SHINGALA UKABHAI GHUSABHAI,VADASADA JETPUR vs. ITO WD 1(2)(1) RAJKOT, RAJKOT

Succinctly, the factual panorama of the case is that assessee before us is an Individual. In the assessee’s case, the Income Tax Department was in possession of information that the assessee entered into transaction of an immovable property during the period under consideration. As per information, the assessee sold an immovable property with a sale consideration of Rs. 2,00,000/- vide sale deed no. 1609, dated-09/04/2012, during the year under consideration. However, as per the Jantri value of stamp duty valuation authority, the fair market value of the said property comes to Rs. 4,44,898/-

Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has set aside the order to the file of the Assessing Officer for de novo assessment. Further, aggrieved by the order of the ld CIT(A), the assessee is in appeal before this Tribunal.

I 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 brought on record.

Shri R.K. Takvani, Learned Counsel for the assessee has challenged the reopening of assessment under section 147/148 of the Act and stated that reasons recorded by the assessing officer are bad in law. The ld.Counsel submitted that reasons recorded are defective & invalid as no date in the reasons recorded mentioned, hence it is not possible whether the reasons were recorded before the approval or after the approval u/s 151 of the Act or the reasons were recorded for the different assessment year. No tangible material available before the assessing officer, that is, Sale Agreement was already with assessing officer. No details about the property was mentioned, in the reasons recorded by the assessing officer, whether it is land or building etc. No information about buyer of the property who is younger brother of appellant who is considered relative u/s 56(2) of the Act. No verification or examination of sale deed was conducted where the details about purchase of land on 28.06.1973 & residential house construction year 1974 was mentioned. Quantification of escapement of income was made of entire Stamp (Jantri) Valuation & not the difference

Learned Counsel for the assessee also argued that the sanction u/s 151 of the Act had following defects, viz: (i)the reopening in the instant case had been done beyond 4 years from the end of the relevant assessment year, therefore approval and sanction ought to have been granted only by learned Principal Chief Commissioner of Income Tax (PCIT) alone, while in this case the approval was taken from Joint CIT. Besides, there is no any quantifying the escapement of income and cryptic satisfaction note and without narrating any facts and case details and also does not bear the date of the signature of Hon'ble PCIT.It shows that the approval was mechanical which was against the law and it makes whole proceedings null and void.

Learned Counsel for the assessee also argued that assessment has been carried out by three different ITO without following the due procedure mentioned u/s 120 and u/s 127 of the Act. The Rajkot & Jnd (Junagadh) Veraval are not in same localities and both are different cities. So, the transfer of the case was without giving the opportunity of being heard, shall be considered as invalid and no transfer order under section 127 of the Act, was made.

On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

I have considered submissions of both the parties and I have gone through the reasons recorded by the Assessing Officer and noted that there is merit in the submissions of learned Counsel for the assessee to the effect that there is no date mentioned in the reasons recorded, hence it is not possible whether the reasons were recorded before the approval or after the approval u/s 151 of the Act or the reasons were recorded for the different assessment year. No tangible material available before the assessing officer, that is, Sale Agreement was already with assessing officer. No details about the property was mentioned, in the reasons recorded by the assessing officer, whether it is land or building etc. No information about buyer of the property. No any verification or examination of sale deed was conducted by the assessing officer, before recording the reasons of reopening. There is also not a quantification of escapement of income hence the reasons recorded by the Assessing Officer are not in accordance with law.

Based on the above facts, I note that the reasons recorded are factually incorrect and vague which are not sustainable in eyes of law in view of the judgment of the Hon’ble ITAT Jaipur, in the case of Shri Ram Mohan Rawat (ITA No. 1014/JP/2018, wherein it had asserted the importance of recording of correct 'reasons' and proper application of mind, while recording the same. In the said judgement reference to finding of Hon'ble Gujarat High Court on this issue has been made whereby it has been held that the formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid. Therefore, I note that the assessing officer proceeded for reopening of the assessment for non-existent and factually incorrect reasons and has not

I note that reasons must have a live link with the formation of the belief. This is supported by Circular No.549 dated 31.10.1989 which clarified that the words “reason to believe” did not mean a change of opinion. The Hon’ble Supreme Court in ITO vs Lakhmani Mewal Das [1976 ]103 ITR 437 has lucidly explained the power of assessing officer to bring to tax income escaping assessment u/s.147 of the Act. The Hon’ble Court first held that the section provides that there must exist “reasons to believe“ and not “reasons to suspect”. The following were the relevant observations: “The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed.”

In view of the reasons set out above, as also bearing in mind entirety of the case, I am of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. I, therefore, quash the reassessment proceedings. As

In the result, appeal of the assessee is allowed in above terms.