Dated: 15/05/2025
A K Keot