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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI SAKTIJIT DEY, & SHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order dated 26.09.2023 by the NFAC, Delhi pertaining to A.Y. 2012-13.
The assessee has challenged the assumption of jurisdiction u/s 147 of the Income-tax Act, 1961 [the Act, for short] by issuing notice u/s 148 of the Act and has further challenged the addition of Rs. 8,72,50,059/– on account of long-term capital gain.
Since the assumption of jurisdiction goes to the root of the matter, we decided to adjudicate it first.
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
Briefly stated the facts of the case are that the assessee filed his return of income on 30.07.2012 electronically, declaring total income of Rs.43,62,956/–, which included income from salary, income from house, property, income from capital gain, and Income from other sources.
Income from capital gains consisting of sale consideration of property at NEA, Pusa Road, New Delhi amounting to Rs.10.50 crores with cost of acquisition as on 01.04.1981 at Rs.1,43,68,400, /–, which was indexed at Rs. 11,27,91,940/–, making a net capital loss of Rs. 7, 791, 940/–.
Return was selected for scrutiny assessment and assessment was framed u/s 143 (3) of the Act vide order dated 23.02.2015 by which returned Income was accepted as such.
Assuming jurisdiction u/s 147 of the Act, notice dated 30.03.2019 u/s 148 of the Act was issued and served upon the assessee.
Approval was taken vide order dated 29.03.2019. This approval is exhibited at page 50 of the paper book, which is full of factual errors.
A.Y in respect of which reopening is proposed has been mentioned as A.Y 2011-12 whereas the impugned A.Y is 2012-13. The quantum of income which has escaped assessment has been mentioned as Rs. 10,15,79,973/- whereas the addition has been made for Rs. 8,72,50,059/-. Under Sl. No. 8 whether assessment is proposed to be made for the first time, it has been mentioned as “Yes”, whereas as mentioned elsewhere, assessment is framed u/s 143(3) vide order dated 23.02.2015.
This clearly shows non application of mind not only by the Assessing Officer for issuing notice u/s 148 of the Act, but also by the Additional CIT, Range - 17 and PCIT, Delhi- 24 for according approval on such erroneous form for recording reasons for initiating proceedings u/s 147/148 of the Act.
Now, coming to the reasons for reopening of assessment, the same read as under:
12. Since the reopening is done four years after the end of the impugned A.Y, first proviso to Section 147 of the Act is squarely applicable.
We have given thoughtful consideration to the reasons recorded for reopening assessment (supra). We could not find any averment/reference by the Assessing Officer to show that there was a failure on the part of the assessee to disclose fully material facts. On the contrary, we find a questionnaire dated 03.12.2014 issued at the time of original assessment proceedings wherein at Point 11, the assessee was specifically asked to furnish details of movable and immovable properties and sale/purchase of immovable properties with evidence and the assessee has filed sale deed of the impugned property.
The assessee also filed a Valuation Report for adoption of fair market value as on 01.04.1981. The valuation report is at pages 41 to 45 of the paper book.
After considering all these documentary evidences, the Assessing Officer framed the assessment order dated 23.02.2015 by accepting the returned income.
At this stage, it would be pertinent to refer to the observations of the Hon’ble High Court of Delhi in the case of Shourya Infrastructure Private Limited WP(C) 12709/2018 wherein at para 50, the Hon’ble court observes :
“According to us, reopening of the concluded scrutiny assessment is a serious business. Act provides for layered approach precisely for this reason. Senior officers like the ACIT/PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings. Several pitfalls that Court’s notice can be avoided if the concerned authorities were to look closely at the request made for reopening”.
17. In light of the above obiter, when we see the approval form at Page 51 of the book, we find that the PCIT rubber stamped the request made by the Assessing Officer for initiating assessment proceedings without applying his mind to the requisite aspects.
The Hon’ble Jurisdictional High Court of Delhi in Atma Ram Properties Private Limited 343 ITR 141 has, inter alia, held that reasons recorded do state that the assessee had failed to fully and truly disclose the facts but do not indicate why and how the assessee had failed to make full and true disclosure of material facts.
Mere repetition or quoting the language of the proviso is not sufficient. The basis of averment/ statement should be either stated or should be apparent/lucid/explained from the record.
In the instant case, reasons do not state that the assessee had failed to fully and truly disclose the material facts and also failed to mention how the assessee had failed to make full and true disclosure of material facts.
On careful consideration of reasons for reopening the assessment mentioned elsewhere, there is no mention of any new tangible material evidence brought on record. Whatever has been referred therein was already placed on record during the course of original assessment proceedings. Therefore, the ratio laid down by the Hon’ble Supreme Court in the case of Kelvinator of India 320 ITR 561 squarely applies wherein the Hon’ble Supreme Court has held as under:
“When a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. An order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion.”
Similar view was taken by the Hon’ble Jurisdictional Delhi High Court in the case of Usha international 3 48ITR 485 wherein it has been held as under:
“11. Accordingly, we hold that the following observations in Consolidated Photo and Finvest Limited (supra) do not reflect the correct legal position:
“In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion.”
The said observations have been rightly held to be contrary to the Full Bench decision of the Delhi High Court in Kelvinator of India Limited (supra) in Eicher Limited (supra). The said decision in Eicher Limited (supra) makes reference to the decision of KLM Royal Dutch Airlines vs. Assistant Commissioner of Income Tax [2007] 292 ITR 49 (Delhi). KLM Royal case (supra) deals with some other issues on which we do not express or make any observation approving or disapproving. Some of these aspects have been considered and explained in other decisions in light of the judgment of the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500”.
Considering the facts of the case in totality, in light of the judicial decisions discussed hereinabove, we are of the considered view that the assumption of jurisdiction is bad in law. Notice u/s 148 of the Act is hereby set aside and resultant assessment order is quashed.
Since we have quashed the assessment order, we do not find it necessary to dwell into the merits of the case.
Since the stay petition has not been pressed by the assessee, the same is dismissed.
In the result, the appeal of the assessee in is allowed whereas the Stay Application is dismissed as not pressed.
The order is pronounced in the open court on 20.12.2023.