SH. NARESH KUMAR,NEW DELHI vs. ITO, NEW DELHI

The information was received in this case from the office of The Director Of Income Tax (Investigation), New Delhi on 22/10/2009 that assessee has sold one agricultural land admeasuring 7.6875 acres comprising various sellers at village Baprola Delhi to M/s Experience builder private limited for a consideration of INR 196,000,000/- and in the said land the share of the assessee is 10%, therefore, assessee has received a sum of INR 1 9603125/– during the financial year 2007 – 08. Therefore the learned assessing officer issued inquiry letter to the assessee but no reply was received, therefore, another letter dated 1/2/2012 was issued and same also remained uncomplied with. Therefore the learned assessing officer recorded the reasons for initiating proceedings for assessing income of the assessee under section 147 of the act, notice u/s 148 was issued on 29/8/2012. However in response to that notice no response was received and therefore the notice u/s 142 (1) was issued on 14/1/2013, same also remain uncomplied with. Therefore, after the several opportunities granted to the assessee but he did not appear before AO. So Assessing officer was left with no other alternative but to pass an order u/s 144 of the income tax act and he found that the capital gain on sale of the land has escaped the assessment. To compute the capital gain, the learned AO estimated the fair market value of such property as on 1/4/1981 amounting to INR 1 650000/– per Acre gathered from different sources and computed the capital gain on the sale of land considering the sale consideration of INR 1 9603125/- and granting indexed cost of acquisition as deduction of INR 6 889090/– , computed the long-term capital gain of INR 12614035/–. Consequently the assessment order was passed.

Assessee aggrieved with the order of the learned assessing officer preferred an appeal before the learned CIT –( A) – 15, New Delhi. The learned CIT – A passed an order on 26/10/2015 in case of all the 10 joint owners of the land dismissing their appeals. Before the learned CIT – A the assessee raised an objection that the reopening of the assessment is invalid as notice u/s 148 of the act issued by the AO on 29/8/2012 , was never served on him. Hence the proceedings under section 148 was challenged. The learned CIT – A verified the assessment record and found that notice u/s 148 of the act was issued on 29/8/2012 on the same date through Speed speed and there is no evidence on record to suggest that the notice has returned back by postal authorities as unserved. Therefore respectfully following the decision of the honourable Jharkhand High Court in case of Miln Poddar vs CIT 357 ITR 619 as well as the honourable jurisdictional High Court in case of CIT vs Madhsy films private limited 301 ITR 692 dismissed this ground, as assessee has failed to give any evidence to establish that notice u/s 148 has returned back or unserved. He stated that therefore normal presumption has to be drawn that the notice was duly served upon the appellant within the time limit prescribed under the act. The 2nd objection raised before him for the computation of the capital gain stating that the capital gain did not belong to the assessee as an individual but it belonged to the Hindu undivided family of Sri Dalel Singh stating that the land was inherited by his father, who in turn had inherited it from his father. Therefore the contention of the assessee was that since the land belonged to the HUF of the appellant, AO has wrongly issued notice u/s 148 to the assessee in individual capacity. The learned CIT – A rejected the above explanation stating that the enquiry report received from the assessing officer shows that the assessee has sold the property in his individual capacity and not in HUF capacity. Therefore he held that the property belongs to the assessee and in individual capacity and not in the hands of the Hindu undivided family. The 3rd objection raised by the appellant is the reason for reopening was not communicated to the assessee. The same argument was also rejected stating that notice u/s 148 of the act was issued along with the reasons recorded therein which was sent through speed post and the assessee did not comply with the notices and therefore the above objection does not survive. On the merits it was stated that AO has estimated the cost of acquisition without any material available but is on arbitrary valuation. The learned CIT – A held that the cost of the land for the purpose of computing the indexed cost of acquisition has been taken at INR 1 650000 per acre by the assessing officer on the basis of information gathered by him from different sources to know that what is the fair market value as on 1/4/1981. He held that as the appellant could not find any fault except raising general objection, he rejected it.

