SATBIR SAGWAL,KARNAL vs. INCOME TAX OFFICER, WARD-4, KARNAL , KARNAL

5. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.78,00,000/- made on account of alleged unexplained investment in purchase of property treating the same to be income u/s 69 in utter disregard of the explanations rendered which is arbitrary and unjustified.

3. The brief facts of the case are that the assessee filed its return of income on 30-03-2012 declaring a total income of Rs. 1,66,230/- + Rs.1,23,000/-(Agriculture Income) which was processed vide order dated 21-07-2012 u/s 143(1) of the Act. The case of the assessee was selected into scrutiny under CASS. Accordingly notice u/s 143(2) of the Act dated 28-09-2012 was issued. A fresh notice u/s 142(1) was issued to the assessee. The Assessing Officer completed the assessment after making the addition of Rs.2,00,000/- as agreed by the ld.AR of the assessee for the A.Y.2011-12. Therefore, the assessment order was set aside under section 263 of the Act by the Principal Commissioner of Income Tax, Karnal vide order dated 11-02- 2016 and revised assessment was framed at income of Rs,1,08,67,030/-. Aggrieved the revised assessment order dated 15-12-2016 the assessee preferred the appeal, which is pending before the Ld. CIT(A), after remand from the Hon’ble ITAT. During the pendency of the aforesaid proceedings, notice u/s 148 of the Act dated 28-03-2018 was issued to the assessee.

The reason for re-opening was recorded by the Assessing officer was that the assessee had purchased immovable property from Sh. Ishwar Singh for Rs.78 Lacs, whereas the sale deed was executed for Rs. 15 Lacs during the F.Y.2011-12. Notice under section 148 of the Act was issued to the assessee on 26/28-03- 2018 after taking the approval from the Pr. Commissioner of Income Tax. The reasons for re-opening of the assessment by the Assessing officer as under:

This assessee is an individual and has filed income tax return for the A.Y. 2011-12 on 30.03.2012 declaring income at Rs. 1,66,230/-. Further, the case of assessee was selected under scrutiny through CASS and assessment u/s 143(3) was completed vide order dated 25.02.2014 at an assessed income of Rs.3,66,230/-. Later on the said assessment order was revised by worthy Pr. CIT, Karnal u/s 263 being prejudicial to the interest of revenue, by passing an order dated 11.02.2016 to make fresh assessment. Consequently, the assessment was made u/s 143(3) r.w.s. 263 vide order dated 15.12.2016, enhancing the earlier assessed income of Rs.3,66,230/- to Rs. 1,08,67,030/--

In view of the above facts & circumstances, this is a case of non-disclosure of material facts on part of assessee & thus, remains un-examined during the course of assessment proceedings on both occasions. Hence, the provisions of Explanation 1 of section 147 of the Act are applicable in this case. Therefore, this case is not being a case of change of opinion by the AO. Therefore, notice u/s 148 of the Act is required to be issued to assess the escaped income of Rs.78,00,000/- as well as any other income which comes to the notice during assessment proceedings. Notice u/s 148 is to be issued to the assessee for A.Y. 2012-13.

4. According to the Assessing Officer the assessee had purchased the immovable property for Rs.78,00,000/- and did not disclose in the ITR. The Assessing officer completed the assessment under section 143(3) read with section 147 of the Act at Rs.1,86,67,030/- after making the addition of Rs. 78,00,000/-. Aggrieved the order from the Assessing Officer, the assessee preferred the appeal before the Ld. CIT(A), who vide his order dated 20-02-2024 dismissed the appeal, against which the assessee is in appeal before the tribunal. Ld. CIT(A) has observed in his order as under: “6.4 After due consideration of the material on record, the ground-wise discussion and decision in this appeal is as under.

