ICHCHABEN KANTILAL DESAI L/H RITESH ASHOKBHAI DESAI,VAPI vs. ITO, WARD-1, VAPI

The additional grounds of appeal raised by the assessee, are as follows: "Ld. CIT[A], NFAC, Delhi and the Jassessing officer, has erred in law and on facts to reopen assessee's assessment u/s 147 and issued of notice u/s 148 of the Act and subsequently completed the assessment by making addition of Rs.29,62,107/- which is altogether on different grounds."

Learned Counsel for the assessee stated that above ground is an additional ground raised as the ground no. I of appeal memo in Form 36. It was not raised and argued before the Ld. CIT(A), NFAC, Delhi as well as before the assessing officer. It is raised before the Honorable Tribunal for the 1st time. The Ld. Counsel further submitted that above ground is purely technical and legal in nature. As all relevant facts pertains to the said ground are on record of the assessing officer and CIT(A), so it does not require investigation of facts. Hon’ble ITAT has power to admit and adjudicate the said ground, therefore, such legal ground may be admitted.

On the other hand, Ld. DR for the revenue, opposed the prayer of the assessee and submitted that since the assessee did not raise this legal ground before lower authorities, therefore, at this stage, assessee cannot raise additional legal ground.

Succinct facts are that there was information with the Department that the assessee has made investment and earned interest of Rs. 10,24,329/-. Therefore, notice u/s 148 of the I.T. Act, in the case of assessee, was issued on 26.03.2018, after recording reason for escapement of Income. In response to notice u/s 148 of the Act, the assessee filed his return of income on 23.04.2018. The notice u/s 143(2) of the Act has been issued in assessee’s case on 23.09.2018. The Reasons for re-opening the assessment have been provided to the assessee. The notices u/s 142(1) of the Act has been issued from time to time. During the course of assessment proceedings, the assessee filed a written submission that the assessee had made fixed deposits of Rs. 5,00,000/-, with Saraswat bank. On perusal of the date of fixed deposits and the bank accounts submitted by the assessee it was seen by the assessing officer that the fixed deposits were made out of cash payment in the bank. The assessee further submitted that the cash was out of the sale proceeds of ancestral land at channod from which the assessee received a share of Rs. 24,71,792/-. The assessee has not shown the capital gain on such transaction to the Department. It was only when the department asked the assessee regarding the fixed deposits, the matter came up in the file. On perusal of the sale deed submitted by the assessee, it was noted by the assessing officer that the amounts of Rs. 24,71,792/-, have been received through cheque and the time deposits of Rs. 5,00,000/- (Rs. 2,50,000/- + Rs. 2,50,000/-) have been made

During the assessment proceedings, the assessee has submitted that the time deposits was made out of the sale proceeds of ancestral land at channod from which the assessee received a share of Rs. 24,71,792/-. The contention of the assessee was found to be incorrect by the assessing officer. However, the capital gain on such land was not disclosed by the assessee in her return of income. The assessee did not submit any valuation report nor did he worked out the capital gain on such sale of land. Therefore, an instance of sale was asked regarding sale of agricultural land at channod, from the sub-registrar, Killa-Pardi. The sub-registrar gave an instance related to sale of land at channod in the year 1983 wherein the sale price is Rs. 7,000/- and the area is 2.83.19 acres, i.e. approximately 11460 sq. meters. Therefore price per sq meter comes to Rs. 0.62 per sq. meter. The capital gain on sale of land by the assessee was worked out by the assessing officer, as under: Land 1 Sale Price : Rs. 66,18,745/- Cost of acquisition: Sq. Mts 6475 x Rs. 0.62 = Rs. 4,015/- Cost inflation index of 2010-11 = 711 Cost inflated price = Rs. 28,547/- :Rs. 28,547/- CAPITAL GAIN : Rs. 65,90,198/- Share of the assessee is 20% in the land as per the payment received by her Rs. 13,18,040/-

The assessing officer observed that the assessee has failed to pay tax on such long term capital gain arising out of sale of agricultural land, therefore, an addition of Rs. 24,62,107/- was made to the total income of the assessee under the head "CAPITAL GAINS".

