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Income Tax Appellate Tribunal, JAIPUR BENCHES, SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI,
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihyla-@ITA No.1225/JP/2024 fu/kZkj.k o"kZ@Assessment Year :2015-16 Ashok Kumar Jain cuke NFAC, Vs. H. No. 11 SBI Colony, Fafadih, New Delhi Raipur, Chhattisgarh LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.:ACIPJ 2962 J vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by :Sh. Mahendra Gargieya, Adv.& Sh. Devang Gargieya, Adv. jktLo dh vksjls@Revenue by: Sh. Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing : 05/02/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 18/03/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.
In the present appeal the above named assessee challenges the order of the National Faceless Appeal Centre, Delhi [ for short CIT(A) ]dated 31/07/2024 made u/s. 250 of the Act and the same relates to the assessment year 2015-16. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 01.03.2023 passed under section 147 r.w.s 144 r.w.s 144B of the Ashok Kumar Jain vs. NFAC Income Tax Act, [ for short “Act”] by National Faceless Assessment Unit [ for short AO ].
2. At the outset of hearing, the Bench observed that there is delay of 02 days in filing of the present appeal by the assessee for which the ld. AR of the assessee filed an application for condonation of delay with following prayers:
The Humble - Assessee most respectfully begs to submit as under:
1. 1. That in the aforesaid matter, the ld. CIT(A) passed the order u/s 250 on dated 31.07.2024 (hereinafter referred as “impugned order”). As per Section 253(3), the appeal was to be filed on/before dated 29.09.2024 however, the same has been filed on dated 01.10.2024. Thus, the appeal was filed with a delay of 2 days.
2. Reasonable Cause Exist: In this connection, it is humbly submitted that although there was no delay in filing the instant appeal, in as much as the same was e-filed on dated 29.09.2024 i.e within the statutory period of 60 days. However, the physical filing was delayed due to a bona fide delay in obtaining the necessary documents from the client. Despite our diligent efforts to request the documentation in a timely manner, the client encountered unforeseen circumstances that prevented the prompt supply of the appeal materials, which ultimately resulted delay in a physical filing that caused delay of two days later i.e on 01.10.2024 than the intended deadline. The unavoidable results of this were 'unintentional' and imminent delay in performance of the litigant obligations.
3. The applicant is a layman and not very conversant with the legal procedure and because of the circumstances stated above, the delay so caused was beyond his control but was bonafide, unintended and his conduct was not contumacious. The assessee was not going to gain any benefit because of the delayed filing. The Hon’ble Courts have always advocated for a very liberal approach while considering a case for condonation of delay.
4. The denial/rejection of this prayer shall certainly result in to a genuine hardship with the humble assessee because denial to the deduction of a substantial amount has resulted into huge tax liability merely because of a technical and venial breach of law that too not on merits even though the assessee had a strong meritorious case in his favor. The Hon’ble courts have held that the expression genuine hardship must receive a liberal interpretation.
5. Case laws in support of Prayer for Condonation of Delay: The principle propounded in these cases fully support the present case. Kindly refer the judgment of the Hon'ble Supreme Court in the case of Collector, Land & Acquisition v. Mst. Katiji& Others (1987) 167 ITR 471 (SC) has advocated for a very liberal approach while considering a case for condonation of delay. The said judgment is a leading case on the subject and has a binding Ashok Kumar Jain vs. NFAC force on all the officers subordinate thereto. The following observations of the Hon'ble Court are notable: "The legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act 1963 in order to enable the Courts to do substantial justice to parties by disposing of matters on 'merits'. The expression sufficient cause' employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub serves the ends of justice-that being the life-purpose of the existence of the institution of Courts. It is common knowledge that this Court has been making a justifiably liberal approach in matters instituted in this Court. But, the message does not appear to have percolated down to all the other Courts in the hierarchy." Prayer It is, therefore, humbly prayed that: (a) This application may kindly be allowed by condoning the delay, taking a sympathetic view, in the interest of justice. (b) Any other order, which this Hon’ble Tribunal deems fit and proper, be also passed in favour of applicant-assessee.”
3. During the course of hearing, the ld. DR not objected to assessee’s application for condonation of delay and prayed that Court may decidethe issue as deem fit in the interest of justice as delay is of two days only.
We have heard the contention of the parties and perused the materials available on record. The prayer by the assessee for condonation of delay of two days has merit as the assessee has filed the online appeal in time but the physical copy of the same were forwarded 2 days later and thereby register considered it delayed for 2 days. Considering that fact, we concur with the submission of the assessee. Thus, the delay of two days in filing the appeal by the assessee is condoned.
“1.1. The ld. CIT(A) erred in law as well as facts of the case in confirming the validity of the impugned notice u/s 148A of the Act as also the notice issued u/s 148 of the Act dated 30.03.2022 are bad in law and facts of the case, for want of jurisdiction and hence the same deserves to be quashed. The assessment proceeding consequent thereto also deserves to quashed. 1.2. The ld. CIT(A) erred in law as well as the facts of the case in confirming the validity of the proceedings-initiated u/s 148A of the Act manually as against legal requirement of making the same under faceless manner u/s 151A of the Act. Hence proceedings as well as the impugned notice deserves to be quashed. Moreover, the assessment proceeding consequent thereto also deserves to quashed. 1.3. The impugned additions and disallowances made in the order u/s 147 r.w.s 144 of the Act dated 01.03.2023 are bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.