7. Ground No.1 to 5 are on single issue of validity of proceedings w/s.147 of the Act. Therefore, these grounds are decided together clear from the record that in various proceedings prior to initiation of assessment proceedings uis.147, assessee had not disclosed true and correct facts regarding his total investments in the property. It is clear from the record that the fact of assessee investing total of Rs. 78 lakh in the property but registering it at Rs. 15 lakh was not on record. After completion of the assessment vide order dated 15.12.2016 passed us. 143(3) r. w.s. 263 of the Act, AO received information from the Investigation Wing/Section of Income-tax Department that assessee had purchased an Immovable property for Rs. 78 lakh and it was registered at only Rs. 15 lakh. Assessee has not brought anything on record to demonstrate that he had declared the said transaction before Assessing Officer or any other Income-tax Authority. Therefore, assessee's contentions in his written submission are found to be irrelevant because through that submission assessee is mainly harping on the arguments that there was no reason to believe that income has escaped assessment, that there was change of opinion and there was borrowed satisfaction in the form of information received from Investigation Wing. It is networthy that AO did not mechanically initiate proceedings proceedings u/s.

5. Ld. AR of the assessee submitted that the case of assessee was reopened, mechanical manner without any application of mind, and without recorded the correct reasons. The approval was also provided in a mechanical manner. He further submitted that the Assessing Officer has relied upon the agreement, wherein the sale consideration has been stated at Rs. 15,00,000/-. The agreement has been entered into the seller and the three purchasers namely Sh. Satbir Sawal the assessee, Sh. Lalit Mohan and Sh. Shyam Sunder but the Assessing Officer treated the assessee to be the sole purchaser, re-opened the case. He further submitted that assessment of the assessee was already completed u/s 143(3) of the Act and even revised assessment was framed after invocation of Section 263 of the Act by the Principal Commissioner of Income Tax. The assessee has filed all the details of the banks accounts, when the original assessment was framed. Thus, the case was re-opened on the change of opinion. Ld. AR of the assessee also submitted that reasons recorded were not provided to the assessee. Ld. AR further submitted that the additional evidence filed by the assessee was not accepted by the Ld.CIT(A), and appeal was dismissed. He further submitted that the co-purchasers namely S. Lalit Mohan and Sh. Shyam Sunder has admitted in their affidavits that they have paid the consideration to the seller in cash. Reliance has placed the case of Kissan Fats Ltd. Anr V. Deputy Commissioner of Income Tax & 409 /Chd/2023 in this case the Co-ordinate bench held as under :-

8. Now, it is to be seen as to whether in such a scenario, the re-assessment proceedings are liable to be quashed as void, as contended by the assessee. 8.1 In this regard, under similar circumstances, in Smt. Monika Rani vs. ITO, Vide 2020, passed for asst yr 2010-11 in ITA No. 582/Chd/2019. it was observed that from the reasons recorded, it was clear that the AO had issued the notice under s 148 of the Act for the reason that the assessee had not filed her return of income Financial Year 2009-10: that further the said reasons given by the AO for re-and that the assessee had purchased a property for Rs. 1.49.02.500 during opening the assessment were not correct, since the assessee had filed the return assessee's compilation: that the assessee had also shown investment in of income on 30th March, 2011.the copy of which had been placed in the agricultural land amounting to Rs. 52.20.000 in her balance sheet as on 31st March, 2010, copy of which had been placed in the assessee's compilation: that both the reasons given by the AO were, thus, wrong: that the AO had thus, reopened the assessment on the basis of wrong facts and therefore, the re-opening was not valid and it was being quashed 8.2 The Tribunal followed the decisions cited as under:

(i) Sagar Enterprises vs. Asstt. CIT (supra)

(ii) Baba Kartar Singh Dukki Educational Trust vs. ITO (2016) 158 ITR 965 (Chd) (Trib), rendered by the Chandigarh 'SMC' Bench of the Tribunal, (iii) Shri Ram Mohan Rawat vs. ITO (supra) in (ITA No. 1014/jp/2018, order dt. 10th Oct., 2019) passed by the Jaipur Bench of the Tribunal (iv) Van Oord Dredging & Marine Contractors BV vs. Addl. Director of IT, order dt. 28th Feb., 2018, passed by the Mumbai Bench of the Tribunal in & 496/Mum/2016.

8.3 Similarly, in Sagar Enterprises (supra), it has been held as follows:

"that it was apparent that the fact of non-filing of the return for the asst. yr. 1991-92 had weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income.

However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the ITO had stated that the payment which was stated to be undisclosed income relevant for the asst. yr. 1991-92 could have been made during the financial year 1990-91 relevant to the asst. yr. 1991-92 and hence, "to cover up that probability, protective addition was made in the asst. yr. 1992-93." The first appellate authority decided the appeal for the asst. yr. 1992-93 on Jan..

