RAHUL BAJPAI,IDGAH CHOWK vs. ACIT CIRCLE 1(1), SHRI RAM PLAZA

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7. That the appellant craves leave to add to and/or amend. Alter; rescind the grounds taken here in above, before or the time of hearing of this appeal.”

"In the facts and circumstances of the case and in law, reassessment order passed by A.O is illegal, ab initio void as it was passed without issuing notice u/s.143(2) within the prescribed time. The reassessment order has been passed in violation of mandatory provisions of law and is liable to be quashed as illegal and not sustainable.

As the assessee based on the additional ground of appeal has assailed the validity of the jurisdiction that was assumed by the A.O for framing the impugned assessment, the adjudication of which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view that where an assessee, had raised, though for the first time, an additional ground of appeal before the Tribunal which involves purely a question of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon’ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC).

4. Subsequently, the A.O based on information that while for the assessee had purchased a land situated at Talapara, Bilaspur vide a registered sale deed for a consideration of Rs.4,11,000/-, but the Fair Market Value (FMV) of the said property that was adopted by the stamp valuation authority was Rs.3.75 crore, thus, holding a conviction that the difference in the aforesaid value being the income of the assessee chargeable to tax u/s. 56(2)(vii)(b) of the Act had escaped assessment, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act, dated 06.06.2018 was issued by the A.O. In compliance, the assessee filed his return of income for the subject year on 11.06.2018 declaring an income of Rs.38,25,590/- Thereafter, the A.O issued notice u/s. 143(2) of the Act, dated 05.11.2019 calling upon the assessee to furnish documents, accounts and other evidence in support of the return of income filed by him. The “reasons to believe” based on which the A.O had initiated proceedings u/s. 147 of the Act are culled out as under:

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8 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur concluded that the assessee had not carried out any real estate business or land development for A.Y.2012-13 to A.Y.2017-18 and, thus, was not holding any property as stock-in-trade. Also, the A.O observed that unlike the preceding and succeeding years the assessee had only in his return of income filed in compliance to notice u/s. 148 of the Act for the year under consideration i.e. A.Y.2014-15 disclosed in the “balance sheet” therein filed “current assets” of Rs.51,95,700/-. Accordingly, the A.O based on his aforesaid deliberations was of the view that the assessee’s claim of having purchased the subject land i.e. land situated at Talapara, Bilaspur as stock-in-trade of his business could not be accepted, for the following reasons:

“i) The assessee has not been able to prove that he was in business of land development or real-estate during the year under consideration. ii) The assessee has not shown said immovable property as stock in trade/current asset in his return of income filed on 31.03.2015. iii) The assessee has not been able to give any evidence regarding purchase & sale of land as his business. iv) The assessee has submitted that the project is still under planning stage. The assessee has not furnished any evidence in support of his claim. v) The intention of purchaser (for real-estate business or land development) at the time of purchase is important. At the time of purchase in case of assessee nowhere it is evident that the assessee has considered the said immovable property as stock of business. On the analysis of return of income from A.Y. 2012- 13 to 2017-18 it is concluded that the assessee has failed to substantiate his claim that the said immovable property is his stock in trade.”

9 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur The A.O based on his aforesaid observations rejected the assessee’s claim that the subject property i.e. land situated at Talapara, Bilaspur was held by him as stock-in-trade and, thus, for the said reason, the provisions of Section 56(2)(vii) of the Act were not applicable in his case.

“5. Observations, Findings and Decisions: 5.1. I have carefully examined the facts of the case, the assessing officer's (hereinafter A.O) conclusion and the appellant's submission. The order passed by the A.O. under section 143(3) read with section 147 of the Income Tax ct,1901 (hereinafter the Act) has been challenged on four grounds as listed above in paragraph of 2.1 of this order. Even though the appellant has taken four ground in appeal, the effective grounds of appeal are two as mentioned below:- (1) Challenge to the validity of assumption of jurisdiction by the A.O under section 147 read with section 148 of the Act. (2) Challenge to the addition of rupees 3,70,89,000/-made by the A.O. under section 56(2(vii)(b) of the Act.

