SMT . SUSHILABAI ISHWARDAS BAMB,PUNE vs. INCOME-TAX OFFICER, WARD - 5(1), PUNE

आदेश / ORDER

PER R.S.SYAL, VP :

This appeal filed by the assessee arises out of the order

passed by the CIT(A)-4, Pune on 19-06-2017 in relation to the

assessment year 2012-13.

as under : -

“1. The learned (ld) CIT(A) grossly erred in confirming the impugned reassessment order for the AY 2012-13, as the appellate order suffers from a number of fatal and vital defects and the same is also based on totally erroneous / false statements on a number of vital aspects.

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of re-assessment proceedings. Briefly stated, the facts of the case,

are that the assessee filed original return on 28-07-2012 declaring

total income of Rs.83,88,922/- inclusive of long term capital gain

of Rs.34,57,850/-. This return was revised on 22.11.2013

declaring total income of Rs.84,95,772/-. In such revised return,

there was no variation in the amount of long term capital gain

originally declared by the assessee at Rs.34,57,850/-. The

Assessing Officer (AO) initiated re-assessment proceedings by

means of a notice u/s.148 of the Income-tax Act, 1961 (hereinafter

also called as ‘the Act’) dated 30-03-2015. Proceedings pursuant

to such notice were dropped vide order dated 16.03.2016.

Thereafter, another notice dated 28-03-2016 was issued u/s.148 of

the Act on the ground that the amount of long term capital gain

declared by the assessee by taking indexed cost of acquisition at

Rs.17,41,01,150/-, being, 98% of the sale consideration, was

exorbitantly excessive when considered in the light of a much

lower indexed cost of acquisition shown by one Sh. Kundanmal

Chunilal Khivansara, another co-owner of the same property. The

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assessee objected to the initiation of re-assessment proceedings by

arguing that the AO could not have re-opened the assessment on

the same reason for which the earlier notice dated 30-03-2015 was

issued and the proceedings were dropped. The AO rejected such

contention by noticing that there were certain typographical

mistakes and other infirmities in such earlier notice of re-

assessment and that was the rationale for dropping proceedings out

of such a notice followed by a fresh notice u/s.148 dated 28-03-

2016 recording proper reasons. During the course of assessment

proceedings, the AO elaborated the position by indicating that the

assessee adopted fair market value of the property on 1.4.1981 at

the rate of Rs.700 per sq.mt., as against such fair market value

shown by Sh. Kundanmal Khivansara at Rs.400 per sq.mt. The AO

made a reference to the Valuation Officer, Solapur for determining

the FMV of the property as on 01-04-1981. Since the report of the

DVO was not received till the completion of the assessment on

30-12-2016, the AO adopted the FMV of the said property as on

01-04-1981 at Rs.400/- per sq.mtr, being, the same rate at which

another transferor of the same property had declared. It was,

however, mentioned in the assessment order that this adoption

shall be subject to FMV as on 01-04-1981 as determined by the

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DVO, to whom reference was made and the report was awaited.

This led to an addition of Rs.7,86,71,212/-. The assessee remained

unsuccessful before the ld. CIT(A) both on merits as well as

against the initiation of re-assessment proceedings. This is how,

the instant appeal has been filed before the Tribunal.

relevant material on record. The first issue raised before us is

against the initiation of re-assessment proceedings. The ld. AR

contended that the AO initiated re-assessment proceedings vide

notice u/s 148 of the Act dated 30-03-2015 by recording the

reasons on 10-03-2015 to the effect that it transpired during the

course of examination of high value transactions of Mr.

Kundanmal Chunilal Khinvasara, another co-seller of the same

property which the assessee transferred, that the assessee received

sale consideration of Rs.17,76,63,000/- and there was some

escapement of capital gains in the hands of the assessee. These

proceedings were dropped vide order dated 16-03-2016. The ld.

