JITENDRAKUMAR AMBELAL PATEL,NA vs. ARIVS.ITO, WARD-3, NAVSARI

4. It is therefore prayed that above penalty may please be 4. It is therefore prayed that above penalty may please be 4. It is therefore prayed that above penalty may please be deleted as learned members of the tribunal may deem it deleted as learned members of the tribunal may deem it deleted as learned members of the tribunal may deem it proper.

5. Appellant craves leave to add, alter or delete any 5. Appellant craves leave to add, alter or delete any 5. Appellant craves leave to add, alter or delete any ground(s) either before ground(s) either before or in the course of the hearing of or in the course of the hearing of the appeal.

2. Briefly stated, the assessee Briefly stated, the assessee is an individual and and has shown his main source of income his main source of income as agricultural income. During the gricultural income. During the year, the assessee year, the assessee purchased agricultural Land at gricultural Land at ‘Pananj’ Village, Tahsil ‘Chikhli Chikhli’, District ‘Navsari’ (Gujrat) at total ’ (Gujrat) at total price of Rs. 2,11,000/-. However, the ld. Assessing Officer However, the ld. Assessing Officer considered the considered the fair market value of the said land at Rs. 4,51,000/ alue of the said land at Rs. 4,51,000/- - per ‘bigha’ ( i.e. area unit prevailed locally) i.e. area unit prevailed locally) based on the “Satakhat Satakhat” ( i.e. agreement to sale in local language) to sale in local language) between the same same seller and another buyer. Accordingly, he made the addition of Rs. buyer. Accordingly, he made the addition of Rs. buyer. Accordingly, he made the addition of Rs. 46,05,680/- by applying the above rates as under: by applying the above rates as under:- Total Area of Land Purchased: 10.68 bigha*4,51,000/- per bigha : Total Area of Land Purchased: 10.68 bigha*4,51,000/ : 48,16,680 Purchase Consideration as per Registered Deed ation as per Registered Deed : 2,11,000 : 2,11,000 Difference added as income of the assessee Difference added as income of the assessee : 46,05,680 : 46,05,680 3. On further appeal, the Ld. CIT(A) On further appeal, the Ld. CIT(A) observed that the observed that the appellant accepted the purchase of only one part of appellant accepted the purchase of only one part of appellant accepted the purchase of only one part of out of total land having S. No. 197 No. 197, vide document number 1626 and even vide document number 1626 and even acknowledged the document number 1625 for another part of the acknowledged the document number 1625 for another part of the acknowledged the document number 1625 for another part of the above land being executed in name of other party i.e. Shri above land being executed in name of other party i.e. Shri above land being executed in name of other party i.e. Shri Vallabhbhai C. Patel. Accordingly, as per the observation of the Vallabhbhai C. Patel. Accordingly, as per the observation of the Vallabhbhai C. Patel. Accordingly, as per the observation of the ld. Assessing Officer, the ld. Assessing Officer, the seller of land Smt. Ur seller of land Smt. Urvashi Alias, Urmilaben Ajitbhai Desai has executed sale deed of one piece Urmilaben Ajitbhai Desai has executed sale deed of one piece Urmilaben Ajitbhai Desai has executed sale deed of one piece 10.68 bighas of land vide document no. CKL/1626/2008 in 10.68 bighas of land vide document no. CKL/1626/2008 in 10.68 bighas of land vide document no. CKL/1626/2008 in favour of appellant at the document sale price of Rs. 2,11,000/ favour of appellant at the document sale price of Rs. 2,11,000/ favour of appellant at the document sale price of Rs. 2,11,000/- though the seller, as per though the seller, as per “Satakhat” sold two pieces of land sold two pieces of land through person namely Jayesh I. Desai at Rs. 99,22,000/ through person namely Jayesh I. Desai at Rs. 99,22,000/ through person namely Jayesh I. Desai at Rs. 99,22,000/- for a payment at Rs. 4,51,000/ payment at Rs. 4,51,000/- per bigha. The ld. CIT(A) dismissed per bigha. The ld. CIT(A) dismissed the appeal of the assessee for want of proper evidences and the appeal of the assessee for want of proper evidences and the appeal of the assessee for want of proper evidences and justification by the appellant. justification by the appellant.