Therefore, total addition made by the assessing officer in the hands of the assessee was to the tune of Rs. 29,62,107/- ( Rs. 24,62,107 + Rs. 5,00,000).

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. The Ld. CIT(A) noticed that assessee has relied on the valuation of the land by the approved valuer. On the other hand, it was seen by Ld. CIT(A) from the assessment order that the assessing officer has made inquiries with the office of the Sub-Registrar and he has collected the instances of sale of similar lands in the same village and has adopted such value as the value of the said lands as on 01-04-1981. The assessee has not brought on record any evidence to disprove the value adopted by the assessing officer. The valuation report submitted by the assessee does not have any clear reasoning to arrive at the value of Rs.150 per sq.mt, whereas the assessing officer has adopted the said value based on actual sale of land in the same village. The assessee has not brought on record any material evidence to refute the value adopted by the assessing officer which is based on the actual sale value

Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before this Tribunal.

At the outset, Learned Counsel for the assessee vehemently submitted that during the assessment proceedings, the assessing officer has reopened the assessment on the fact that assessee has not disclosed fixed deposit and interest on the fixed deposit. However, the assessing officer made addition on different footing on account of Long Term Capital Gain to the tune of Rs.24,62,107/-. Therefore, the assessing officer made addition account of Long Term Capital Gain to the tune of Rs.24,62,107/-, without recording fresh reasons of reopening and without taking permission from the Higher Authority. That is, without recording reasons, made an addition on different footing, that is, on account of Long Term Capital Gain, which was not the reason to reopen the assessment, hence it is not acceptable. Therefore, reassessment proceedings initiated against the assessee may be quashed.

I have heard, the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, I reproduce, the reasons recorded by the assessing officer, which are as follows: “Reasons for the belief that income has Escaped assessment: 1. In this case, assessee has not filed her return of income for the year under consideration. 2. As per the NMS information available with system, it was seen that the assessee had made investment of Rs.10,00,000/-in form of time deposit during the F.Y. 2010-11 pertaining to A.Y. 2011-12.Also, as per the ITS data, she has earned interest income of Rs.24,329/- during the year under consideration. 3. In connection with the above, assessee was issued a query letter, dated 19/01/2018 by this office, seeking details of the above transactions, supported with necessary documentary evidences as also tax treatment of above. Assessee vide her letter dated 07/02/2018 replied that she is an old lady and what so ever deposits are made as above are out of her and her husband's past savings. However, she did not furnish any details/evidences in support of her above claim. 4 Reply of the assessee has been perused. It is clear that she could not furnish satisfactory reply in connection with the above claim. The unsatisfactory reply of the assessee makes the undersigned to believe that the assessee is not in a position to explain that the sources of above investment and the interest income were not liable to be taxed during the year under consideration. 5. It is pertinent to mention here that in this case, the assessee has chosen not to file return of income for the year under consideration although the total income in form of deposits and interest income has exceeded the maximum amount which is not chargeable to tax as discussed in paragraph 4 above and the assessee was assessable under the Act. 6. As the assessee neither filed her return of income for the year nor did she satisfactory reply regarding the above transactions, undersigned has reason to believe that the income chargeable to tax amounting to Rs.10,24,329/- (10,00,000 + 24,329) has escaped assessment in the hands of the assessee for the assessment year under consideration for reason of failure on the part of the assessee to disclose fully and truly all the material facts of the case. In view of the above, the provision of clause (a) of explanation 2 to section 147 is applicable to the facts of this case where income chargeable to tax has escaped assessment.

I also note that in the reasons recorded by assessing officer it is mentioned that there is time deposit made by the assessee in cash, however, there is no time deposit in cash, in the name of the assessee, therefore addition made by assessing officer on account of time deposit, is also wrong. Therefore, I find that when the assessing officer had not made any addition, as regards the very basis on which the proceedings under section 147 of the Act were initiated in the case of the assessee, that is, time deposit and the assessing officer has divested of his jurisdiction from making an independent addition, and has made a different addition, therefore, the assessment order framed by the assessing officer is bad in law. Hence, I find that,

As the reassessment itself is quashed, all other issues on merits of the additions, in the impugned assessment proceedings, are rendered academic and infructuous.

In the result, the appeal of the assessee is allowed.