AR submitted that the initiation of re-assessment proceedings

again on 28-03-2016 on some subject matter amounted to change

of opinion, which was not permissible. This was strongly refuted

by the ld. DR, who submitted that there were certain irregularities

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in the recording of reasons by the AO on 10-03-2015, which

necessitated the dropping of the proceedings flowing from such

notice and initiating fresh proceedings pursuant to notice u/s.148

dated 28-03-2016.

score, it would be apposite to note the reasons recorded by the AO

on 10-03-2015, copy of which is available on page 2 of the paper

book as under :-

“In this case, information has been received from the DIT(Intel. & Cr .Inv.) Pune, vide letter dtd.22.01.2015 that while verifying the high value transaction in the case of Shri Kundanmal Chimanlal Khinvasara, it was received that Smt. Sushilabai Ishwardas Bamb, one of the co-sellers has received sale consideration of Rs.17,76,63,000/- during the F.Y. 2011-12. Though letter was issued by the DIT (Intel.& Cr. Inv) Pune, to this assessee, no information was received by them in this respect. Therefore, the said information has been passed on to the jurisdictional AO. In order to verify the transaction and escapement of Capital Gain, re- opening of assessment in the case of the assessee for A.Y.2012-13 is necessary. Notice issued u/s.148 of the I.T. Act, 1961.”

30-03-2015, a copy of which is available at page 1 of the paper

book. The AO dropped these proceedings vide order dated

16-03-2016, a copy of which is available at page 12 of the paper

book. It is two-lined order reading : `Proceedings initiated u/s.147

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of the I.T. Act, 1961, vide issue of notice u/s.148 of the Act dated

10-03-2015 are hereby dropped’. It can be seen from the reasons

dated 10-03-2015 that the AO simply recorded that information

was received from DIT (Intel. & Cr. Inv.), Pune, that while

verifying the high value transaction in the case of Kundanmal

Chunimal Khinvasara, the assessee was also found to have

received sale consideration of Rs.17.76 crore and odd. In order to

verify the transaction and escapement of capital gain, the re-

assessment proceedings were initiated. It is apparent from a

perusal of the above reasons that there is no positive satisfaction by

the AO about the escapement of income in the hands of the

assessee. What has been recorded is a vague attempt to verify the

transaction without their being any reason to believe about the

escapement of income. The AO, after initiation of assessment

proceedings pursuant to such reasons dated 10-03-2015,

understood the gravity of the mistake committed in the manner of

recording the reasons and thought it better to drop the proceedings.

A finding to this effect has been returned in the assessment as well

as the impugned orders. This led to the passing of the order dated

16.3.2016 dropping the proceedings.

28-03-2016 accompanied by the reasons, a copy of which is given

at pages 14 and 15 of the paper book, reading as under : -

“The assessee has filed her return of income for the financial year 2011-12 relevant to the assessment year 2012-13 on 22.11.2013 declaring total income at Rs.84,95,772/-. The return was processed u/s.143(1) of the I.T. Act, 1961. 2. In this case information has been received from office of the DIT (Intel. & Cr. Inv.) Pune, regarding high value transaction related to the sale of immovable property of Rs.29,93,59,000/- (market value of Rs.28,22,81,175/-) in respect of the land bearing survey No.50/1, Survey No.50/2, ½ portion out of survey No.50/4, survey No.50/6, Survey No.50/7+8 and Survey No.50/10+11/2/2. In all measuring about 5.33 Hectare, 8 Acre, i.e. 53,380 sq. mtr and registered with Jt. SRO, Class-2, Haveli-19, Pune on 06.09.2011 vide document number 8555/2011 sold by the vendors as per table below :

Sr.No. Name of the Vendor Vendor % Share of Amount No. the vendor received (Rs.) towards payment received 1 Kundanmal Chunilal 1 22% 6,50,54,000 Khinvasara 2 Shirish Kundanmal 2 19% 5,66,42,000 Khinvasara Meenal Kundanmal Khinvasara Madhur Kundanmal Khinvasara Yash Kundanmal Khinvasara 3 Sushilabai Ishwardas Bamb 3 59% 17,76,63,000 Total 29,93,59,000