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5.2 There are many objections raised by the appellant regarding lack of jurisdiction as well as on the addition mentioned above. Following paragraphs address the issues so raised by the appellant in appropriate place. 6.1. The appellant states that there was failure of the A.O, to provide the reasons recorded for re-opening of the assessment under section 147 of the Act. The appellant has made detailed submissions and relied on the decisions of the Hon'ble Supreme Court and various High Hon'ble High Courts to support his arguments as noted above in this order. It is crucial to examine if the A.O. failed to provide the reasons so recorded for re- opening of the assessment under section 147 of the Act. despite the appellant's request. 6.2. There is no dispute that the A.O. recorded the reasons prior to issuance of notice under section 148 of the Act. The material available on record indicates that the A.O. provided the appellant with the reasons before the reassessment proceedings were completed. As a matter of fact, the appellant admitted the above facts in his submissions, as reproduced above in this order. The only issue that remains to be decided is if the appellant received the reasons within a reasonable time. 6.3 It is essential to reproduce the relevant part of the appellant's submission to gain a better understanding of the matter. "Later, in response to the notice u/s 148 dL6/6/2018 ITR was filed on 17/6/2018 declaring total income of Rs.38,25,590/- with a specific request in writing for supply of reasons for re- opening of the assessment of the case and also for supply of justification given by the competent authority. This request was made on 13/06/2018” "Reasons for re-opening together with copy of approval by the competent authority, if any, were not communicated within reasonable time. Notice u/s 148 was issued on 6/6/2018 In response, ITR was filed on 17/6/2018. Request for supply if reasons recorded for re-opening together with copy of approval obtained, if any, was made vide letter 13/6/2018." “For proper presentation of facts, and for arriving at reasonable conclusion on the crux of the issue, the A/R of the assessee had officially inspected the records of the assessee for the relevant year. 6.4 Thus, it is clear from the appellant's above submissions that the appellant failed to comply with the decision of Hon'ble

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Supreme Court in the case GKN Drive shift(India) Ltd vs ITO because he sought reasons recorded for re-opening of assessment even before submitting the return in response to the notice under section 148. It was held by the Hon'ble Supreme Court that after filing of the return in response to notice under section 148 of the act request for copy of the reasons recorded to be made by assessee. It is important to mention here that the appellant practically sought for reasons recorded for re-opening of assessment when he furnished submission before the A.O. on 08/11/2019. It is pertinent to take note of the fact that the appellant did not comply with notice issue under section 143(2) and 142(1) of the Act respectively until 08/11/2019 when he furnished submission for the first time. 6.5 Moreover, the appellant own admission noted above shows that the A.O. allowed inspection of the record of the assessee for the relevant assessment year. In fact, the authorised representative of the appellant officially inspected the records of the appellant for the relevant assessment year. Not only that, the appellant was also given a certified copy of the reasons recorded by the officer. Considering the above facts, it cannot be concluded that the appellant was denied the chance to file an objection for re-opening of assessment. Even assuming, but not conceding, that the reasons recorded by the A.O. was given to the appellant late on 15/12/2019, the appellant had two weeks to object to re-opening, but he chose not to object. It is not the case of the appellant that recorded reasons were not given to him before completion of reassessment proceedings. If the assessee does not file objections before the A.O., he cannot challenge the same in appellate proceedings. As the appellant failed to raise the question of the validity of the A.O's assumption of jurisdiction under section 147 read with 148 of the Act, he is not entitled to another chance to raise the same issue in the appellate stage. As stated previously, the appellant has placed reliance on the decisions of the Hon'ble Supreme Court and various High Court in support of his contention. In this context, it is to be noted that no court has held that the ratio decided by any case can be applied universally without understanding the fact of the case in hand. The facts of the cases referred by the appellant are not the same as the facts of the present case and therefore the ratio of the cases cited by the appellant are not applicable to the facts of the present case. Taking into consideration the entirety of the facts and the discussion made earlier, I am of the view the AO initiated reassessment proceedings validly. Hence, the contentions of appellant are rejected.