4. Before us, the Ld. Counsel for the assessee , the Ld. Counsel for the assessee referred to his referred to his submissions filed with the ld. CIT(A) which are reproduced in the submissions filed with the ld. CIT(A) which are reproduced in the submissions filed with the ld. CIT(A) which are reproduced in the CIT(A)’s order. He argued on the validity of CIT(A)’s order. He argued on the validity of the reopening and on the reopening and on merits and requested requested for deleting the addition.

5. On contrary, the ld. D 5. On contrary, the ld. Departmental Representative appearing presentative appearing for the Revenue argued that the ld. CIT(A) has extensively dealt evenue argued that the ld. CIT(A) has extensively dealt evenue argued that the ld. CIT(A) has extensively dealt with the validity of reopening of the case and has rightly with the validity of reopening of the case and has rightly with the validity of reopening of the case and has rightly dismissed the ground in that regard. Further, apropos dismissed the ground in that regard. Further, apropos dismissed the ground in that regard. Further, apropos, merits of the case, the assessee had the case, the assessee had not furnished any justification at all furnished any justification at all as to why the fair market value should not be adopted in his case as to why the fair market value should not be adopted in his case as to why the fair market value should not be adopted in his case and has not even furnished any s not even furnished any supporting documentary upporting documentary evidences, which could , which could disprove the credentials of the original prove the credentials of the original buyer and the sanctity of the buyer and the sanctity of the “Satakhat”. The ld. DR . The ld. DR has filed his written Submission and Submission and prayed that the addition should be that the addition should be sustained.

6.2 It is now well-settled by a long line of judicial authorities, settled by a long line of judicial authorities, settled by a long line of judicial authorities, both domestic and international, that at the threshold stage of both domestic and international, that at the threshold stage of both domestic and international, that at the threshold stage of reopening, the test to be app reopening, the test to be applied is not the sufficiency of the lied is not the sufficiency of the material, but the existence of material which can reasonably form material, but the existence of material which can reasonably form material, but the existence of material which can reasonably form the basis of the requisite belief of escapement of income. It is the basis of the requisite belief of escapement of income. It is the basis of the requisite belief of escapement of income. It is equally trite that the formation of belief must be that of the equally trite that the formation of belief must be that of the equally trite that the formation of belief must be that of the Assessing Officer himself, Assessing Officer himself, founded on relevant material, and not founded on relevant material, and not a mechanical exercise. a mechanical exercise.

6.3 In the present case, the record does not disclose any In the present case, the record does not disclose any In the present case, the record does not disclose any element of non-application of mind. On the contrary, it is evident application of mind. On the contrary, it is evident application of mind. On the contrary, it is evident that the Assessing Officer acted upon specific and credible that the Assessing Officer acted upon specific and credible that the Assessing Officer acted upon specific and credible information received through the departmental channel in the n received through the departmental channel in the n received through the departmental channel in the form of a Tax Evasion Petition (TEP), processed and corroborated form of a Tax Evasion Petition (TEP), processed and corroborated form of a Tax Evasion Petition (TEP), processed and corroborated by the Investigation Wing. Such information, in our considered by the Investigation Wing. Such information, in our considered by the Investigation Wing. Such information, in our considered opinion, constitutes tangible material sufficient to trigger the opinion, constitutes tangible material sufficient to trigger the opinion, constitutes tangible material sufficient to trigger the jurisdictional satisfaction envisaged under Section 147. al satisfaction envisaged under Section 147. al satisfaction envisaged under Section 147.

6.4 We, therefore, find no infirmity in the reopening of the We, therefore, find no infirmity in the reopening of the We, therefore, find no infirmity in the reopening of the assessment. Accordingly, assessment. Accordingly, Ground No. 1 of the appeal stands Ground No. 1 of the appeal stands dismissed.

Addition of ₹46,05,680/- in respect of Land 7. Ground No. 2 – Addition of in respect of Land Transaction 7.1 Turning now to Ground No. 2, which pertains to the rning now to Ground No. 2, which pertains to the rning now to Ground No. 2, which pertains to the addition of ₹46,05,680/ 46,05,680/- sustained by the Ld. CIT(A) Ld. CIT(A), we have carefully examined the documentary evidence and the reasoning carefully examined the documentary evidence and the reasoning carefully examined the documentary evidence and the reasoning of the authorities below. of the authorities below.