Full value of consideration Rs.17,76,63,000 Less : Cost of acquisition : Rs.17,41,05,150/- (98% of sale consideration) Expenditure on transfer : Rs.1,00,000 Rs.17,42,05,150 --------------------- LTCG : Rs.34,57,850/- --------------------

On comparing the cost of acquisition taken for the purpose of calculating the LTCG offered by Smt. Sushilabai Ishwarbai Bamb with the cost of acquisition as taken by Shri Kundanmal Chunilal Khinvasara in the ratio in which the sale consideration have been received, it is observed that the cost of acquisition as taken by Smt. Sushilabai Ishwardas Bamb is unexpectedly very high (almost 100% high) as compared to the cost of acquisition taken by Shri Kundanmal Chinulal Khinvasara. Hence, it clearly established that there was the escapement of Capital Gain as offered by Smt. Sushilabai Ishwardas Bamb by adopting the cost of acquisition unexpectedly high to evade taxes. There is nothing on record to show the cost of acquisition. 5. In view of above, I have reasons to believe that income to the extent of Rs.17,76,63,000/- for the A.Y. 2012-13 has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.”

initiated fresh re-assessment proceedings vide notice u/s 148 dated

28-03-2016 by properly recording that one piece of land

admeasuring about 53,380 sq.mtr was sold by persons, namely,

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Kundanlal Chunilal Khinvasara, being, Vendor No.1 having 22%

share; Shirish Kundanmal Khinvasara, Meenal Kundanmal

Khinvasara, Madhur Kundanmal Khinvasara and Yash Kundanmal

Khinvasara, being, Vendor No.2 having 19% share; and the

assessee, being, Vendor No.3 having 59% share in the total sale

consideration of Rs.29,93,59,000/-. While disclosing the amount

of capital gain from the transfer of the land as a co-owner of the

same property, Sh. Kundanlal Chunilal Khinvasara, being, Vendor

No.1 with 22% share, adopted cost of acquisition at Rs.46,40,000/-

by considering fair market value of the property as on 1.4.1981 at

the rate of Rs.400 per sq.mtr, and the corresponding indexed cost

of acquisition at Rs.3.64 crore, thereby determining long term

capital gain at Rs.2.86 crore. As against that, the assessee, another

co-seller of the same property with 59% share declared long term

capital gain of Rs.34.57 lakhs by considering indexed cost of

acquisition at Rs.17.41 as against the full value of consideration at

Rs.17.76 crore. Cost of acquisition at Rs.17.41 crore was worked

out by taking fair market value of the same property at Rs.700 per

sq.mt. This led to the formation of reasons to believe by the AO

that there was escapement of capital gain in the hands of the

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assessee, necessitating the issuance of notice u/s 148 of the Act on

28.3.2016.

reassessment, leading to the passing of the instant order, is invalid,

can be better appreciated in two steps, viz., one, whether a notice

of reassessment can be issued more than once and two, whether a

second notice of assessment can be issued on the same subject

matter.

times an AO can venture to make reassessments, of course, subject

to the relevant provisions. So long as the successive assessments or

reassessments u/s 147 of the Act are within the stipulated time,

there can be no impediment on the powers of the AO to issue

notice and frame reassessments one after another. It is a settled

legal position, which has not been rightly disputed on behalf of the

assessee.

