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Income Tax Appellate Tribunal, DELHI BENCH: ‘C+SMC’, NEW DELHI
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
Shri Jagat Singh, (v) Harola, Sector-5, Noida. The Income Tax Officer, PAN AJBPS0480L vs. Ward-1(3), Income Tax C/o.Sh. V.K. Sachdeva, Office, Ghaziabad. Advocate, R-12/23, Raj Nagar, Ghaziabad. U.P. Appellant Respondent Assessee by : Shri M.P. Rastogi, Advocate Revenue by : Shri Vijay Kumar Jiwani, Sr. D.R. Date of Hearing : 08.08.2018 Date of Pronouncement : 04.09.2018 ORDER
PER BHAVNESH SAINI, JM
This appeal by Assessee has been directed against the Order of the Ld. CIT(A), Ghaziabad, Dated 22.03.2018, for the A.Y. 2008-2009, challenging the initiation of re- assessment proceedings under section 147 of the I.T. Act and 2 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. addition of Rs.37,91,000/- on account of short term capital gains.
Briefly, the facts of the case are that AIR information was received in this case that the assessee has sold immovable property worth Rs.65,84,000/- during the assessment year under appeal. The assessee was given number of opportunities to explain the source of the transaction but there were no compliance. Therefore, the case was reopened under section 147 of the I.T. Act, 1961 and notice under section 148 of the Act was issued to the assessee on 17.03.2015. The A.O. raised queries. The A.O. noted that during the year under consideration, the assessee has sold land and received consideration of Rs.20 lakhs. The circle value of the land was Rs.45,84,000/-. The assessee was required to explain as to why capital gain of Rs.45,89,000/- may not be added to his income. The assessee furnished a written reply along with copy of the Certificate issued by Tehsildar, Dadri, Dated 02.02.2006 in which it was reported
3 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. that Khasra No.326, Gram Kot is distance 13 KM from Kot Gram Nagar Palika Parishad, Dadri. The A.O. however, did not accept the contention of assessee and noted that the property under sale is capital asset which would fall within the Municipal limit i.e., 1 KM on either side of Dadri-Noida Road and Dadri-Bulandshar Road. Therefore, it was within 8 KM from Municipal limits of Dadri Nagar Palika Parishad. The A.O. accordingly taken sale consideration under section 50C at Rs.45,84,000/- and after excluding cost of acquisition and stamp duty, computed the short term capital gain of Rs.37,91,000/-.
The assessee challenged the reopening of the assessment as well as above addition on merit before Ld. CIT(A). However, the appeal of the assessee has been dismissed by the Ld. CIT(A).
We have heard the Learned Representatives of both the parties and perused the material available on record.
4 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad.
Learned Counsel for the Assessee reiterated the submissions made before the authorities below. He has referred to PB-2 which is copy of the reasons recorded under section 148 of the I.T. Act and submitted that reasons recorded are incorrect and non-existent. The assessee filed the return of income originally on 22.10.2008 for assessment year under appeal mentioning PAN also, copy of which is filed at page-63 of the paper book. PB-29 is certificate of the Tehsildar confirming that property under reference is at the distance of 13 KM. The A.O. do not bring any evidence on record to compute capital gains. Copy of the sale deed is filed at page-34 to show that property was sold for a consideration of Rs.20 lakhs only. Therefore, A.O. has wrongly mentioned in the reasons that property was sold for a consideration of Rs.65,84,000/-. Therefore, it was submitted that assumption of jurisdiction by the A.O. under section 148 is without any basis. Initiation of re-assessment proceedings is illegal and bad in law and liable to be quashed.