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6.6. The assessee contends that copy of approval was not supplied to him by the officer. The assessment order indicates that the approval was obtained by the A.O. before initiation of proceedings under section 147 read with section 148 of the Act. The submission of the appellant shows that on the one hand, he claims that he was not given a copy of the approval, while on the other hand, he asserts that approval for initiation of reassessment proceedings was granted mechanically and without application of mind by the competent authority. Therefore, the question that arises from the appellant claims is that how he came to know without consulting the relevant record that the approving authority granted approval mechanically without application of mind for initiation of proceedings under section 147 read with 148 of the Act. The appellant's admission that his authorised representative officially inspected the record of the appellant for the relevant assessment year is the key factor in determining the answer. Despite official inspection of records by his A/R the appellant asserts he is not aware of the satisfaction recorded by the approving authority. Although inspection record was carried out but the appellant has failed to demonstrate the reason for his conclusion that the approval was granted mechanically and without application of mind by the approving authority. As previously sated the decisions of various case laws relied upon by the appellate are distinguishable on the facts of the present case. He cannot advance his arguments by stating that approval was granted mechanically without supporting materials. Therefore, it is concluded that the appellant has not provided any evidence to back up his assertion that approval was granted mechanically by the approving authority and therefore the contention of the appellant is hereby rejected. Hence, appeal fails on this issue. 7.1. The appellant states that the AO, assumed the jurisdiction under section 147 of the Act disregarding the fact that there was no failure on the part of the appellant to disclose the particulars of purchase plots of land in the course original assessment proceedings and accordingly present reassessment was bad in law and need to be quashed. Therefore, the issue to be addressed is whether the first proviso of section 147of the Act, as it existed before its amendment bin 2021 is applicable in the case of the appellant. To address the matter, it would beneficial to reproduce the relevant portion of section 147 of the Act. “Section 147:- If the assessing officer has reason to believe that any income chargeable to tax has escape assessment for any assessment year, he may. subject to provision of section 147 to 13 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur ITA No. 348/RPR/2023

153 assess or reassess such income and also any other income chargeable to tax which comes to his notice subsequently in the course of the proceedings under thus section or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in the section 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub section 3 of section 143 or this section has been made for the relevant assessment year, no action should be taken after the expiry of four years from the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to notice issued under sub section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." 7.2. The record reveals that notice under section 148 of the Act was issued on 06/06/2018, which is before expiration of four years from the relevant assessment year, Furthermore, the appellant Tailed to mention in his return of income the fact that -the-stamp value of the subject land was Rs.3,75,00,00/- compared to purchase consideration of Rs.4,11,000/-. Hence there was failure on the part of the appellant to disclose primary fact of taxing in his return of income. And most importantly, the A.O. had no occasion to examine the issue in limited scrutiny proceedings. 7.3. In order to understand the issue at hand and appreciate the facts better I think it is appropriate to reproduce the relevant part of limited scrutiny assessment order passed under section 143(3) of the Act dated 23.08.2016. "Assessment Order” "Return of income was filed by the assessee on 31/03/2015 declaring total income of rupees Rs.38,06,600/-. Subsequently the case was selected through CASS(Limited). Notice under section 143(2) was issued on 28/08/2015 and served fixing the case for hearing on 21/09/2015. Notice under section 142(1) along with questionnaire issued and order sheet entries which are placed on record. 2. xxxxxxxxxxxxxx 3. During the year under consideration, assessee has sold two pieces of land for sale consideration price of Rs.51,60,000/- and 14 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur 42,15,700/- respectively. Assessee was asked to explain as to why no capital gain is offered on the sale two properties and assessee submitted that the said properties which were sold were pieces of agricultural land. Profit on sale of these land have taken in the computation of income as exempt income and. therefore there is no liability for capital gain arises. The justification submitted by assessee was considered after examination of relevant documents.

15 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur scrutiny case by examining the all the issued that came to his notice. It is reiterated that the A.O, did not form any opinion on the issue in question. Therefore, there is no question of A.O's change of opinion on the subject matter. 8.2 The fact of the case in which the appellant relied to present his argument do not apply to the fact of present case. In view of discussion made above I am of the considered view that the jurisdiction assumed by the under section 147 of Act does not suffer from jurisdictional defect in so far as the issue mentioned above is concerned. 9.1 The last issue regarding the validity of A.O. assumption of jurisdiction under section 147 read with 148 of the Act is to be determined based on if the A.O. was in possession of credible and tangible information to form a reasonable belief that income chargeable to tax had escaped assessment within the meaning of section 147 of the Act. The primary argument of the appellant is that the A.O. acted under section 147 of the Act solely on the basis of information received ADIT(I &C)., Raipur. Furthermore, it was argued that reason to believe was formed by the A.O. by borrowing satisfaction. 9.2. 'Information', as has been held by the courts, means communication, or reception of knowledge or intelligence. It includes information received from external sources. Thus, A.O. can use such information for formation of belief that income chargeable to tax has escaped assessment as provided under section 147 of the Act. It is crucial to determine if the A.O. applied his mind to the information so received and formed a reasonable belief that income chargeable to tax of the appellant escaped assessment within the meaning of section 147 of the Act. 9.3. The AO's application of mind to the information received is demonstrated by the elaborate reasons recorded. The officer used the information received from the ADIT(I&C), but acted independently after verification of record as is evident from the materials available on record. The reasons recorded by the A.O. clearly shows that tangible material was made the basis for formation of belief that income chargeable to tax had escaped assessment for the relevant assessment year. The A.O. established that the information he had was closely linked to formation of 'reason to believe'. The decisions of courts relied upon by the appellant can be beneficial if the facts of those cases are similar to the facts of current case. It is evident, it is not identical. Therefore, the decisions he relies on cannot save him.

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9.4. In light of above discussion, the contention that the A.O. acted merely information received from ADIT(I&C), Raipur and borrowed satisfaction is rejected. It is held that the jurisdiction assumed by the A.O. under section 147 read with 148 of the Act is within legal framework. 9.5. In short, the A.O' assumption of jurisdiction under section 147 read with 148 is considered valid and in accordance with legal framework, Consequently, the grounds of appeal fails. 10.1. The appellant objected to AO's addition of Rs.3,70,89,000/- under section 56(vii)(b) of the Act ignoring the fact the plots land in question was stock-in-trade, The key issue is to determine if the land in question was a capital asset or a stock-in- trade. If it was a capital asset, the AO was justified making an addition under the said section otherwise, he was not justified in making an addition. 10.2. It was observed by the A.O that appellant did not declare the plots of land in question in his return of income for the assessment year 2012-13 to 2017-18 as stock in trade except in the return filed for the assessment year 2014-15 in response to notice issued under section 148 of the Act. Furthermore, it was observed that by the A.O. that there were no purchases or sales disclosed in the return of income for the assessment year 2012- 13 to 2017-18. The A.O analysised the return of income for the assessment year 2013-14 to determine the position of opening stock in assessment year 2014-15 and found that closing stock was shown 'nil in the assessment year 2013-14, The AO concluded that no business in real estate was carried out by the appellant as he failed to produce any evidence in support same. Hence, subject land was treated as capital asset and difference between purchase price and stamp duty value was added as income of the appellant in accordance with provisions of section 56(2)(vii) (b) of the Act. 10.3. In appellate proceedings the appellant has contested the addition made by the AO by presetting a variety of arguments and relying on a wide range of case laws. It is to be noted here that the AO made a convincing case that the subject land was not a stock in trade but capital asset. The view of the AO is supported by the fact that the appellate himself treated two pieces land as capital asset and gain arising out sale of those land was treated as long term capital gain which was claimed exempt as the land was agricultural land. In addition to that the appellant disclosed the plots of land as stock in trade in return of income and trading account and balance sheet that accompanied the return of income filed in response notice under 17. Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur section 148 of the Act. It is important to mention that no opening and closing stock were show in the original return of income filed for the assessment year 2014-15. The appellant's action are merely an attempt to enhance the authencity of his claim that land in question was stock-in-trade, which in reality was capital asset. The case of the appellant cannot be advanced if it is not supported by evidence after presenting a variety of arguments and citing plethora of case laws. 10.4. Frequency of transactions, volume of transactions, entries, and treatment of books of account, intention of holding are some of the many factors determine whether any transactions on sale or purchase fall under the head from profit and gain from business or capital gain. The Hon'ble Supreme Court in the case CIT (Central), Kolkata vs Associated Industrial Development Company (P) Ltd.(82 ITR 586) observed that whether a particular holding of shares is by way investment or forms stock-in-trade, is a matter within the knowledge of the assessee, when he holds the shares and it should, in normal circumstances, be in a position to produce evidence from its record as to whether it maintained any distinction between those shares which are its stock-in-trade and those which are held by way of investment. In the appellate proceedings, the appellant has not produced any evidence to prove that purchase of plots of land was held in as stock of business. As a matter of fact. the AO overwhelmingly established that the appellant did not carry on any business in a real estate. The appellant's presumption that the plots of land were held as stock in trade of his real estate business is not sufficient and he needs to demonstrate it by producing evidence. The appellant has failed to do so. 10.5. Section 56(2) (vii)(b) of the Act stipulates that any difference between the stamp duty value and the deed value of immovable property is to be deemed to be to income for and individual and HUF wherever stamp deed value of immovable property exceeds the deed value by Rs.50,000/-. The above mentioned section deals with any property and is not restricted to any specific nature of property. The scope of that section encompasses agricultural land also. 10.6 Considering the above discussion, I am inclined to agree with the view of the AO that plots land were not held as stock of appellant's business as no business in real estate was carried out by the appellant. Therefore, the addition of Rs.3,70,89,000/-made by the AO under section 56(2)(vii) of the Act is confirmed.

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11. In the final result, the appeal filed by the appellant is treated as dismissed.”

20 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur which was e-verified on the same date and was a valid return of income filed in compliance to notice u/s.148 of the Act. The Ld. AR submitted that though no notice u/s. 143(2) of the Act was issued by the A.O after 17.12.2019, but the assessment was framed by him vide order u/s. 143(3) r.w.s.147 of the Act, dated 30.12.2019, which, thus, was illegal and bad in the eyes of law. To sum up, the Ld. AR submitted that as the assessee had filed a valid return of income in compliance to notice u/s. 148 of the Act only as on 17.12.2019, therefore, the assessment which thereafter had been framed by the A.O in absence of any notice u/s. 143(2) of the Act having been issued after filing of the said return of income was invalid and non-est in the eyes of law.

23 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur assessment vide his order passed u/s. 143(3) of the Act, dated 23.08.2016?

24 Rahul Bajpai Vs. ACIT, Circle-1(1), Bilaspur then the A.O, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner shall serve upon him a notice requiring him, on a date to be specified therein, either to attend the office of the A.O or to produce, or cause to be produced before him any evidence on which, he may rely in support of the return. Accordingly, after the return of income was e-verified by the assessee on 24.10.2019, the notice u/s. 143(2) of the Act which was thereafter issued by the A.O could not be held to be invalid. Accordingly, finding no justification in the aforesaid claim of the assessee, we reject the same. Thus, the additional Ground of appeal raised by the assessee is dismissed in terms of our aforesaid observations.

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“QUESTIONNAIRE SHRI RAHUL BAJPAI Annexure