whether a second notice of reassessment can be issued on the same

subject matter. Ordinarily, when a notice of reassessment is issued

and the issue is decided, the AO cannot once again initiate

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reassessment on the same subject matter. The reason is obvious

that once he has decided a particular aspect in the first round of

reassessment and he again takes up the same after some time,

without there being any tangible material coming into existence

after the completion of the first reassessment leading the AO to

form a belief that the income escaped assessment, it would amount

to change of opinion, which is not permissible under the law. There

is an exception to it. If however, the AO has not rendered any

decision on that aspect on which the reassessment was initiated, for

some technical reasons and the proceedings are closed at the

threshold, there can be no embargo on the powers of the AO to

initiate the reassessment once again on such subject matter after

making good the technical reasons which hindered him to proceed

in the first round of reassessment. In order to bring a subject matter

within the ambit of `change of opinion’, it is of foremost

importance that at the first instance, there should be some

formation of opinion. If the subject matter of reassessment in the

first round has not been taken up at all for consideration and

decision, it cannot be said the second reassessment notice on the

same subject matter constitutes change of opinion, so as to debar

the AO from espousing the reassessment.

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extant case falls in the exception as discussed above. Albeit, the

subject matter of reasons for issuing first notice u/s.148 on

30-03-2015 and the second notice dated 28-03-2016 is same, but

the fact that the AO had to drop the first set of reassessment

proceedings without going into merits, in our considered opinion,

properly clothed the AO with the power to issue second notice of

reassessment on the same subject matter, this time de hors, any

technical glitch. It is manifest that the reasons recorded by the AO

in the first reassessment notice were vague and did not elaborate

anything about the escapement of income in the hands of the

assessee. They simply referred to “verify the transaction”, which

is obviously not permissible within the scope of re-assessment

proceedings since the proceedings cannot be initiated for making

roving enquiries or attempting to find out if there is an escapement

of income. In order to get jurisdiction u/s.147, it is sine qua non

that the AO should have reason to believe that some income

chargeable to tax escaped assessment which is obviously at a

higher pedestal than an attempt to verify the escapement of

income.

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mistake in recording the reasons, he swung into action and dropped

the proceedings without adjudicating on the merits of the issue.

Within a span of 15 days from the date of such dropping of the

proceedings, the AO issued a fresh notice u/s.148 on 28-03-2016,

this time, recording the reasons about the escapement of income in

a proper manner. The situation would have been otherwise if the

AO had dropped the proceedings by recording in the order that he

was satisfied with the amount of capital gain shown by the

assessee. That would have prevented him from issuing another

notice u/s.148 on the same subject matter. Since the first notice

dated 30-03-2015 did not elaborately record reasons to believe

about the escapement of income, the action of the AO in dropping

such proceedings without going into the merits and initiating fresh

proceedings, cannot be faulted with. As the second notice u/s 148

dated 28.3.2016 was within the permissible time and the eventual

assessment order u/s 143(3) read with section 147 dated

30.12.2016 was also not barred by time, we are afraid that the

contention of the ld. AR urging us to quash the initiation of

reassessment, cannot be countenanced. Ergo, we accord our

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imprimatur to the issuance of notice dated 28.3.2016 u/s 148 of the

Act.

the Tribunal in Cornerstone Proper Investments Pvt. Ltd. Vs. ITO

(2018) 193 TTJ 58 (Bang.). The facts of that case are almost

similar to those instantly under consideration. In that case also the

re-assessment proceedings pursuant to the first notice u/s.148 were

dropped as the reasons were not properly recorded. Second re-

assessment notice was issued and then the assessment was framed.

The assessee challenged the initiation of re-assessment

proceedings, in the same way, as has been done before us.