5 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. 6. On the other hand, Ld. D.R. submitted that since assessee did not respond to the query letter issued by the A.O, therefore, A.O. rightly recorded reasons for reopening of the assessment. The Ld. D.R. relied upon many decisions in the list of cases filed and mainly relied upon the following decisions :
(i) PCIT vs. Paramount Communication (P.) Ltd., 2017- TIOL-253-SC-IT. (ii) PCIT vs. Paramount Communication (P.) Ltd., (2017) 392 ITR 444 (Del.) ( HC). (iii) Indu Lata Rangwala vs. DCIT (2016) 384 ITR 337 (Del.) (HC) (iv) Thakorbhai Maganbhai Patel vs. ITO (2017) 245 Taxman 333 (SC) (v) Thakorbhai Maganbhai Patel vs. ITO 79 taxman.com 409. (vi) Aravali Infrapower Ltd., vs. DCIT 2017-TIOL-42-SC- IT. (vii) Aravali Infrapower Ltd., vs. DCIT 2017 390 ITR 456 (Del.) (HC). (viii) Yogendrakumar Gupta vs. ITO (2014) 227 Taxman 374 (SC). (ix) Raymond Woollen Mills Ltd., vs. ITO & Others 236 ITR 34 (SC)
6 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. 7. We have considered the rival submissions and perused the material available on record. It is well settled law that validity of initiation of re-assessment proceedings have to be determined with reference to the reasons recorded under section 147/148 of the I.T. Act. The assessee has filed copy of the reasons recorded under section 148 of the I.T. Act at page- 2 of the paper book which reads as under :
“Name & Address of the Assessee : Shri Jagat Singh III-E-119, Nehru Nagar Ghaziabad. PAN : Assessment Year : 2008-2009 Reasons for issue u/s 148 of the IT. Act 1961 As per AIR information received in the system, during the financial year 2007-08 Sh.Jagat Singh, III-E-119, Nehru Nagar, Ghaziabad has sold. immovable property for sale consideration of Rs.65,84,000/ on 02,11.21107. An enquiry letter was issued to the assessee on 17/09/2014, In response to the letter, the assessee has not filed written
7 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. reply in this office. In the interest of natural justice another letters was issued to the assessee on 13.10.2014, 17/12/2014 & 09/01/2015 requiring the assessee to submit his explanation either personally or through authorized representative. In spite of opportunities given, the assessee has not filed any reply of the notice.
In this case, the assessee has not filed Income Tax return and capital gains arises on the sale of property was not shown by him. I have reason to believe that capital gains arises on the sale of property is chargeable to tax for the assessment year 2008-09 has escaped assessment within the meaning of section 147 of the I.T. Act, 1961.
Sd/-xxx (A.K.SINGH) Income Tax Officer Ward -1(3), Ghaziabad” 7.1. In this reasons, A.O. has not mentioned PAN of the assessee and noted that as per AIR information, the assessee has sold immovable property for a sale consideration of 8 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. Rs.65,84,000/- on 02.11.2007. The assessee filed copy of the sale deed at page-34 of the paper book which shows that assessee had sold the property for a total consideration of Rs.20 lakhs only. However, the circle rate of the land have been mentioned at Rs.45,84,000/-. The A.O. in the reasons has, however, mentioned incorrect amount of consideration at Rs.65,84,000/- which is the total of the actual sale consideration and the value as per Circle rate. Further, the A.O. in the reasons has mentioned that assessee has not filed income tax return and capital gain on the property have not been shown. The assessee however, filed original return of income on 22.10.2008 mentioning PAN also for assessment year under appeal. Therefore, A.O. again incorrectly reported in the reasons that assessee has not filed return of income. The assessee further explained that property is situated at 13 KM away from Kot Gram Nagar Palika Parishad, Dadri which is supported by Certificate issued by Tehsildar, Dadri. The A.O. however, did not bring any evidence on record to show that property falls within 8 KM from the Municipal limit of 9 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. Dadri Nagar Palika Parishad. Thus the A.O. recorded non- existing and incorrect reasons in the reasons for reopening of the assessment. Further, the A.O. noted in the reasons that inquiry letter were issued to the assessee against which no reply have been filed. The A.O. did not explain as to under which provision of law, he has issued the letter to the assessee to seek explanation of assessee on 17.09.2014 when no return for assessment year under appeal was legally pending for assessment before A.O. It, therefore, appears that the A.O. merely in absence of any reply from the assessee and on assumption of incorrect facts, formed his opinion that income chargeable to tax has escaped assessment. The A.O. did not verify the AIR information before taking any action against the assessee because the assessee did not sold the property for a total sale consideration of Rs.65,84,000/- as noted in the reasons. It is the case of non-application of mind by the A.O. to the AIR information and that the A.O. recorded incorrect facts in the reasons for reopening of the assessment. Since the A.O. did not apply his independent mind to the AIR
10 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. information received which was also incorrect, therefore, the very basic requirement for reopening of the assessment is not satisfied. In the instant case, the crucial link between the information made available to the A.O. and the formation of belief was absent. The reasons to believe recorded were incorrect and mere conclusion of the A.O. based on incorrect and non-existing facts. There were no basis to record reasons for reopening of the assessment. The reasons recorded failed to demonstrate the link between the tangible material and the formation of the reason to believe that income chargeable to tax has escaped assessment. The A.O. had not independently considered and verified the AIR information which formed the basis for the reasons to believe that income chargeable to tax has escaped assessment. Therefore, on this reason alone, the reopening of the assessment is illegal and bad in law. We rely upon the decision of Hon’ble Delhi High Court in the case of Pr. CIT vs. GANDG Pharma India Ltd., 384 ITR 147 and Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 395 ITR 677. The A.O. had based his belief on the fact that assessee had not filed any 11 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. return, due to which, there were escapement of income on account of sale of immovable property. The assessee, however, filed original return within time and produced the Certificate from Tehsildar to show that it was not a capital asset liable for capital gain. The A.O. instead of dropping the re-assessment proceedings, rejected the claim of assessee without bringing any material on record. The grounds for re-assessment thus, are incorrect and non-existing and would not survive or to justify the initiation of re-assessment proceedings. The very foundation on which reopening of the assessment was based are thus unsustainable. Therefore, on the reasons recorded, the A.O. could not have formed the belief that income had escaped assessment, inasmuch as, such belief had been formed on a factually incorrect premise.
