BHAGWAN LAXMAN ROKDE,KALYAN WEST vs. INCOME TAX OFFICER - 3(1), KALYAN, KALYAN WEST

Shri Bhagwan Laxman Rokde was pertaining to financial year 2010-11 relevant to AY 2011-12 However, the assessee has failed to offer any capital gains or income on the aforesaid transaction of sale of immoveable property.

3. As per provision of section 139(1) of the Income Tax Act, 1961, the assessee was required to file return of income for AY 2011-12 on or before 31/07/2011, however, the assessee has failed to deliver the return. Moreover, the assessee has failed to comply with notices issued by this office under Non Filers Monitoring System from time to time. Therefore the transactions of sale of immovable property remained unexplained. In view of the above, I Save reason to believe that the income of more than Rs.1,00,000/- for the A.Y. 2011-12 has escaped assessment within the meaning of Explanation 2 to the provision to Section 147 of the Income Tax Act, 1961.

4. In this case more than four year has been elapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice under section 148 of the Income Tax Act 1961 may kindly be accorded as per provisions of section 151 of the Income Tax Act 1961.

Your Honour has observed that I have entered into transaction of sale of immovable property amounting to Rs. 4,07,20,000/- on 05.10.2010 duly registered in the office of Sub Registrar, Kalyan-2 as per the Individual Transaction Statement available with your good office. It is further observed by Your Honour that because of the above transaction I was required to file my return of income u/s. 139(1) of the Act. Therefore Your Honour has opened that my income to the tune of Rs.4,07,20,000/- has escaped assessment.

In regard to the said reasons, I raise the following objections:

3. Your Honour has proceeded with the reopening on the erroneous premise that I had sold property during the year under consideration and further a mere suspicion that my income has escaped assessment in excess of Rs.1,00,000/- which is contrary to the facts of my case. Thus, the basis of reopening seems to be mere reasons to suspect" against the mandate of the section which is "reasons to believe". Further, it may be noted that it is a well settled principle that mere information recorded In 26AS/ ITS details without any independent verification by itself cannot be a reason for reopening of the assessment.

4. The basis of reasons to believe in this case was formed with the following basis

Shri Bhagwan Laxman Rokde 1. It is seen from the ITS records that assessee is one of the two parties to immovable property transaction for Rs 4,07,20,000/ which was registered with the SRO vide registration No 10110/2010 on 25 10 2010 But there was no mention of PAN of M/s Sai Developers in the said registered document, thus not reported in the ITS ii. On further verification from the Return Receipt Register maintained with the Systems (which includes physical returns entered into the systems), no return of income was filed by any entity namely M/s Sal Developers for A.Y.2011-12. iii. Given the background that there is no mention of PAN and return of income filed in the name M/s Sai Developers. It could not ascertained, whether Sai Developers is a name given to the joint venture or Association of persons Just a appellation for co- ownership In such cases the co-owner/conventurer is Individually liable to Tax iv. There also cannot be an excuse that PAN was not allotted at the time of registration of sale document, as they could have filed a belated return also. But till the date of re opening not a single return of income is found to have been filed by the so claimed Firm M/s Sai Developer v. This transaction pertains to sale of property. When the sale of property transaction is not disclosed, the transaction of purchase of the property is also not disclosed. When both purchase & sale transaction of property is not disclosed in the so claimed Firm Sai Developer by way of filing of return of income, the existence of the so called firm is not known to the department and therefore, was not considered for re-opening of assessment for escapement of income vi. As per ITS data, the information about cash deposits amounting to Rs 14,50,000/ Axis Bank and Rs. 10,50,000/- in Kalyan Janata Sahakari Bank, was available with the department and the assessee had sold immovable property during the year for Rs. 4,07,20,000/ Shri Bhagwan Laxman Rokde vii. The assessee has failed to comply with the notices issued under Non-filer Monitoring System. Thus, there is a reason to believe, that the assessee, in his individual capacity has carried out the sale of immovable property transaction and has not filed his return of income for the year under consideration.