Rejecting such contention, the Tribunal held that the proceedings

pursuant to second notice were valid because “the proceedings

initiated by issue of the earlier notice u/s.148 of the Act dated 18-

04-2012 was arrived as the reasons had not been properly

recorded”. In reaching this conclusion, the Bangalore Bench of

the Tribunal relied on the judgment of Hon’ble Allahabad High

Court in Sukhlal Ice and Storage Company Vs. ITO and Another

(1993) 199 ITR 129 (All). The reliance of ld. DR on another

judgment of the Hon’ble Madhya Pradesh High Court in Kohinoor

Enterprises Vs. ITO and others (1997) 226 ITR 86 (MP) also

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fortifies the view canvassed by us. In that case also, first notice

issued u/s.148 was without any basis and the Department had to

drop proceedings. The Hon’ble High Court held that the second

notice issued would not be quashed as the same was within the

jurisdiction of the AO.

mistake committed by him at the time of recording reasons in the

year 2015. To buttress such a contention, the ld. AR relied on

certain decisions laying down the proposition that the AO cannot

take benefit of his own errors. In our considered opinion, the

proposition propounded by the ld. AR and those decisions are not

germane in the present context. The question before us is not that

the AO sought to take certain advantage out of the errors

committed by him in issuing notice u/s.148 on 30-03-2015.

Reliance on such decisions would have assumed significance if the

AO had stuck to such reasons and tried to validate his action on the

strength of actual facts urging that even if the reasons were not

properly recorded, but in substance his action was justified. In that

situation, it could have been contended on behalf of the assessee

that the AO cannot take benefit of his own errors committed while

recording reasons at the time of issuing notice dated 30-03-2015.

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Au contraire, here is a case, in which the proceedings arising out of

notice u/s.148 dated 30-03-2015 were dropped without going into

merits. For all practical purposes, such proceedings ceased to exist

on their dropping. While examining the validity or otherwise of the

second notice, we cannot take cognizance of the first validly

dropped proceedings without entering into the merits of the case.

What we need to examine and evaluate is to test the validity of the

initiation of re-assessment proceedings on the touchstone of the

reasons recorded by the AO on 28-03-2016. Since the assessment

order is based on the reasons as recorded pursuant to notice dated

28-03-2016, it would not be right to claim that the AO tried to take

some benefit out of his own mistakes. As the notice dated

28-03-2016 was well within the stipulated time and the earlier

proceedings u/s.148 had been validly dropped, we hold that there

can be no case to argue that the AO initiated re-assessment

proceedings in a wrong manner by taking advantage of his own

mistakes. This contention is, therefore, repelled.

provisional assessment order which is impermissible in law. This

was so stated on the ground that the AO recorded in para No.7 of

his order that he was adopting FMV of the property as on 01-04-

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1981 @ Rs.400/- per sq.mtr as against the FMV taken by the

assessee at Rs.700/- per sq.mtr and the same was subject to the

FMV as on 01-04-1981 to be determined by the DVO. The ld. AR

submitted that this amounted to passing of a provisional

assessment order, subject to a final order to be passed, which was

bad in law.

of the assessee. There is no doubt that the AO has recorded in his

order that adoption of FMV of the property as on 01-04-1981 @

Rs.400/- per sq. mtr shall be subject to the FMV as on 01-04-1981

to be determined by the DVO, but the fact of the matter is that the

assessment got concluded with the adoption of FMV of the

property as on 01-04-1981 @ Rs.400/- per sq.mtr and the income

was determined accordingly. Not only that, the AO also issued

demand notice u/s.156. The issuance of demand notice coupled

with the passing of assessment order amply proves that it was a

final assessment order in all respects. On a pertinent query, the ld.

AR fairly admitted that the AO did not revise this assessment order

by any other order and further there was nothing to show that any

adverse report of the DVO was received or considered. This

shows that the assessment order passed by the AO, based on the

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cost of acquisition, being, FMV as on 01-04-1981 @ Rs.400/- pre

sq.mtr, derived from the same cost of acquisition as declared by

another co-seller of the same property, cannot be considered as

based on any report of the DVO etc. Reference made to DVO

became academic because the AO never took cognizance of any

report of the DVO, if at all received at any stage, after the

conclusion of the assessment order. Thus, it is overt that the

assessment order passed by the AO is final in all respects and the

same cannot be characterized as provisional so as to claim its

quashing on this very score. We, therefore, reject this contention

raised by the ld. AR.

being FMV as on 01-04-1981 of the property, on merits. It is

noticed that the assessee declared cost of acquisition by adopting

rate of Rs.700/- per sq. mtr, being, the FMV as on 01-04-1981.