7.2 The Hon’ble Delhi High court in the case of Pr. CIT vs. RMG Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del.) held as under :
12 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. “The assessee filed its return for the assessment year 2008-09 and assessment was made under section 143(1) of the Income-tax Act, 1961. The Assessing Officer issued a notice for reassessment based on information received from the Investigation Wing that the assessee was the beneficiary of certain accommodation entries, which were given in the garb of share application money or expenses or gifts or purchase of shares during the period relevant to the assessment year 2004-05. He recorded that the assessee had not filed a return for the assessment year 2004-05, as there was no return available in the database of the Department, and that consequently he had not offered any income for taxation. On appeal :
Held, dismissing the appeal, that no link between the tangible material and the formation of the reasons to believe that income had escaped assessment, could be discerned. The information received from the Investigation
13 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. Wing was not tangible material per se without a further enquiry having been undertaken by the Assessing Officer, who had deprived himself of that opportunity by proceeding on the erroneous premise that the assessee had not filed a return for the assessment year, 2004-05, when in fact it had. In his assessment order, the Assessing Officer had, instead of adding a sum of Rs.78 lakhs, even going by the reasons for reopening of the assessment, added a sum of Rs.1.13 crores and the basis for such addition had not been explained. No error was committed by the Appellate Tribunal in holding that reopening of the assessment under section 147 was bad in law. No question of law arose.”
7.3. The Hon’ble Gujarat High Court in the case of Vijay Harishchandra Patel vs. ITO (2018) 400 ITR 167 (Guj.) (HC) held as under :
Held, allowing the petition, that the very basis for reopening of the assessment was unjustified and the 14 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. assumption of jurisdiction under section 147 by the Assessing Officer by issuing a notice under section 148 was without authority of law and could not be sustained. The Assessing Officer had sought to reopen the assessment to once again examine the very aspect which had been gone into by his predecessor-Assessing Officer in the first round of proceedings under section 147. When an Assessing Officer had applied his mind to an issue in the assessment proceedings, the successor-Assessing Officer could not have sought to reopen the proceedings on the same ground as it amounted to a mere change of opinion. In the reasons recorded, the Assessing Officer had based his belief on the fact that the assessee had not filed any return due to which there was an escapement of income on account of sale of an immovable property. The Assessing Officer, instead of dropping the assessment proceedings, by an order rejecting the objections filed by the assessee, had sought to proceed with the reassessment proceedings on afresh ground which was not found in the reasons
15 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. recorded. When the original ground for reopening the assessment did not survive, the Assessing Officer had sought to proceed further with the assessment on totally different grounds, which was impermissible. Despite the fact that the assessee had duly submitted that he had filed his return, wherein the very same issue had been examined, instead of dropping the proceedings, the Assessing Officer had sought to proceed further for reasons which were alien to the reasons recorded for reopening the assessment. Thus the very intent and purpose behind submitting the objections by an assessee and passing an order thereon, was frustrated. Considering the fact that a return had been fled disclosing the sale of the immovable property, the very foundation on which the reopening of the assessment was based, in the reasons recorded was unsustainable. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income had escaped assessment, inasmuch as such belief had been formed on a factually incorrect
16 ITA.No.2749/Del./2018 Shri Jagat Singh, Ghaziabad. premise. The notice, dated March 31, 2017, issued under section 148, for reassessment, was to be quashed.”
The decisions relied upon by the Ld. D.R. would not support the case of the Revenue in the facts and circumstances of the case noted above. In view of the above discussion, we are of the view that initiation of re-assessment proceedings in this case is bad and illegal and without any basis. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act. Resultantly, the addition stands deleted. In view of the above, remaining grounds on merit are not decided as are left with academic discussion only.
In the result, appeal of Assessee is allowed.
Order pronounced in the open court.