2. The ld. CIT(A) erred in law as well as facts of the case in confirming the assessment framed u/s 144 of the Act which was made without affording adequate and reasonable opportunity and even without complying with the mandatory statutory requirement of law. The impugned order having been framed in gross breach of natural justice, kindly be quashed. 3. 9,31,742/- The ld. CIT(A) erred in law as well as facts of the case in confirming the addition of Rs. 9,31,742/- made in the declared capital gain (against the loss of capital gain Rs. 1,87,905/- declared by the assessee, the AO computed LTCG at Rs. 7,43,837/-). The additions so made in the declared LTCG being contrary to the provisions of law and facts, hence the additions so made and confirmed, deserves to be deleted.
4. The impugned show cause notice issued u/s 148A(d) of the Act, as also the impugned notice u/s 148 dated 30.03.2022 are barred by limitation u/s 149 and hence the same deserves to be quashed. The impugned assessment order consequent thereto also deserves to be quashed.
5. The appellant prays your honour to add, amend or alter any of the grounds of the appeal on or before the date of hearing.
Ashok Kumar Jain vs. NFAC 6. Succinctly, the fact as culled out from the records is thatthe assessee the case of the assessee was selected for scrutiny u/s 147 of the Act, for the reason that the assessee has received interest other than interest on securities of Rs. 3,747/-, purchased immovable property of Rs. 85,00,000/- and sold immovable property of Rs. 93,20,000/-. During the A.Y 2015-16 income of Rs. 1,78,23,747/- escaped from assessment and assessee has not filed his return of income and therefore, notice was issued as per provision of section 147/148 of the Act. Assessee has filed its Return of Income in response to that notice issued u/s 148 on 07/09/2022 declaring income of Rs. 78,750/-. 6.1 Ld. AO issued required statutory notice along with the questionnaire on 26/08/2022, 12/09/2022 and on 29/12/2022. In response to the same, the assessee submitted its reply alongwith 26AS, computation of income, copy of purchases deed and sale deed and details of expenses incurred and copy of return of income filed in response to the notice u/s 148. During the year under consideration, assessee, 'Ashok Kumar Jain (PAN: ACIPJ2962J)'was engaged in family business with his brothers at Raipur. 6.2 During the year under consideration, assessee has sold immovable property for a consideration of Rs.85,00,000/-, whereas stamp duty valuation was Rs.93,20,000/-. Assessee had purchased the said immovable property at Rs.65,74,500/-in the F.Y. 2011-12 and claimed Rs.85,76,163/-as cost of Ashok Kumar Jain vs. NFAC acquisition after indexation. Assessee has also claimed construction cost of Rs. 9,31,742/- after indexation. Further assessee has claimed that he has paid Rs. Rs.18,750/- and Rs.50,992/-as additional registration charges. During the assessment proceedings, assessee has submitted the documentary evidence regarding the payment of stamp duty. Further assessee has also offered income of Rs.78,748/- from income from other sources. As is evident from the record that the assessee has sold immovable for a consideration of Rs.85,00,000/, whereas the value adopted by the stamp valuation authority for the purpose of levying stamp duty on registration of property was at Rs 93,20,000/-, it could be clearly seen from the sale agreement submitted by the assessee. Ld. AO therefore, issued a Show Cause Notice dated 31/01/2023, asking the assessee to show cause as to why an amount of Rs. 7,43,837/-(Rs.93,20,000/-(-)Rs.85,76,163/-) should not be added to the total income of the assessee attracting the provisions of section 50C of the Act. However, the assessee remained silent on this issue. Hence, it was assumed that assessee has nothing to say in this regard and an amount of Rs. 7,43,837/- added to the total income of the assessee for violation of the provisions of Section 50C of the Act. 6.3 Ld. AO further noted that the assessee claimed expenses of Rs. 9,31,742/- (after indexation) for the construction, payment made to the various parties. For that vide notice u/s 142(1), assessee was requested to submit the PAN of the Ashok Kumar Jain vs. NFAC parties, their address and documentary evidence showing payment made. Assessee has submitted the PAN of Shri Jambu Kumar Jain (PAN: ACIPJ2961M) only. FAO has tried to issue notice u/s 133(6) to the above party, but notice could not be issued as Shri Jambu Kumar Jain has not registered on online filing portal, that means he is not filing Income Tax Return regularly. In SCN issued to the assessee he was again requested to submit the details of the PANs of the parties, documentary evidence regarding the payment made, but again assessee failed to submit the confirmation of payment made for the construction. On 04/02/2023, the assessee submitted his reply to the SCN dated 31/01/2023 and requested for the Video Conference. Therefore, VC has been scheduled on 20/01/2023 at 12.00 p.m. Assessee attended the Video Conference [VC], during the VC assessee stated that he has withdrawn money from the bank account to meet the expenses of registration charges, stamp duty and construction of work. The ld. AO worked out the capital gain at Rs. 7,43,837/- and added to the returned income of the assessee as against the loss of Rs. 1,87,905/- declared by the assessee.
Aggrieved from the order of the National Faceless Assessment Center, assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below: “4.2 Decision 4.2.1 Briefly stated the fact of the case is that during the relevant previous year the appellant sold immovable property for consideration of Rs. 85,00,000/- whereas the Stamp Valuation Authority has determined the value of the property sold at Rs. 93,20,000/-. The Ashok Kumar Jain vs. NFAC AO found that while computing long term capital gains the appellant has claimed indexed cost of construction amounting to Rs. 9,31,742/-. However, as discussed by the AO in the impugned assessment order, the appellant failed to provide satisfactory details and documentary evidences in support of this construction expenditure claimed. The A.O. in the assessment completed therefore disallowed appellant's claim of deduction on account of 'indexed cost of consturction' while computing capital gains. Accordingly, in the assessment computed taxable long term capital gain is computed at Rs. 7,43,837/- and the same was brought to tax.
