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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P. M. Jagtap & Shri S.S. Viswanethra Ravi
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12
IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA Before: Shri P. M. Jagtap, Vice President and Shri S.S. Viswanethra Ravi, Judicial Member I.T.A No.2314/Kol/2018 (Assessment Year: 2011-12)
Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Appellant [PAN:AVZPS2888N] Vs ACIT, Circle-45, Kolkata Respondent
For the Appellant : Shri Miraj D. Shah, AR For the Respondent : Shri K. Nath, Addl. CIT, Sr. DR Date of hearing : 15.07.2019 Date of pronouncement : 01.10.2019 ORDER Shri S.S. Viswanethra Ravi, JM:
This appeal by the assessee against the order dated 19.09.2018 passed by the Commissioner of Income Tax (Appeals)-13, Kolkata [‘CIT(A)’] for Assessment Year 2011-12.
Shri Miraj D. Shah, the ld. AR submits that the assessee is not interested to prosecute Ground Nos.1 to 4 and prayed to dismiss the same as not pressed. Accordingly, the Ground Nos.1 to 4 are dismissed as not pressed. He submits that the Ground Nos.5 & 6 raised questioning the validity of reopening of assessment, since it is a legal issue prayed to take up the same as preliminary issue. With the consent of both the parties, we proceed to hear the Ground Nos.5 & 6 as preliminary issue.
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12 3. Heard both parties and perused the material available on record. The contention of Shri Miraj D. Shah, the ld. AR is that the Assessing Officer issued notice u/s 147 of the Act to reopening the assessment basing on a DVO report in the case of co-owner i.e. Sanjay Saraf. He submits that the Assessing Officer recorded reasons and referred to Page No.2 of Assessing Officer’s order. He contended that no new material involving the escapement of income was brought on record by the Assessing Officer but he only reopened the assessment basing on the DVO report concerning another co-owner is not maintainable and the reassessment made thereon is liable to be quashed. Shri Miraj D. Shah placed reliance on the orders of this Tribunal in the case of Shri Ravi Shankar Saraf and Shashi Shekhar Saraf involving the Assessment Year 2008-09 vide order dated 21.06.19 and 28.06.19 respectively.
We find that the Assessing Officer reproduced the reasons recorded in his order at Page No.2. On perusal of the same, it is noted that a valuation of cost of acquisition of property as on 01.04.1981 in the case of Shri Sanjay Saraf who is alleged to be co- owner of the assessee was referred to District Valuation Officer (DVO). According to Assessing Officer the cost of acquisition as reported by the DVO is Rs.95,50,971/- and the assessee has taken at Rs.1,54,73,000/- and the difference of which according to Assessing Officer has escaped assessment. We find that the assessee filed his return of income declaring a total income of Rs.79,70,361/- on 30.09.2011. The Assessing Officer reopened the assessment by issuing a notice u/s 147 of the Act on 23.03.2015, it is noted from reasons recorded that there was no mention of any new material that has come to the knowledge of Assessing Officer to reopen the assessment of assessee before us. It clearly establishes from the reasons recorded basing on DVO report of another co-owner for
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12 Assessment Year 2012-13, the Assessing Officer issued notice u/s 147 of the Act to respondent assessee, establishing that it is a change of opinion by the Assessing Officer without there being any new material on record.
There is no dispute that all the documents were filed before the Assessing Officer in the original assessment proceedings. Therefore it can be concluded that the assessee filed all the relevant evidence regarding its claim on the long-term capital gain before the Assessing Officer and the Assessing Officer accepted the cost of acquisition as shown originally by the assessee. Thus the reassessment made without there being any new tangible material to show escapement of income chargeable to tax is not maintainable and is liable to be quashed.
Further coming to the decision of this Tribunal in the case of Ravi Shankar Saraf vide order dated 21.06.2019 in ITA No.2311/Kol/2018, we find that the ‘SMC’ Bench of this Tribunal held that the reopening of assessment is bad in law as the material based on which the reopening is made that is the DVO report could not be used for the impugned assessment year as the Assessing Officer has no ground to refer such an issue to the DVO. The relevant portion is reproduced hereinbelow: 5. A perusal of the same demonstrates that the Assessing Officer was relying on an information of the DVO for the purpose of valuing the cost of acquisition of the property on 01/04/1981. Reference to the DVO cannot be made for the purpose of determination of the value of the cost of acquisition as on 01/04/1981 if the Assessing Officer was of the opinion that such value is lesser than that which was declared by the assessee, prior to the amendment u/s 55A(a) of the Act, which was inserted w.e.f. 01/07/2012 as the impugned Assessment Year was 2008-09. This position is clear from the following decisions:- 5.1. The Hon’ble Bombay High Court in the case of CIT vs. Puja Prints [2014] 360 ITR 697 (Bombay), held as follows:- “Section 55A of the Income-tax Act, 1961 - Capital gains - Reference to Valuation Officer (Validity of reference) - Assessment year 2006-07 - Whether when a specific provision under which reference can be made to Departmental Valuation Officer(DVO) is available, there is no occasion for Assessing Officer to invoke general powers of enquiry - Held, yes - Assessee adopted value of his property at Rs.35.99 lakhs as a fair market value as on 1-4-1981 on basis of a valuation report - Assessing Officer was of view that value of property as adopted by assessee was high - Therefore, Assessing Officer referred issue of valuation to DVO who
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12 valued property at Rs.6.68 lakh as on 1-4-1981 and indexed cost at Rs.33.20 lakhs - Consequently, Assessing Officer by his assessment order enhanced capital gain of appellant - Whether law to be applied in instant case is section 55A(a) as existing during period relevant to assessment year 2006-07 wherein reference could be made to DVO only if value declared by assessee is in opinion of Assessing Officer less than its fair market value - Held, yes - Whether when value of property adopted by assessee was much more than fair market value even as determined by Departmental Valuation Officer, invocation of section 55A(a) was not justified - Held, yes - Whether in face of clear position in law, CBDT circular dated 25-11-1972 can have no application as understanding of statutory provisions by revenue as found in circular issued by CBDT is not binding upon assessee and it is open to an assessee to contend to contrary - Held, yes [Paras 7, 10]” 5.2. This Co-ordinate Bench of the Tribunal has taken a similar view in the following cases:- ITO vs. M/s. Tolaram and Sons (HUF) in ITA No. 974/Kol/2015, Assessment Year 2011-12, order dt. 11/04/2018 M/s. Royal Calcutta Turf Club vs. DCIT in ITA No. 231/Kol/2013, Assessment Year 2008-09, order dt. 01/09/2017 6. Consistent with the view taken in the above referred case-law, I have come to a conclusion that the reopening of the assessment is bad in law as the material based on which the reopening is made, that is the DVO report could not be used for the impugned Assessment Year as the Assessing Officer has no power to refer such an issue to the DVO.
On perusal of the aforesaid order, we find that the ‘SMC’ Bench held that the reference to the DVO cannot be made for the purpose of determination of the value of the cost of acquisition as on 01.04.1981 if the Assessing Officer was of the opinion that such value is less than that which were declared prior to the amendment u/s 55A(a) of the Act which was inserted w.e.f 01.07.2012. We find the present year under consideration is 2011-12 involving F.Y. 2010-11 wherein the power of Assessing Officer to refer an issue to the DVO was inserted with an amendment u/s 55A of the Act which came into force on 01.07.2012 and it is clear that the said amendment is not applicable to the present year under consideration. When there is no power to Assessing Officer to refer an issue to the DVO and reopening of assessment u/s 147 of the Act does not arise at all and the reassessment made therein is liable to be quashed.
Coming to another order by the Coordinate Bench of this Tribunal in assessee’s own case for Assessment Year 2008-09 vide order dated 28.06.2019 it was held that the reopening based on report of DVO could not be done as there was no new material before
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12 the Assessing Officer establishing escapement of income. The relevant portion of order of Co-ordinate Bench is reproduced below: “9. Before we adjudicate this technical issue, let us examine the conditions laid down in section 147 of the Act, which are as follow: “If the A.O. has reason to believe that any income chargeable to tax has escaped assessment for any assessment year.” - There must be material for the belief. - Circumstances must exist and cannot be deemed to exist for arriving at an opinion; - Reasons to believe must be honest and not based on suspicion, gossip, rumour or conjecture; - Reasons referred to must disclose the process of reasoning by which the AO holds “reasons to believe” and change of opinion does not confer jurisdiction to reassess; - There must be nexus between material and belief; and - Reasons recorded must show application of mind by the AO. In the assessee`s case under consideration, before the assessing officer there was no material for the belief. Reasons to believe is not honest and based on suspicion, gossip, rumour or conjecture, that is based on DVO report only. The process of reasoning is not clear.There is no nexus between material and belief and reasons recorded by AO does not show application of mind by the AO. Therefore, reasons recorded by the AO is not in accordance with the spirit of section 147 of the Act, as narrated above. Hence the reasons recorded by the AO is bad in law and reassessment made based on these reasons should be quashed. 10. We note that Hon`ble Supreme court in the case of ACIT Vs. Dhariya Construction Co. 328 ITR 51 held as follows: “1. Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). The opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment. 2. Civil appeal is, accordingly, dismissed. No order as to costs.” Respectfully following the judgment of the Hon`ble Supreme Court in the case of Dhariya Construction Co. (Supra), we hold that reassessment proceedings are bad in law as the opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961, therefore, we quash the reassessment order.”
As discussed in the aforementioned para, that there was no new tangible material brought on record by the Assessing Officer to support his view in reopening the assessment. In the absence of which, the assessment completed in pursuance of the reasons recorded is invalid and it is quashed.
In view of the above order of this Tribunal and the discussion made hereinabove, we held that the reassessment computed by the
I.T.A No.2314/Kol/2018 Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf) Assessment Year: 2011-12 Assessing Officer and confirmed by the CIT(A) vide its order dated 19.09.2018 is not maintainable and is quashed. Thus the preliminary issue raised by the assessee in Ground Nos.5 &6 are allowed.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 01.10.2019.
Sd/- Sd/- [P. M. Jagtap] [S.S. Viswanethra Ravi] Vice President Judicial Member Dated : 01.10.2019 Place : Kolkata RS, Sr.PS Copy of the order forwarded to: 1. Appellant – Shashi Shekhar Saraf (L.R. of Late Shri Ram Awatar Saraf), C/o D J Shah & Co. “Kalyan Bhawan”, 2, Elgin Road, Kolkata – 700020. 2 Respondent – ACIT, Circle-45, Kolkata. 3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata
By order, //True Copy// Assistant Registrar, ITAT, Kolkata