1996, and the reason had been recorded thereafter on 18th Aug., 1997. The notice of reassessment was not valid and was liable to be quashed." 8.4 Where AO processed under s. 143(1) returns of income filed by assessee for asst. basis that assessee had not filed returns for years preceding to asst. yr. 2004-05 yrs, 2001-02 to 2003-04 and subsequently he reopened said assessments on sole and therefore, its income having escaped assessment, reopening of assessment was on basis of suspicion and non- existent and incorrect facts and it was invalid"

8.5 Further, in Ram Mohan Rawat ( supra), it has been held as follows:

Thus the reasons recorded by the AO for formation of belief that income assessable to tax has escaped assessment are based on two counts. One, the assessee has made bogus purchases and the second that the purchases are not verifiable as the assessee has not filed the return of income. Thus the formation of belief is based on these two factual aspects that the assessee has made bogus purchases which are not verifiable as assessee has not filed the return of income. The reason for non verifiableness of the purchases made by the assessee due to non filing of the return of income as stated by the AO is absolutely incorrect and wrong and contrary to the record when the assessee has filed the return of income electronically on 29th Oct., 2007. This fact was also subsequently accepted by the AO that the assessee filed the return of income under s. 139(1). The second aspect of the reasons that the assessee has made bogus purchases is also not based on any enquiry or verification of record by the AO but this is simply reproduction of information received from the Investigation Wing. The said information is also incomplete as regards the details of the purchases and the parties from whom such purchases were made by the assessee. Thus the reasons recorded by the AO manifest that there is no application of mind and the averments as recorded in the reasons are very vague and general and rather inconsistent with the facts available on record so far as the filing of return of income by the assessee. The formation of belief on such incorrect and vague reasons would lead the reopening of the assessment as invalid.

8.6 Then, in Van Oord Dredging and Marine Contractors BV (supra), it has been held as under:

In asst. yr. 2005-06, the AO has reopened the assessment on incorrect facts and further the AO has failed to demonstrate that there was failure on the part of ht assessee to disclose fully and truly all material facts during the course of original assessment proceedings. Hence the reopening of assessment of asst. yr. 2005-06 is liable to be quashed on these two grounds also. Accordingly we set aside the order passed by learned CIT(A) on this issue and hold that the reopening of assessments of both the years are not in accordance with the law and accordingly quash the assessment orders passed for both the years under consideration.

10. Therefore, respectfully following the ratios of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. The plea of the Department, that the recording of wrong facts by the AO in the reasons was an inadvertent mistake, is of no avail and it does not validate the reasons recorded by the AO. It is trite that the reasons recorded are to be read as they are, and the reasons recorded in the present case, read as they are, are factually incorrect reasons which could not have led the AO to arrive at a valid satisfaction that income for the year under consideration had escaped assessment. Accordingly, the initiation of the re-assessment proceedings through the incorrect reasons recorded and the entire re-assessment proceedings, culminating in the order under appeal are quashed as void ab initio.

9. Ld. DR submitted that as per the sale deed, there was only one seller, i.e. Ishwer Chand and there was only one buyer i.e. Satbir Sagwal. As per the sale deed the seller and buyer presented themselves before the authority for the registration purpose and their thumb impression/signature and photo are available on the said deed, which shows that the property was purchased in the name of the assessee only. This argument has no force, because as per sale deed three persons purchased the property and the possession was handed over to the buyers. The Ld. CIT(A), without accepted the additional evidence dismissed the appeal. The ld. AO has reopened the assessment on incorrect facts. Therefore, respectfully following the ratio of the above discussed decisions, we hold that the re-opening of the completed assessment in the present case was not valid. Hence the reopening of assessment for A.Y.2011-12 is liable to be quashed on these grounds. The plea of the Department, that the recording of wrong Assessment Year in the reasons of re- opening by Assessing Officer was an inadvertent mistake in not tenable. There, we quashed the re-assessment proceedings. The grounds raised by the assessee are allowed. Because we, quashed the re-assessment proceedings therefore nothing further survives for adjudication.

Order pronounced in the open court on 19.11.2025.