4.2.2During the course of appellate proceedings, the appellant filed copy of purchase deed dated 12.05.2011 towards purchase of immovable property which is sold by the appellant during the relevant previous year for total sale consideration of Rs. 85,00,000/-. On perusal of this purchase deed it is found that the immovable property purchased is part of plot of land no. 11 in State Bank of India colony 19/1, Khasra no. 286/287/284 of 3200 sq feet with 20 years old residential house of 1600 sq feet. The appellant also filed copies of bills/letters in support of the claim of construction expenditure. The details are as under:
Ashok Kumar Jain vs. NFAC 4.2.3 Thus, out of total expenditure claimed of Rs. 7,14,275/- the appellant has provided bills/letters in respect of an amount of Rs. 6,44,603/-, Further on perusal of the copies of above bills/letters submitted by the appellant it is found that the work carried out is not related to construction today existing structure and hence cannot be considered as expenditure on account of 'cost of construction'. The expenditure incurred is in the nature of current repairs and maintenance and furniture and fixture which cannot be treated as cost of improvement to the capital asset sold. Therefore, considering the findings given by the A.O. in the assessment order as well as the details and documentary evidences provided by the appellant during the course of appellante proceedings, in my considered opinion, appellant's claim of indexed cost of acquisition of Rs. 9,31,742/- is not an allowable deduction while computing taxable capital gains. The action of the A.O. in denying the same is therefore in accordance with the provisions of law and hence upheld. This ground of appeal raised by the appellant is thus dismissed. 5.1 The second ground of appeal raised by the appellant read as under. "That the learned AO erred in facts and law by not considering the cost of construction claimed of Rs 714275 whereas after indexation the value comes to Rs 931742 which may kindly be allowed". 5.2 Decision 5.2.1 In view of the detailed discussion made in the first ground of appeal, this ground of appeal need no separate adjudication and hence dismissed. 6.1 The third ground of appeal raised by the appellant read as under. "That the learned AO erred in facts and law by not allowing the credit of TDS of Rs 85375 which may kindly be allowed". 6.2 Decision 6.2.1 In the submission made, the appellant has not provided any details or documentary evidences to establish that he is eligible for credit for TDS amounting to Rs. 85,375/-. However, the A.O. is directed to allow due credit of TDS to the appellant after due verification. This ground of appeal raised by the appellant is thus allowed. 7.1 The fourth ground of appeal raised by the appellant read as under: "That the learned AO erred in facts and law by not allowing proper opportunity of being heard because as per provisions of Sec 148A of the Income tax Act a minimum period of 7 days is required to be given to the Assessee for submitting the reply but in the instant case such period of 7 days has not been provided therefore the issue of notice is invalid as the notice has been issued on 13 03 2022 and fixed the hearing on 16 03 2022 similarly in the notice dated 17 03 2022 the date of hearing was fixed on 23 03 2022 hence passing order is against the principles of natural justice"
Ashok Kumar Jain vs. NFAC 7.2 Decision 7.2.1 The contentions raised by the appellant in this ground of appeal have been carefully perused and considered. Notice dated 13.03.2022 was issued u/s. 148A(a) of the I. T. Act for conducting enquiry with respect to the information available with the A.O. which suggest that the income chargeable to tax has escaped assessment. Under this section, time limit to be given to the assessee is not specified. Subsequent notice dated 17.03.2022 was issued u/s. 148A(b) of the I. T. Act wherein the compliance was sought on or before 23.03.2022. Thus, minimum 7 days' time was allowed to the appellant to make compliance to this notice. As per this provision u/s, 148A(b) the time limit to be allowed to the assesse is not less than 7 days but not exceeding 30 days. Thus, in my considered opinion the A.O. has duly complied with the requirement of provision u/s. 148A(b) of the I. T. Act. Further as per the case records, the appellant has not requested for further time for compliance to this notice issued. Subsequently notice u/s. 148 of the I. T. Act was issued to the appellant on 30.03.2022. The case record further reveal that the appellant filed return of income in response to the notice issued u/s. 148 of the I. T. Act dated 30.03.2022 and never raised any objection of whatsoever nature to said notice issued u/s. 148A(b) of the I. T. Act. The contentions raised by the appellant in this ground of appeal is therefore not acceptable. This ground of appeal raised by the appellant is therefore dismissed. 8.1 The fifth ground of appeal raised by the appellant read as under: That the learned AO erred in facts and law by issuing notice u s 148 and passing the order dated 01 03 2023 the learned AO has mentioned in the notice dated 17 03 2022 about the purchases of immovable properties whereas in the notice no reason or proof was mentioned about the said purchases mentioned in the notice and more so there was no property purchased by the Assessee during the period under consideration We have requested AO to provide us the proof of such purchases of immovable properties on which basis AO have initiated the proceedings in absence of which the issue of notice is not valid and passing order is against the provisions of law" 8.2 Decision 8.2.1 On perusal of the annexure to notice issued u/s. 148A(b) of the I. T. Act dated 17.03.2022 it is noted that sale of immovable property is shown at Rs. 93,20,000/-, and purchase of immovable property is shown at Rs. 85,00,000/-. It