Shri Bhagwan Laxman Rokde 3.3 From the perusal of the document, it is seen that the assessee Bhagwan Rokade (Sai Developer) has purchased land from Mr. Shankar Govind Mhatre vide Regn 1857/2008 and vide Regn 1856/2008. Thus, the copy of the documents Regn 1857/2008 and vide Regn 1056/2008, were obtained from the Sub-registrar but the same are turned out to be different Flat purchase agreements not related to this transaction. Both the documents are placed on record.

3.4 Further, there is reference of M/s Sai Developer towards purchase of land in 2000 but as per assessee, the partnership deed was made on 22/02/2010. This suggests that was provided wrong information in the present sale deed under consideration. Therefore, in the absence of any documentary evidence from assessee, the cost of acquisition/purchase of the land could not ascertain. Hence, the entire purchase transaction is attributed to the assessee.

3.5. It is pertinent to mention here that the Hon'ble Supreme Court of India in the case of Malabar Fisheries Co. Vs Commissioner of Income Tax (1979) 120 ITR 49 (SC) has held that the firm itself does not have any right on the assets held by the partnership firm and it is the partners who have the interest on the asset jointly. The relevant para is reproduced below "a partnership firm under the Indian Partnership Act, 1932, is not a distinct legal entity apart from the partners constituting it and equally in law the firm as such has no separate rights of its own in the partnership assets and when one talks of the firm's property or firm's assets all that is meant is property or assets in which all partners have a joint or common interest 04 In view of the above discussion, it is clear that the assessee, in his individual capacity, has carried out transaction of sale of immovable property and not discloses the said transaction. Therefore keeping in view the fact that the sale of property

Shri Bhagwan Laxman Rokde transaction has not been disclosed and not offered to tax in the alleged partnership firm and in view the fact that the assessee did not provide any information in regard to purchase of land and sharing of sale proceeds of the land. I treat it to be an "Adventure in the nature of Trade bring to tax the entire sale consideration of Rs. 4,07,20,000/-as income from Business Profession: Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961, is initiated separately for concealing the particulars of income.”

Shri Bhagwan Laxman Rokde 11. The ld. AO despite taking note of the fact of the sale deed which was between the two partnership firms and not by the assessee in his individual capacity nor anything pertain to the assessee in his individual capacity qua the said transaction, he still proceeded to entertain his ‘reason to believe’. Even the partnership deed and the PAN of M/s. Sai Developers were also filed during the course of assessment proceedings, which AO has ignored. Now, whether the firm has disclosed the said transaction or not, and instead of proceeding against the firm, the ld. AO proceeded to make assessment by issuing notice u/s.148, and also made the addition in the hands of the assessee for the entire value of transaction. Once, assessee has brought these facts on record, then ld. AO could not have proceeded to tax the above transaction in the hands of the assessee, because the agreement and transaction was not with the assessee, albeit between two partnership firm. In fact, ld. AO should have issued notice u/s.148 to the partnership firm, M/s. Sai Developers. He has simply gone by ITS records, i.e., information from the individual transaction statement and that there is no return of income filed by the name of Sai Developers. Therefore, he presumed that all the transactions belong to assessee. Once the sale deed or the agreement is between the two partnership firms, then how the transaction can be viewed in the individual hands by the ld. AO, is beyond comprehension. Even the reasoning given by the ld. AO as incorporated above is not based on rationale reasoning either on facts or in law. Thus, reasons recorded by the ld. AO based on certain information that Shri Bhagwan Laxman Rokde assessee has entered into transaction of immovable property itself is incorrect and based on such incorrect assumption of facts, notice u/s.148 cannot be issued nor the same amount can be taxed in the hands of the assessee. At least when assessee has raised this objection and has filed all the documents like partnership deed, PAN of the partnership firm and more specifically the developer’s agreement entered between two different parties namely M/s. Om Shree Sai Developers and M/s. Sai Developers. When all these documents were filed before him then how the assessment can be made u/s.148 in the hands of the assessee. Accordingly, the reasons recorded itself in the case of the assessee do not give jurisdiction to the ld. AO to make any assessment or issue notice u/s.148 and accordingly, same is quashed. Accordingly, the entire proceedings u/s.148 is held to be invalid. Consequently, the assessment order is quashed.