Therefore, aggrieved with the order of the learned CIT – A the assessee is in appeal before us. Firstly the assessee contested the same argument as raised before the learned CIT – A that notice u/s 148 was never served on anyone at anytime. It was further stated that assessee himself took assessment file inspection and he has not seen the delivery status report of the notices sent by speed post in the assessment file. He therefore stated that the order passed under section 148 of the income tax act without service of notice under that section is invalid. The 2nd point the assessee raised is that the land belonged to the HUF of the assessee but not to the assessee. The notices should have been issued to the Hindu undivided family of the assessee but according to the assessment order it has been issued on the individual status of the assessee, therefore, the notice issued is also invalid. Therefore the order passed by the learned assessing officer taxing the above capital gain in the hands of the individual status of the assessee in state of Hindu undivided family is invalid. He submitted that action has been taken against the wrong person. He reiterated the same argument as were raised before the learned CIT – A. The 3rd point that was raised is that he further challenged the notice itself stating that the notice dated 1/7/2014 which was issued to the assessee at addressed K 01 – 06, Mohan Garden, Nagar, New Delhi 59 does not mention the permanent account number, father’s name and address is incorrect. He further referred to the another notice dated 28/2/2014 stating that there are more than one person of the similar name in the village and when the assessee questioned the assessing officer about the receipt of the above notice and by which person, no reply was given to the assessee. He further stated that the name of the assessee is Mr Naresh Kumar Solanki and the permanent account number of the assessee is AWIPS4862N and the address of the assessees 90, village Baprola, Najfgarh , New Delhi 43. He therefore submitted that the learned assessing officer never mentioned the permanent account number in the notice. He also noted the error in the writing of the name of the father of the assessee. Adverting to the 2nd ground of the appeal he stated that the passing of the assessment order u/s 144 of the income tax act in wrong hands of the appellant without a specific notice in that behalf in completing the assessment without providing the reasonable and adequate and proper opportunity of hearing is bad in law. It only contention in this regard is that the income is required to be assessed in the hands of the Hindu undivided family and not the assessee in the individual capacity. With respect to the 4th ground of appeal

We have carefully considered the rival contention and perused the orders of the lower authorities. The facts clearly show that the assessee has sold an agricultural land for Rs 19,60,00,000 in village Baprola to M/s Experience builder private limited wherein the assessee’s having 10% share. Accordingly, assessee received a sum of INR 1 9603125/–. On the basis of the information received from the annual information return (AIR) as per address mentioned in the sale deed, the learned assessing officer sent communications for inquiring about the chargeability of capital gain on transfer of above assets. However assessee did not respond to the communications. Therefore the learned assessing officer issued notices u/s 148 of the income tax act at the same address. The notices were admittedly sent by the speed post at the given addresses which were never returned as unserved. The learned CIT – A has noted that assessee has been served the notice through speed post bearing number ED613882447 IN and there is no evidence on record to suggest that this notice was returned back by postal authorities as unserved. He has followed the decision of the honourable Jharkhand High Court in 357 ITR 619. The assessee has stated that on inspection of the file it did not find any evidence of service of the notice. It is to be noted that he did not find any cover returned unserved. The notices were sent at the address which is mentioned in the sale deed. Assessee did not file any return of income nor mentioned the PAN in the sale deed. The return filed by the assessee are also for Ay 2011-12 and not Ay 2008-09. The ld AO did not have ny mechanism to find out who is the person who has sold the land. The only source of information is the copy of the sale deed and address mentioned there n , notices / communication were sent. It is not the claim of the assessee that in sale deed wrong address is mentioned. Therefore, the argument of the assessee that no notice has been served on the assessee is rejected.

Further with respect to the claim of the assessee that the land belongs to the Hindu undivided family and not in the status of individual is also dealt with by the learned CIT A wherein he held that in the documents submitted by the assessee for the sale of land, it is nowhere mentioned that the assessee has sold the above land in the name of Hindu undivided family. Further in all the documents the names of all the appellant’s including Sri Dalel Singh is mentioned in their individual capacity only. Further the enquiry report also names the appellant’s in their individual capacity only. In view of this we reject the claim of the assessee that capital gain is chargeable to tax even if it is at all in the hands of the Hindu undivided family.

As we already rejected the argument of the assessee that land belongs to the Hindu undivided family and not to the assessee in his individual capacity, all the arguments of the assessee with respect to the service of notice not made in the hands of the Hindu undivided family of the assessee is also rejected.

Accordingly we dismiss the ground number 1 – 3 of the appeal of the assessee.

In the present appeal it is not disputed by the assessee that the land sold is not a capital asset transfer of which is chargeable to income tax under the provisions of section 45 of the income tax act. Therefore, the arguments placed by the learned departmental representative that whether the sale consideration received is chargeable to tax or not is not an issue in this appeal.

Adverting to the 4th ground of appeal

The 5th ground of appeal

Applicant 2. Respondent 3. CIT 4. CIT (A) Page | 8