is to be noted that these mistakes by the A.O. in the notice issued, has been raised by the appellant only after attending the entire re-assessment proceedings without raising any objections before the A.O. In other words no objections were raised before the Assessing Officer but were raised only during the present appeal proceedings. In such cases, Hon'ble Supreme Court and several Hon'ble High Courts have held that the reassessment proceedings are not vitiated. The courts also held that the protection of section 292B of the IT Act 1961 is available in such cases. The Hon'ble courts have held that since the appellant willingly participated in the reassessment proceedings, they have lost the right to raise any discrepancy or deficiencies in the reassessment proceedings conducted by the A.O. and hence the same carinot be considered at the appellate stage. Further, it is well within the knowledge of the Ashok Kumar Jain vs. NFAC appellant that an amount of Rs. 93,20,000/- shown in the notice is actually the value determined by the Stamp Valuation Authority in respect of immovable property sold by the appellant and the value of Rs. 85,00,000/- is the value of sale consideration shown by the appellant in the sale deed. Therefore, mere typographical error occurred in the annexure to the notice issued u/s. 148A(b) of the I. T. Act cannot make the notice invalid. Considering these facts of the case and in law, this ground of appeal raised by the appellant is thus dismissed. 9.1 The sixth ground of appeal raised by the appellant read as under: "That the leamed AO erred in facts and law by passing the order in reference to issue of notice us 149 as As per section 149 amended by finance act 2021 is reproduced as under 149
1. No notice under section 148 shall be issued for the relevant assessment year a if three years have elapsed from the end of the relevant assessment year unless the case falls under clause bb if three years but not more than ten years have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax represented in the form of asset which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year Because Income chargeable to tax is below Rs
50. Lacs hence issue of notice Us 148 and subsequently passing the order dated 01 03 2023 is time barred and invalid hence should be set aside". 9.2. Decision 9.2.1 The contentions raised by the appellant in this ground of appeal have been carefully perused and considered. In this regard, it needs to be mentioned that the assessment year under consideration is A.Y. 2015-16 and in view of old provision u/s. 149(1)(b) of the I. T. Act applicable at the relevant time, no notice under section 148 of the I. T. Act shall be issued beyond 6 years from the end of the relevant assessment year. In this case, as per said provision u/s. 149(1)(b) before substitution by the finance act 2021 with effect from 01.04.2021] notice u/s. 148 of the I. T. Act could be issued on or before 31.03.2022. Thus, notice issued u/s. 148 of the I. T. Act dated 30.03.2022 is a valid notice. It may further be mentioned that the decision of the Supreme Court in Union of India vs Ashish Agarwal, 2022 SCC OnLine Hon'ble Supreme Court 543 read with the time extension provided by Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (for short 'TOLA') allows extended reassessment notices to travel back in time to their original date when such notices were to be issued and then new Section 149 of the Act is to be applied at that point. Thus, the Apex Court has in fact legalised/validated all the notices issued under un-amended provisions by treating them to be deemed show cause notice u/s. 148A of the I. T. Act (as substituted by Finance Act, 2021) as a one time measure. Therefore, if the contention raised by the appellant is accepted, then it would render the said judgment of Hon'ble Supreme Court in Union of India vs. Ashish Agarwal (supra) nugatory. Considering the facts of the case and in law the contentions raised by the appellant in this ground of appeal is not acceptable. This ground of appeal raised by the appellant is thus dismissed.
Ashok Kumar Jain vs. NFAC 10.1 The seventh ground of appeal raised by the appellant read as under. "That the leamed AO erred in facts and law by not considering the additional value of stamp duty amount as cost of acquisition or construction under the facts and circumstances of the case it is submitted that in the order the learned AO has mentioned for considering the additional value of stamp duty as cost of acquisition or construction whereas while calculating the tax the leamed AO has not considered the additional stamp duty of Rs 69672 18750 and 50922 as cost of acquisition or construction the indexation value of which comes to Rs 90884 which may kindly be allowed 10.2 Decision 10.2.1 In this regard it is found from the statement giving computation of total income that while computing long term capital gains the appellant has considered full value of consideration at Rs 93,20,000/- and after deducting indexed cost of acquisition of Rs. 85,76,173/- and indexed cost of construction of Rs. 9,31,742 has computed long term capital loss of Rs. 1,87,905/-. On perusal of the details available on record it is found that additional stamp duty of Rs. 69,672/- has been considered by the appellant in the cost of construction of Rs. 7,14,275/-. The A.O. in the assessment completed has disallowed appellant's claim of indexed cost of construction in respect of such cost of construction. Even duringthe course of appellate proceedings the appellant has not justified with sufficient details and documentary evidences the claim of additional stamp duty paid of Rs. 69,672/-. Therefore, in my considered opinion appellant’s claim of deduction on account of additional stamp duty paid of Rs. 69,672/- is not allowable while computing capital gains. This ground of appeal raised by the appellant is thus dismissed.