This was done on the basis of a report of a Registered Valuer. The

assessee was one of three sets of co-sellers of the property

transferred at the same time. The other co-sellers also got the

property valued as on 01-04-1981 from the same Registered

Valuer, who determined the FMV on that date at Rs.700/- per

sq.mtr. Assessment of Mr. Kundanlal Chunilal Khinvasara was

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completed u/s.143(3) of the Act. Notwithstanding the report of the

Registered valuer determining the F.M.V. as on 1.4.1981 at Rs.700

per sq.mtr, Sh, Kundanlal Chunilal Khinvasara computed capital

gain by taking the value of Rs.400/- per sq.mtr as per Ready

reckoner value, determined by the municipal authorities. The

relevant circular/ready reckoner relied copy relied by Shri

Kundanlal Chunilal Khinvasara adopting the FMV as on

01-04-1981 at Rs.400/- per sq.mtr, was also supplied to the

assessee. The AO of the assessee also wrote to the Town Planning

Department of the State Government to enquire about the correct

valuation of property as on 01-04-1981. They also sent Circular

dated 03-10-1999 accompanied by the Ready reckoner showing the

area-wise valuation of the property in Pune city. As per the

circular and the Ready reckoner, the valuation of the property in

question as on 01-04-1981 was Rs.400/- per sq.mtr. Now we need

to decide that which out of two values, namely, Rs. 400 or Rs.700

per sq.mtr. is accurate. Por una parte, we have the assessment of

co-seller of the property transferred, who adopted FMV as on

01-04-1981 at Rs.400/- per sq.mtr coupled with the Ready

reckoner rate determined by municipal authorities and the value

determined by the Town Planning Department of State

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Government at Rs.400/- per sq. mtr; and por otra parte we have a

report of Registered valuer of the assessee showing value @

Rs.700/- per sq.mtr. When we peruse the report of the Registered

Valuer, copy placed at page 86 onwards of the paper book, it

transpires that he has mentioned against Col.38 that “instances of

sale of exactly similar comparable properties for the year 1981 are

not available”. In Col. 39 and 40, the registered valuer has given

rate of Rs.700/- per sq.mtr on the basis of “spot enquiries made in

locality concerned, consideration of parameters of location,

availability of basic civic amenities….”. Thus, it is evident that the

report of registered valuer is based on no evidence as he has

himself admitted that there is no comparable sale instance as on

01-04-1981. When the sole instant report of the Registered valuer

is pitted against the Ready reckoner rate, the value adopted by

another co-seller of the property at the same time and the value

given by the Town Planning Department, there can be no prize for

guessing that the value of Rs.400 per sq.mtr. is more authentic and

reliable. We thus hold that the adoption of rate of Rs.400/-per

sq.mtr by the authorities below as cost of acquisition, being, FMV

as on 01-04-1981, is proper.

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not have validly made a reference to the DVO for determining

FMV of the property as cost of acquisition as on 01-04-1981 has

paled into insignificance as the AO has not gone with the report of

DVO determining cost of acquisition of property as on 01-04-

1981. Rather he took the value declared by another co-seller of the

same property itself, based on the Ready reckoner rate. These

submissions are, therefore, rejected.

authorities below were justified in computing capital gains by

taking cost of acquisition, being, FMV as on 01-04-1981 at

Rs.400/- per sq.mtr.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT पुणे Pune; �दनांक Dated : 01st February, 2019 सतीश

आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत आदेश आदेश

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 31-01-2019 Sr.PS 2. Draft placed before author 01-02-2019 Sr.PS 3. Draft proposed & placed before the JM second member 4. Draft discussed/approved by Second JM Member. 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *