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Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
Before: SHRI H.S.SIDHU & SHRI PRASHANT MAHARISHI
O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against order of the ld CIT(A)-I, Dehradun dated 04.03.2013 for the Assessment Year 2007-08 raising following grounds of appeal “1. The order of the ld CIT(A), Dehradun is arbitrary, biased bad in law, and facts of the case in is so far as it sustains the additions made by the Assessing Officer.
2. That the ld CIT(A) has grossly erred in conforming the action of the Assessing Officer in reopening the assessment u/s 147 of the Act.
3. That the ld CIT(A) has grossly erred in not treating the assessment null and void as the assumption of jurisdiction u/s 147 and 148 by the Assessing Officer is illegal and bad in law.
4. That the ld CIT(A) has grossly erred in treating the estimated income of Rs. 206069/- from business in the hands of the appellant in stead of HUF.
5. That the ld CIT(A) has grossly erred in not treating the sale of land at village Mundet, Pargana Manglour, Tehsil Roorkee, Distt. Haridwar as agricultural land, sale of which ought to be treated as exempt. 5.1 That the ld CIT(A) has grossly erred in treating the impugned sale of land subject to levy of capital gains tax as it was outside the purview of definition of capital assets as given in section 2 sub-section 14 of the Income Tax Act, 1961. 5.2 That the ld CIT(A) has grossly erred in treating the impugned sale of land subject to levy of capital gains tax and in sustaining an addition of Rs. 2785900/- under the head short term capital gain despite the Assessing Officer describing it as agricultural land in the remand proceedings. 5.3 That the ld CIT(A) has grossly erred in confirming the applicability of provisions of section 50C of the Act on sale of agricultural land.
Sanjeev Jain Vs. ITO (Assessment Year: 2007-08) 5.4 That the ld CIT(A) while confirming addition under the short term capital gain has grossly erred in quoting out of context various case laws which are not para material with facts of the appellant’s case. 5.5 Without prejudice to ground NO. 5 to 5.4 that no capital gain tax liability arises on assessee on sale of agricultural land, the CIT(A) has grossly erred in non accepting the plea of the assessee that the agricultural land was owned by HUF and profit if any of the sale of land could be charged to tax in the hands of the HUF only.”
Brief facts of the case is that the assessee is an Ayurvedic Medical Practioner earning income from business and profession. He filed his return of income for AY 2007-08 on 31.03.2009 declaring income of Rs. 95970/-. In the return of income no agricultural income was shown. The ld Assessing Officer received information from ITO, Jaipur vide letter dated 12.10.2009 that assessee has made deposits in Axis Bank, Roorkee against his PAN of Rs. 1560660/- and therefore, notice u/s 147 of the Act was issued to the assessee after recording the reasons. The assessee submitted that the return of income has already been filed may be treated as return filed in response to the notice. Consequently, notice u/s 143(2) was issued on 04.08.2010 and assessee was asked to explain the details of cash deposit. Assessee submitted a detailed chart with respect to debits and credits and stated that the cash deposit amounting to Rs. 156060/- is pertaining to his HUF and business receipts of his HUF. However, the ld Assessing Officer rejected the contention of the assessee and made the addition. A further addition on account of capital gain on transfer of the land of Rs. 2785900/- was also made. A sum of Rs. 125000/- was also added u/s 68 of the Act being amount credit in his personal cash book. Therefore, assessment u/s 143(3) read with Section 147 of the Act was passed on 27.12.2010 determining the total income of the assessee of Rs. 4561280/-.
The assessee aggrieved with the order of the ld AO preferred appeal before the ld CIT(A) on the issue of validity of reopening as well as on the merits. The ld CIT(A) upheld the reopening of the assessment and also upheld the unexplained investment of Rs. 206079/- against the addition of Rs. 1554410/-. He further upheld the addition of Rs. 2785900/- on account of sale of the land in the hands of the assessee by applying the provisions of section 50C of the Act. He deleted the addition of Rs. 125000/- made by the ld Assessing Officer u/s 68 of the Act.
Therefore, assessee being aggrieved with the order of the ld CIT(A) challenged before us the reopening of the assessment, taxing income of Rs. 206069/- in the hands of the assessee instead of HUF and chargeability of capital gain on sale of agricultural land amount to Rs. 2785900/-.
The ld Authorised Representative submitted a detailed submission on each of the grounds.
On the issue of reopening he referred to the reasons accorded by the Assessing Officer at page No. 1 of his paper book which is as under:-
Sanjeev Jain Vs. ITO (Assessment Year: 2007-08) “Information has been received from the income tax officer, Ward-2(4), Jaipur, that the assessee has deposited of Rs. 1560660/- in his bank account No. 249010100006750 of Axis Bank, Roorkee during the FY 2006-07 relevant to the AY 2007-08. On verification of the record it reveals that no return filed by the assessee for the AY 2007-08 I have therefore, reasons to believe that the said transaction of deposit of Rs. 1560660/- has been made out of undisclosed income and therefore, income to the extent of Rs. 1560660/- for AY 2007-08 has escaped assessment within the meaning of Section 148 of IT Act. Issue notice u/s 148 of IT Act to asses the income escaped for the assessment at least to the extent of Rs. 1560660/- “ 7. He submitted that reasons recorded clearly speaks that no return has been filed by the assessee for Assessment Year 2007-08, whereas the first line of the assessment order speaks that assessee has filed his return of income on 31.03.2009, therefore, he referred to the decision of the Hon'ble Delhi High Court in 396 ITR 5 in case of Pr. CIT Vs. RMG Polymeline (I) Ltd wherein, it has been held that where the information is received from Investigation Wing could not be said to be a tangible material per se without a further enquiry undertaken by the Assessing Officer to establish a link between tangible material and formation a reason to believe that income had been escaped assessment and hence, reassessment was not justified. He vehemently referred to para No. 5 of that order as stated that facts in that case are identical to the facts of the present case.
He further stated that:- The only reason for reopening is cash deposit of Rs. 1560660/- in Axis Bank. In the reasons also mentioned that no return has been filed. Cash deposit in the bank account be a reason to believe that any income chargeable to tax has escaped asstt. Cash deposit may be out of accounted income also therefore cash deposit in bank account be reason for 147. There is no material on record having a direct link for a belief for existence of escaped income. He further referred to the decision of the coordinate benches.
The ld AR also submitted on ground No. 4 and 5 of the appeal of the assessee extensively.
The ld Departmental Representative vehemently relied upon the orders of the lower authorities.
We have carefully considered the rival contentions and also perused the orders of the lower authorities. In the present case the reopening of the assessment has been initiated stating the reason that information has been received from ITO, Jaipur that assessee has deposited Rs. 1560600/- in his bank account with Axis Bank in FY 2006-07 relevant to AY 2007-08. Based on the reason ld Assessing Officer has further recorded that “on verification of the records it reveals that no return has been filed by the assessee for AY 2007-08.” and further the first Sanjeev Jain Vs. ITO (Assessment Year: 2007-08) line of the assessment order clearly speaks that assessee has filed his return of income on 31.03.2009 showing income of Rs. 95970/-. It is further noted that in the same paragraph ld Assessing Officer noted that the assessee is also filing ITR at his office. The ld AO further held that the above information is not found verifiable form the records of the assessee. In view of this it is clear that there is a glaring error in the above reason recorded that the return of income of the assessee was available with the Assessing Officer as it was filed on 31.03.2009 whereas the reason were recorded on 20.10.2009 says that it has not been filed. Further, the ld Assessing Officer has incorrectly stated that the information received from the ITO, Jaipur was not verifiable from the records of the assessee. Therefore, it suggests that the ld Assessing Officer must have verified some records. In view of this it is apparently clear that in the instant case there is failure of application of mind by the AO to the facts and he proceeded on wrong premises of non filing of the return of income. Hon'ble Delhi High Court in 396 ITR 5 relying on the decision of CIT Vs. Meenakshi Overseas has held that there was a failure of application of mind by AO to the facts, hence, held that reopening u/s 147 of the Act was bad in law. Therefore, in the present case also respectfully following the decision of the Hon'ble Delhi High Court we also hold that reopening of the assessment u/s 147 of the Act is bad in law.
Further, the ld Authorised Representative has also relied on the decision of coordinate benches in Harmit Singh Vs. ITO ITA No. 1939/Del/2016 dated 10.02.2017, wherein on the identical facts the reopening is held to be invalid. In Bir Bahadur Singh Sijwali Vs. ITO 68 SOT 197, Praveen Kr. Jain Vs. ITO ITA No. 1331/Del/2015 and Amrik Singh Vs. ITO 159 ITD 329 are also on the similar issues wherein deposit in the bank account was the reason for reopening and in all the cases it was held to be invalid holding that the belief of the Assessing Officer that the bank deposit constituted undisclosed income is fallacious. Therefore, the decisions of the coordinate benches also supports the argument of the ld AR. In view of this we reverse the finding of the ld CIT(A) in upholding the validity of reopening u/s 147 of the Act. Therefore, we hold that reopening of the assessment made by the ld Assessing Officer u/s 147 of the Act is bad in law on the two counts that despite the return of income filed by the assessee AO has noted that no return has been filed by the Assessee and further holding without verification that cash deposit of Rs. 1560660/- has been made out of undisclosed income of the assessee. In the result appeal of the assessee is allowed on ground No. 1 to 3 of the appeal of the assessee.
Ground Nos. 4 and 5 of the appeal of the assessee becomes infractuous and are not required to adjudicate in view of our decision holding that reopening of the assessment is not validly initiated.