11. In the result, the appeal filed by the appellant is partly allowed.”
8. Since, the contention of the assessee was accepted in part and therefore, assessee preferred the present appeal before this tribunal on the grounds as stated herein above. To support the various grounds so raised by the assessee, ld. AR of the assessee, has filed the written submissions which is reproduced herein below:
Brief General Facts: The assessee is an individual (hereinafter referred as “Assessee”). In the present case, the ld. AO issued notice u/s 148 dt.30.03.2022 recording the following reason, that the assessee: 1. Received interest other than interest on security of Rs. 3,747/- Ashok Kumar Jain vs. NFAC 2. Purchased an immovable property of Rs. 85,00,000/- 3. Sold immovable property of Rs. 93,20,000/- alleging that income of Rs. 1,78,23,747/- has escaped assessment under the provisions of income escaping assessment u/s 148/147 of the Act and that assessee did not filed ROI. The ld. AO issued various notice(s) and the assessee filed his ROI against notice u/s 148 of the Act and filed various replies and document. The ld. AO however completed the assessment u/s 144 r/w 147 on dt. 01.03.2023 with impugned addition/disallowance of Rs. 9,31,742/- on account of LTCG and disallowance of cost of construction claimed by the assessee. Aggrieved from the above order, the assessee filed appeal before ld. CIT(A)/NFAC on 13.03.2023 which was unfortunately dismissed vide order dt. 31.07.2024. Against the above order, the assessee filed this appeal. GOA-1: Addition without jurisdiction: At the outset it is submitted that all the input and additions are completely beyond jurisdiction, were beyond jurisdiction before the AO as detailed here in below. Facts: The ld. AO at page 1 of assessment order stated the reason to believe as under: “The case has been selected for scrutiny u/s 147 of I. T. Act, for the reason that the assessee has received interest other than interest on securities of Rs. 3,747/-, purchased immovable property of Rs.85,00,000/- and sold immovable property of Rs.93,20,000/-. During the A.Y. 2015-16, income of Rs.1,78,23,747/- has been escaped from assessment and assessee has not filed his return of income. The ld. AO’s sole contention of reopening of the case of the assessee stands to be firstly interest other than interest on securities of Rs. 3,747/-, purchase of immovable property of Rs.85,00,000/- and sale immovable property of Rs.93,20,000/-and secondly non filing of return of income which is completely biased and contrary to the facts of present case. Hence this ground. Submission: 1. No Reason to believe existed: 1.1 A bare perusal of reasons recorded appears more to be reasons to suspicion as against reason to believe for the simple reason that in the entire reasons alleged to be recorded, not at all disclosed what type of information or material came to his possession so as to give rise to a ground for the formation of the belief by the AO that some income Ashok Kumar Jain vs. NFAC really escaped assessment. Thus, what appears is firstly, there is no reason to believe as such. There is an attempt and more so endeavor of making roving enquiry in as much as some cash deposits not corroborative with the income in absence of ROI for the year under consideration and hence, alleged that there was escapement of income.
1.2 The law of reopening u/s 147 is well settled that there must be some information or material coming to the possession of the AO, based on which, the AO has to form his reason to believe as to escapement. Further, there has to be a proximate connection/nexus between the material/information coming to possession and the formation of the believe. It cannot be a mere rumour, gossip or here say. The AO, acting as an honest person with reasonable prudence has to form a belief. Belief indicates something concrete or reliable. Kindly refer: Gangasharan& Sons Pvt. Ltd. v/s ITO &Anr. (1981) 130 ITR 1 (SC) and ITO v/s LakhmaniMewal Das (1976) 103 ITR 437 (SC).
1.3 A belief can’t be without any reason, surprisingly however, in present case it is not at all known what is the genesis i.e. material/information coming to his possession even remotely. The ld. AO in present case considered the valuation for the purpose of S. 50C of the Act being Rs. 93,20,000 as against the actual sale consideration of Rs. 85,00,000/- without even considering and applying his mind that the assessee himself has already taken Rs. 93,20,000/- as his value as per S. 50C of the Act for computation of LTCG, while computing his income. Further, the assessee while forming his reasons to belief completely overlooked the fact that the impugned property purchased for Rs. 85,00,000/- does not exist and there is no such transaction is regards to any property sold during the year. The ld. AO merely on that basis of presumption stated that there were two transactions of sale and purchase of property existed, even after bring the fact to his knowledge that the assessee has already disclosed the entire transaction of a single sale of asset in his ROI filed against S. 148 of the Act. This is however, height of imagination. It is evident that the AO did not have any material showing two transaction took place. He was not in possession of any independent source of information. 1.4 Admittedly, the AO did not refer to any paper found during some Search or any statement recorded which might have indicated any possible transaction other than the one disclosed in the RIO filed by the assessee. Thus, it is evidently a case of subjective satisfaction recorded and not an objective one which is the requirement u/s 147 of the Act. Hence, the AO proceeded on mere reasons to suspicion as against reasons to believe and there was entirely no application of mind.
1.4 Reliance is placed on CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312/320 ITR 561 (SC) where Hon’ble Apex court held as under:
Ashok Kumar Jain vs. NFAC "However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer." Therefore, the impugned notice issued u/s 148 as also the consequent impugned assessment framed u/s 144 r.w.s. 147 dated 01.03.2023 deserves to be quashed on this ground alone.
Reopening on entirely wrong factual premise: 2.1 It is submitted that the law of reopening u/s 147 of the Act is well settled that there must be some information or material coming to the possession of the ld. A.O., suggestive of/revealing income escaping assessment, based on which, the A.O. has to form his “reason to believe” or in other words, has to derive satisfaction as to escapement, necessitating issuance of notice u/s 148 of the Act. Further, there has to be a proximate connection/nexus between the material/information coming to possession and the formation of the believe. It cannot be a mere rumour, gossip or here say. The AO, acting as an honest person with reasonable prudence has to form a belief. The belief must indicate something concrete or reliable to form a basis of reopening. The requirement of recording of reason to believe or recording a satisfaction being parimateria, the principle propounded by the Hon’ble Courts in the context of pre-amended law, shall fully apply on the facts of the present case. 2.2 The information provided in the impugned Notice u/s 148 dt 30.03.2022 is vague, without any basis, wherein baseless conclusions were made and is based on entirely wrong factual premise that the assessee has sold a immovable property as well as purchased an immovable property. However, the assessee vide its various replies letters had categorically denied having purchased any property and had already disclosed the LTCG pertaining to sale of immovable property in his ROI filed against 148 of the Act during the year under consideration. 2.3 The Respondent-AO neither denied nor brought on record any reasonable basis of formation of such belief meaning thereby, the reasons are completely non-existent. 2.4 Further, the very Reason to Believe are based on wrong factual premise, such reasons to believe are no reasons at all. Consequently, the reassessment proceedings initiated vide the impugned notice u/s 148, deserves to be quashed. Reliance is placed on Rajhans Ashok Kumar Jain vs. NFAC Processors v. Union of India [2023] 149 taxmann.com 29 (Raj), wherein it was held as under:- “12. Resultantly, we are of the firm view that the very foundation of the impugned notice, the reasons to believe and the order turning down objections is non-existent. All the three proceedings are based sheerly on conjectures and surmises. The A.O. had no tangible evidence to initiate the re-assessment proceedings against the assessee and the impugned action is based sheerly on borrowed satisfaction. Even if it is assumed for argument's sake that the transaction made by the assessee for acquisition of immovable property at Pali may be read in place of Delhi, then also, the said transaction is duly mentioned in the return filed by the assessee for the relevant financial year and is supported by the audited balance-sheet, which was accepted by the Assessing Officer. Hence, there is no escape from the conclusion that no tangible material was available with the Assessing Authority so as to initiate the re-assessment proceedings against the assessee by taking recourse to the provisions under section 148 and 143 (2) of the Income-tax Act.” 2.4.1 The aforesaid findings is further supported in the case of Narendra Kumar Shah v. Assistant Commissioner of Income-tax, [2024] 162 taxmann.com 397 (Bombay), it was held that the “Section 15, read with sections 148A and 148, of the Income-tax Act, 1961 - Salaries – Chargeable as (Reassessment) – Assessment year 2019-20 – Assessee was an individual assessed to income from salary, house property and other sources – A reopening notice was issued upon assessee for reason that an information was received through insight portal that assessee despite having a salary of certain taxable amount and having purchased securities of certain amount had not filed his return of income – It was noted that notice under section 148A(b) did not call upon assessee to provide any justification on any transaction in question – Further, fact was that assessee had filed his return of income and had also paid total tax and had also claimed refund of certain amount – Whether Assessing Officer before issuing notice, was bound to atleast verify or enquire information that was received in accordance with risk management strategy – Held, yes – Whether, therefore, impugned reopening notice issued under section 148A(b) and further order passed under section 148A(d) had to be quashed and set aside – Held, yes [Paras 7 and 8] [In favour of assessee]”
Complete Violation of S. 148A of the Act.: 3.1 The assessee had already disclosed the LTCG in his ROI before the AO, completely disclosing the transaction with himself taking the value of purpose of 50C of the Act as per stamp authorities and paying the due tax thereon. However the authorities below completely ignored this fact and that there existed no transaction of purchased of any immovable property by the assessee, these facts were at all not dealt with by the ld. AO Ashok Kumar Jain vs. NFAC which is against the judicial guidelines and the binding directions given by the Hon’ble Apex Court in the case of GKN Diveshaft (2002) 259 ITR 19 (SC). Unfortunately, however, the ld. AO without adverting to assessee’s contention, straightaway issued the impugned Notice u/s 148 of the Act wherein he held income of Rs. 1,78,23,747/- had escaped assessment. 3.2 The law is well settled and such an approach on the part of the AO was clearly in violation of the categorical directions given by the Hon’ble Apex Court in the case of GKN Diveshaft (supra) and various other decisions following the Apex Court decision that before proceeding to complete the assessment by issuing notices u/s 142(1) of the Act, it is an incumbent upon the Assessing Officer to first dispose of all the objections and only then to proceed further, failing which, the subsequent proceedings are vitiated and the impugned Assessment Order so passed shall be a nullity. In the present case also, the undisputed facts are that the ld. AO has not fully dealt with and considered the material available with him before him going to the root of the issue while challenging the validity of the proceedings u/s 147 r.w.s148 of the Act, thus there is a serious lack of jurisdiction hence the impugned Assessment Order is a nullity. Therefore, the same deserves to be quashed and set aside. 3.3.1 The Hon’ble Courts have repeatedly held that the exercise of considering the Assesse’s objections raised to the reopening of the Assessment, is not a mechanical ritual but a quasi-judicial function. The AO must dispose of and deal with each objection, giving proper reasons for the conclusion. For this proposition kindly refer the case of Tata Capital Financial Services Ltd. Vs. ACIT (2022) 325 CTR 575 (Mum.) wherein in para 4 it was held that: “In the order passed on 17th Dec., 2021, rejecting the objections the AO has not dealt with all these points. The AO was duty bound to deal with all the submissions made by petitioner in its objections and not just brush aside uncomfortable objections under the carpet. We have to note that petitioner had, with the objections, also requested the AO to provide photocopies of documents evidencing request sent by the AO to the Principal CIT/Chief CIT/Principal CIT/CIT in terms of s. 151(1) of the Act for obtaining an approval for reopening of the assessment for the year under consideration and documents evidencing the approval received from the Principal Chief CIT/Chief CIT/Principal CIT/CIT.” It was further held : “Para 8…..In the circumstances, the Revenue is directed to adhere to the following : xxxxx------------xxxxxxx-----------xxxxxx-----xxxxx (c) The order disposing the objections should deal with each objections and give proper reasons for the conclusion.