7.2 The facts, as discernible from the record, reveal that a The facts, as discernible from the record, reveal that a The facts, as discernible from the record, reveal that a parcel of land admeasuring 21.36 bighas (in two equal parts of parcel of land admeasuring 21.36 bighas (in two equal parts of parcel of land admeasuring 21.36 bighas (in two equal parts of 10.68 bighas each) was originally agreed to be sold by one 10.68 bighas each) was originally agreed to be sold by one 10.68 bighas each) was originally agreed to be sold by one Smt. Urvashi alias Urmilaben (hereinafter referred to as “the vendor”) (hereinafter referred to as “the vendor”) Urvashi alias Urmilaben to Shri Jayeshbhai Desai i Jayeshbhai Desai (hereinafter referred to as “the prior (hereinafter referred to as “the prior purchaser”) through a purchaser”) through a Satakhat (agreement to sell) dated (agreement to sell) dated 09.05.2007 for a total consideration of 09.05.2007 for a total consideration of ₹99,22,000/ 99,22,000/-, i.e., ₹4,51,000/- per bigha. Clause 4 of the said per bigha. Clause 4 of the said Satakhat Satakhat expressly stipulates that:

“4. Total sale consideration has been received for the sale of land.

4. Total sale consideration has been received for the sale of land.

7.3 The Ld. Assessing Officer Ld. Assessing Officer was of the opinion that, in was of the opinion that, in pursuance of the said pursuance of the said Satakhat, the registered sale deed for one , the registered sale deed for one part of the land (10.68 bighas) was subsequently executed on part of the land (10.68 bighas) was subsequently executed on part of the land (10.68 bighas) was subsequently executed on 23.12.2008 in the name of the assessee for a total consideration 23.12.2008 in the name of the assessee for a total consideration 23.12.2008 in the name of the assessee for a total consideration of merely ₹2,11,000/ 2,11,000/-, i.e., at the rate of ₹19,756/ 19,756/- per bigha. The Assessing Officer inferred The Assessing Officer inferred that the transaction recorded in that the transaction recorded in the assessee’s name was, in essence, a continuation or the assessee’s name was, in essence, a continuation or the assessee’s name was, in essence, a continuation or culmination of the earlier culmination of the earlier Satakhat arrangement, thereby arrangement, thereby justifying the application of the higher valuation reflected therein. justifying the application of the higher valuation reflected therein. justifying the application of the higher valuation reflected therein.

7.4 The assessee, however, has contested The assessee, however, has contested such inference by such inference by contending that he was neither a party nor a witness to the said contending that he was neither a party nor a witness to the said contending that he was neither a party nor a witness to the said Satakhat; that his purchase was independent and direct from the ; that his purchase was independent and direct from the ; that his purchase was independent and direct from the vendor; and that the price agreed between the vendor and vendor; and that the price agreed between the vendor and vendor; and that the price agreed between the vendor and another person cannot be foisted upon him. another person cannot be foisted upon him.

7.5 Upon a careful scrutiny of the record, we find that no cogent a careful scrutiny of the record, we find that no cogent a careful scrutiny of the record, we find that no cogent material has been brought by the material has been brought by the Ld. AO to demonstrate that the to demonstrate that the assessee acquired the land in continuation of, or under, the said assessee acquired the land in continuation of, or under, the said assessee acquired the land in continuation of, or under, the said Satakhat. No evidence has been placed to show that the assessee . No evidence has been placed to show that the assessee . No evidence has been placed to show that the assessee had any privity of contract with any privity of contract with Shri Jayeshbhai Desai Shri Jayeshbhai Desai, or that the sale deed executed in the assessee’s favour was merely a the sale deed executed in the assessee’s favour was merely a the sale deed executed in the assessee’s favour was merely a formal transfer of the prior purchaser’s rights. Similarly, the formal transfer of the prior purchaser’s rights. Similarly, the formal transfer of the prior purchaser’s rights. Similarly, the Assessing Officer has failed to establish how the consideration Assessing Officer has failed to establish how the consideration Assessing Officer has failed to establish how the consideration mentioned in the registered sale deed was paid, and to whom, or mentioned in the registered sale deed was paid, and to whom, or mentioned in the registered sale deed was paid, and to whom, or how it correlated with the amounts alleged to have been received how it correlated with the amounts alleged to have been received how it correlated with the amounts alleged to have been received under the Satakhat.

7.6 Equally, the assessee too has not adduced evidence as to Equally, the assessee too has not adduced evidence as to Equally, the assessee too has not adduced evidence as to the fate of the said the fate of the said Satakhat — whether it was rescinded, whether it was rescinded, cancelled, or subsisting at the time of his purchase. Given that cancelled, or subsisting at the time of his purchase. Given that cancelled, or subsisting at the time of his purchase. Given that the existence of a prior registered agreement could the existence of a prior registered agreement could have affected the title and enforceability of his own purchase, the assessee the title and enforceability of his own purchase, the assessee the title and enforceability of his own purchase, the assessee ought to have obtained clarity from the vendor on the subsistence ought to have obtained clarity from the vendor on the subsistence ought to have obtained clarity from the vendor on the subsistence or termination of the or termination of the Satakhat. The absence of such explanation . The absence of such explanation raises a cloud of ambiguity over the true nature raises a cloud of ambiguity over the true nature raises a cloud of ambiguity over the true nature of the transaction.

7.7 In these circumstances, both the Assessing Officer and the In these circumstances, both the Assessing Officer and the In these circumstances, both the Assessing Officer and the assessee have left vital aspects unexplored. The Assessing Officer assessee have left vital aspects unexplored. The Assessing Officer assessee have left vital aspects unexplored. The Assessing Officer ought to have examined the vendor and the prior purchaser to ought to have examined the vendor and the prior purchaser to ought to have examined the vendor and the prior purchaser to ascertain (i) whether the ascertain (i) whether the Satakhat was actually acted upon, (ii) lly acted upon, (ii) whether full consideration was indeed received under that whether full consideration was indeed received under that whether full consideration was indeed received under that instrument, and (iii) how the vendor accounted for such instrument, and (iii) how the vendor accounted for such instrument, and (iii) how the vendor accounted for such consideration in her returns. The omission to undertake these consideration in her returns. The omission to undertake these consideration in her returns. The omission to undertake these enquiries renders the assessment factually incomplete and l enquiries renders the assessment factually incomplete and l enquiries renders the assessment factually incomplete and legally infirm.

7.8 The Hon’ble Delhi High Court Hon’ble Delhi High Court in Jansampark Advertising & Jansampark Advertising & Marketing (P) Ltd. v. CIT Marketing (P) Ltd. v. CIT [ITA No. 525/2014, dated 11.03.2015] [ITA No. 525/2014, dated 11.03.2015] has lucidly held that where the Assessing Officer fails to carry out has lucidly held that where the Assessing Officer fails to carry out has lucidly held that where the Assessing Officer fails to carry out the necessary inquiry to reach the logical concl the necessary inquiry to reach the logical conclusion, the usion, the Ld. CIT(A) and, indeed, the Tribunal, cannot remain passive and, indeed, the Tribunal, cannot remain passive and, indeed, the Tribunal, cannot remain passive spectators but are duty spectators but are duty-bound to ensure that the matter is bound to ensure that the matter is subjected to effective verification. The relevant observation of the subjected to effective verification. The relevant observation of the subjected to effective verification. The relevant observation of the Court reads as follows: Court reads as follows:

7.9 Respectfully following the dictum of the Hon’ble Delhi High Respectfully following the dictum of the Hon’ble Delhi High Respectfully following the dictum of the Hon’ble Delhi High Court, and considering the apparent gaps in factual e Court, and considering the apparent gaps in factual e Court, and considering the apparent gaps in factual enquiry at the assessment stage, we deem it appropriate, in the interest of the assessment stage, we deem it appropriate, in the interest of the assessment stage, we deem it appropriate, in the interest of justice, to restore this issue to the file of the justice, to restore this issue to the file of the Ld. Assessing Officer Ld. Assessing Officer for a fresh examination. The Assessing Officer shall make for a fresh examination. The Assessing Officer shall make for a fresh examination. The Assessing Officer shall make comprehensive inquiries with the vendor, the prior purchaser, comprehensive inquiries with the vendor, the prior purchaser, comprehensive inquiries with the vendor, the prior purchaser, and the assessee, and ascertain the true character and and the assessee, and ascertain the true character and and the assessee, and ascertain the true character and consideration of the transaction. consideration of the transaction. We direct that adequate We direct that adequate opportunity of being h opportunity of being heard shall be afforded to the assessee eard shall be afforded to the assessee before any decision is taken. before any decision is taken.

7.10 Accordingly, Ground No. 2 is allowed for statistical Ground No. 2 is allowed for statistical Ground No. 2 is allowed for statistical purposes, with the matter remitted to the Assessing Officer for de , with the matter remitted to the Assessing Officer for de , with the matter remitted to the Assessing Officer for de novo adjudication in accordance with law. novo adjudication in accordance with law.