Ashok Kumar Jain vs. NFAC (d) A personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted…..” 3.3.2. Also in the case of Sabh Infrastructure Ltd. Vs. ACIT (2017) 398 ITR 198 (Del.) it was held in Para 19 that : “ Para19……..(iv) the exercise of considering the assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi-judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.”
4. Reassessment is time barred by limitation : 4.1 With the enactment of Finance Act, 2021, the old provisions of sections 147, 148, 149 and 151 stood substituted with effect from 01.04.2021 and replaced by the existing provisions of the said sections as per sections 1(2)(a) and 40 to 44 of the Finance Act, 2021. 4.2 S. 148A reads “…The Assessing Officer shall, before issuing any notice under section 148…”. The language of the Sec 148A is clear, unambiguous and obliges the AO to comply with the prescribed procedure before issuance of Notice u/s 148. Such procedure, is a precursor to the issuance of the issue u/s 148 and therefore, has to be initiated within the stipulated period of limitation u/s 149 of the Act. Hence, in the amended law any Reopening proceedings even though proposed to be initiated has to be in accordance with the mandatory condition prescribed u/s 148A, 148 and 149 of the Act. 4.3 The law is well settled that the provisions prescribing time must be strictly interpreted as held by the Hon’ble Apex Court in K.M Sharma v. ITO [(2002) 254 ITR 772, 777(SC)]. Even where no limit is prescribed for taking an action under a statutory provision, delay or rather inordinate delay may be an aspect the court can consider for quashing proceedings [CIT v. Harinagar Sugar Lad, (1989) 176 ITR 289, 291 (Bom), special leave petition dismissed by the Court: (1992) 197 ITR (St.) 1 (SC), applying Chimanram Motilal Pvt. Ltd. CT (1983) 140 ITR 809 (Bom) and Bharat Steel Tubes Ltd. V. State of Haryana, 09) 70 STC122(SC)]. 4.4 In the instant case, the impugned notice u/s 148A(b) is dt. 30.03.2022 and consequently impugned reopening notice u/s 148, all are clearly barred by limitation in as much as the newly inserted Section 149(1)(a) by Finance Act, 2021, has reduced the general period for issuance of notice u/s 148 of the Act to three years as against the earlier period of 4 year/6 year or 16 years in the pre amended law. In other words, no notice u/s 148 can validly be issued beyond the period of 3 years from the end of relevant assessment year unless the case clearly falls within the parameters of section 149(1)(b) for a larger period of 10 years on the fulfillment of certain additional conditions prescribed therein but circumscribed by Ashok Kumar Jain vs. NFAC the Proviso further reducing the period up to 6 yrs. only. Hence, the same is beyond the time permissible as per the as per the existing provisions of law. Needless to add that para 6.6 in Ashish Agrawal (Supra) such defense has been specifically permitted. C.5 Because a bare reading of the proviso to Sec 49(1)(b) clearly indicate that the alleged escaped taxable income must be Rs.50 lakh or more then only the benefit of the extended time limit is permissible. Further, the normal limitation period expires on the completion of 3 years from the end of relevant AY which is 2015-16. Since, in this case the escaped taxable income escaping assessments is only Rs. 7,43,837/-, only normal period of limitation of 3 years shall apply if so required. The impugned notice u/s 148A(b) is issued on dated 30.03.2022 and notice u/s 148 shall be issued even thereafter, whereas, the limitation of 3 years had already expired, hence the impugned notice u/s 148A(b) and the proposed initiation is barred by limitation.
Addition/ disallowance not part of reasons raised - not permissible: 2.1 Admittedly, the very escaped income of Rs. 1.78 cr which formed part of reasons to believe was not added to declared income as against which however, the ld. AO chose to make any addition of LTCG which was already disclosed by the assessee himself. Such an approach is, completely impermissible by law and the AO has acted completely beyond jurisdiction. Thus, once the addition on account of the income believed to have been escaped, has not been made, no addition of any other income could be made u/s 147 of Act, more so when prescribed legal procedure was not followed. 2.2 Supporting Case Laws: 2.2.1 CIT vs. Shri Ram Singh (2008) 217 CTR (Raj) 345: (2008) 306 ITR 343 (Raj) (DC 1-6). The Rajasthan High Court construed the words used by Parliament in s. 147 particularly the words that the AO may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under s.
The Hon’ble Court held as follows: "It is only when, in proceedings under s. 147 the AO, assesses or reassesses any income chargeable to tax, which has escaped assessment for any assessment year, with respect to which he had 'reason to believe' to be so, then only, in addition, he can also put to tax, the other income, chargeable to tax, which has escaped assessment, and which has come to his notice subsequently, in the course of proceedings under s.
147. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under s. 147, the AO were to come to the conclusion, that any income Ashok Kumar Jain vs. NFAC chargeable to tax, which, according to his 'reason to believe', had escaped assessment for any assessment year, did not escape assessment, then, the mere fact that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under s. 147." 2.2.2 CIT vs Jet Airways (I) Ltd. (2011) 331 ITR 236 (Mum), wherein it was held as under: “Reassessment—Scope—Income in respect of which notice issued not found to be escaped income—Once the AO accepts that the income in respect of which he entertained reason to believe to have escaped assessment, was not in fact escaped income; he has no jurisdiction to reassess other items of income—In such a situation, Expln. 3 to s.147 does not come to the reserve of AO” 2.2.3 This followed by Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. v/s CIT (2011) 336 ITR 136 (Del HC) wherein, it was held that the AO had jurisdiction to reassess income other than the income in respect of which proceedings u/s 147 were initiated but he was not justified in doing so when the very reasons for initiation of those proceedings ceased to survive. Legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction u/s 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiries and thereby including different items of income, not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. It was further held that the Tribunal was right in holding that the AO had the jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated but he was not so justified when the reasons for initiation of those proceedings ceased to survive. The observations of the Hon’ble High Court on pages 147 and 148 of in 336 ITR 136 are worth noting. 2.2.4 Also kindly refer CIT vs Mohmed Juned Dadani (2013) 355 ITR 172 (Guj) (DC 7- 15). However, it may be clarified that, nothing came to the notice of the AO as contemplated by Explanation-III to S. 147 as much as the AO himself, first, made inquiries through notices u/s142, and when no reply was received, made the impugned additions and disallowances. Therefore, the AO cannot take help of the said Explanation, nor even he has whispered a single word on this aspect.
Ashok Kumar Jain vs. NFAC Therefore, all the impugned additions, deserves to be, deleted, in toto, on this legal ground alone.”
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee re-opening in the case of the assessee was without jurisdiction and for that he relied upon the decision of apex court in the case of Rajiv Bansal (para 19F) and thereby stated that the re-opening is bad in law. He also stated that ld. AO has not made any addition on the reasons for case was re-opened but the addition was made on the cost of acquisition and therefore, considering the jurisdiction high court decision the assessment order is required to be quashed. As regards the merits of the dispute the ld. CIT(A) has appreciated the evidence but he has confirmed the addition merely on the reasons that“the assessee- appellant has provided bills/letters in respect of an amount of Rs. 6,44,603/-, Further on perusal of the copies of above bills/letters submitted by the appellant it is found that the work carried out is not related to construction today existing structure and hence cannot be considered as expenditure on account of 'cost of construction'. The expenditure incurred is in the nature of current repairs and maintenance and furniture and fixture which cannot be treated as cost of improvement to the capital asset sold. Therefore, considering the findings given by the A.O. in the assessment order as well as the details and documentary evidence provided by the appellant during the course ofappellate proceedings, in my considered opinion, appellant's claim of indexed cost of acquisition of Rs. Ashok Kumar Jain vs. NFAC 9,31,742/- is not an allowable deduction while computing taxable capital gains” (SIC). Considering that aspect of the matter the cost of acquisition is required to be allowed.
The ld. DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). He also stated that as regards the validity of the assessment the ld. CIT(A) has already dealt with the contention of the assessee at page 9.2 of the impugned order and so far as the merits of the dispute assessee has not given details to the ld. AO and before ld.CIT(A) has dealt with the fact that as to why those expenditure were not considered as cost of acquisition. Even the assessee has not furnished the bills to the ld. CIT(A) to the extent of its claim.
We have heard the rival contentions and perused the material placed on record. Vide ground no. 2 & 3 the assessee challenges the finding of the lower authority and stated that the assessee-appellant was denied the benefit of the cost of acquisition of the same property for which the capital gain was subjected to the re- assessment proceeding. Assessee-appellant has produced the bills /letters in respect of an amount of Rs. 6,44,603/-, Further on perusal of the copies of above bills/letters submitted by the assessee-appellant it is found was found by the ld. CIT(A) that the work carried out is not related to construction today existing structure and hence cannot be considered as expenditure on account of 'cost of Ashok Kumar Jain vs. NFAC construction'. The expenditure incurred is in the nature of current repairs and maintenance and furniture and fixture which cannot be treated as cost of improvement to the capital asset sold. Therefore, considering the findings given by the A.O. in the assessment order as well as the details and documentary evidences provided by the appellant during the course of appellante proceedings, in my considered opinion, appellant's claim of indexed cost of acquisition of Rs. 9,31,742/- is not an allowable deduction while computing taxable capital gains. The action of the A.O. in denying the same is therefore in accordance with the provisions of law and hence upheld. This ground of appeal raised by the appellant is thus dismissed. With that observation he confirmed the view of the ld. AO and thereby not considered the claim of the assessee. Before us the ld. AR of the assessee specifically argued that considering the principles of natural justice the assessee be given a change to represent the facts of the claim before the ld. AO. The bench noted that Principles of natural justice are soul of an administration of justice and need to be adhered to in order to make the order as a just and fair order. We are also of the view that is between the parties to be decided on merits so that nobody’s rights could be scuttled down without providing an opportunity of being heard to the assessee. Thus, the bench noted that considering the overall facts of the case the assessee given a chance to represent their claim before the ld. AO on mercy ground to allow one more chance. Considering that peculiar aspect of the Ashok Kumar Jain vs. NFAC matter we deem it fit to remand the matter to the file of the ld. AO who will consider the factual aspect of the matter as raised by the assessee after due verification of the facts and charge the correct income in hands of the assessee if so to be taxed in accordance with law after affording due opportunity to the assessee. However, the assessee will not seek any adjournment on frivolous ground and remain cooperative during proceedings before the ld. AO. Based on these observations ground no. 2 & 3 raised by the assessee are allowed for statistical purposes. Ground no. 1, 1,2, 1.3 and 4 raising therein the technical ground. Since the bench has considered ground no. 2 & 3 as raised the technical ground so raised become academic at this stage and are left open. In the result, the appeal of the assessee is allowed for statistical purpose.