AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2011 (11) TMI 659
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.... in having given misplaced credence to doubtful agreement to sell dated 14.10.1999 and also in ignoring the agreement to sell dated 3.2.2000 erred in making an addition of Rs. 2,00,000/- as unexplained investment u/s 169 of the Income-tax Act,1961. The addition be deleted." 3. In the course of appellate proceedings before us, ld. 'AR' contended that the AO failed to apply his mind to the reasons recorded for the purpose of initiating re-assessment proceedings u/s 147 read with Section 148 of the Act. He was of the opinion that the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (2007) 291 ITR 500 (S.C) is not applicable to the facts of the present case. Accordingly, he prayed that the re-opening of the case be declared as bad in law. 3(i). In Ground No.2, ld. 'AR' argued the case on merits. He argued that agreement dated 14.10.1999 is the original agreement and the same has not been acted upon by the assessee appellant. Ld. 'AR' was of the opinion that the agreement dated 03.02.2000 is the agreement which has been acted upon, therefore the addition made u/s 69 is uncalled for. He refe....
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....on of Rs. 85 lacs vide agreement to sell dt.14.10.99. Further, as per the statement of the complainant recorded by the ADI (Inv.) on 09.02.2004 Shri J.D.Gupta was instrumental in negotiating the deal and had signed the agreement as witness No.1. Shri Arun Goyal though he admits that there was an agreement to sell dated 14.10.99 but this agreement was never acted upon, as the complainant had misquoted the sale consideration at Rs. 85 lacs. The complainant had a vested interest and therefore the agreement was negotiated afresh for 5/6th share at a consideration of Rs. 1600000/- vide agreement to sell dated 3rd Feb.2000 (03.02.2000). Latter, the sale deed was executed on 13th Sept.,2002 for 2/3rd share for consideration of Rs. 12,80,000/- through local commission appointed by Civil Judge (Junior Division) Chandigarh. The drop in the sale consideration was attributed to the following facts; i) Because of violation of the Building Law the Estate Office UT had resumed the property. ii) Appeals before the Advisor to the administrator were also unsuccessful. iii) The matter was subjudice as appeal was pending before the Hon'ble Punjab & Haryana High Court. The a....
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....missed the department's special leave petition against the judgment dated Feb 19,2008 of the Delhi High Court ITA No.903 of 2007 reported in 305 ITR 245 whereby the High Court dismissed the department's appeal on the ground that the respondent having denied the transfer of money between him and the respective vendor and the vendors having denied the receipt of money from the respondent there ought to have been corroborative evidence to show that there was infact such a transfer of money : CIT V Ved Parkash choudhary SLP (C) No.17329 of 2008 reported in vol. 309 ITR (Statutes) 19. On merits 1. Apparent is real : The onus is on the department to prove that the sale deed dt.13.9.2002 through Court is a shown document. This has not been done. No mention of this document in the entire assessment order. Onus not discharged. 2. Total reliance has been placed upon the statement of the complainant Shri J.D.Gupta also himself could not prove the transfer of the sale consideration of Rs. 85 lacs. 3. The statement of Shri Kulbhushan Garg the seller has been totally ignored. Statement of seller 1. The seller straight away states that the sale consideration is Rs. 1920000/-. There....
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....gned the statement. Q.No. 4 of Examination in chief and cross examination, where as per: a) The Sellter : i) Mr.JD Gupta, alone come to Rampuraphool ii) There were no signatures of buyers iii) They had never met the buyers iv) Mp copy of the agreement was given to the seller, therefore he denied knowledge of the attestation by the notary, signatures of the buyers etc. v) The amount mentioned for consideration was Rs. 1920000/-. b) The purchaser : He signed on performa agreement to sell, which was signed by him and his wife at Chandigarh Statements of the other purchaser viz Sanjeev Chadha and Smt.Vinod Kumari, Prop. Shivalik Book Depot, not examined." 6. The brief facts necessary for the disposal of the present appeal are that the assessee filed his return of income declaring estimated business income at Rs. 69500/- and income from house property at Rs. 35,000/-. The return was filed by the assessee on 31.3.2004 which was processed on 15.6.2004 at the returned income u/s 143(1) of the Act. Subsequently, it was noticed by the AO that certain income escaped assessment and consequently a notice u/s 148 was issued on 9.3.20....
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....tifiable. The relevant part of the decision is as under : "Section 147 authorizes and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. The function of the AO is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v ITO (1991) 191 ITR 662 for initiation of action u/s 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words at the initiation stage, what is required is "reason to believe" but not the established fac....
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.... the ensuing discussion of the relevant and operative part of the said decision : "Re-assessment-Intimation-Provision for initiating re assessment applied-only one of two conditions to be complied with-Only reason to believe that income chargeable to tax has escaped assessment-"Reason to believe"-Formation of belief within subjective satisfaction of Assessing Officer-Principle relating to 'change of opinion' Not applicable-Income-tax Act,1961 ss. 143(1)(a),147. Income escaping assessment-Intimation-Claim of assessee for bad debts-Notice for re-assessment on the basis that conditions for allowance were not fulfilled-Valid-Within jurisdiction of AO-Income-tax Act,1961, ss. 36(1)(vii), (2) 132(1)(a), 147,148. Words and phrases _"Reason to believe", "Assessment', "Intimation" meanings of. Under the scheme of Section 143(1) of the Income-tax Act,1961, as substituted w.e.f. April,1989 and prior to its substitution w.e.f. June 1,1999, what were permissible to be adjusted under the first proviso to Section 143(1)(a) were: (1) only apparent arithmetical errors in the return, accounts or documents accompanying the return (ii) loss carried....
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.... The expression "reason to believe" in Section 147 would mean cause or justification. If the AO has cause or jurisdiction to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion. What is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the AO. ITO v Selected Dalurband Coal Co. P.Ltd. (1996) 217 ITR 597 (S.C) and Raymond Woollen Mills Ltd. v ITO (1999) 236 ITR 34 (S.C) followed. Taking income escaping assessment in the case of an intimation u/s 143(1)(a) is covered by the main provision of Section 147 as substituted w.e.f. April 1,1989 and initiating re-assessment proceedings in the case of inti....
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....O. Therefore, the question of change of opinion does not arise. Similarly, no opinion was ever expressed or formed by the AO, while processing the return under the said scheme. The change of opinion presupposes the existence of any opinion formed by the AO, in the earlier proceedings. The formation of opinion is positive act on the part of the AO. Thus, an opinion can be said to have been formed where there is application of mind, with reference to the material on record and the relevant provisions of the statute. Hence, under such proceedings, no such opinion is formed by the AO and if there is an escapement of income, then it cannot be contended that the re-assessment proceedings are initiated on mere change of opinion. 11. The case laws cited by the assessee, in the synopsis, reproduced above, on the issue of re-opening the case are not applicable to the facts of the present case, being factually different and distinguishable. The facts narrated in the present case by the AO while recording reasons u/s 148 of the Act, are definite, relevant, credible and have direct nexus to the factum of escapement of income. These reasons are not based on surmises as contende....
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....me Court, in the case of Rajesh Jhaveri Brokers P.Ltd.(supra). Therefore, having regard to the fact situation of the present case, clear findings of the CIT(A) and true ratio of the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri (supra), we uphold the findings of the CIT(A) and consequently, the Ground of Appeal of the assessee is dismissed. 13. Now, we turn to consider the issue of addition made by the AO and challenged by the assessee in Ground No.2 on merit. The AO made an addition of Rs. 2 lacs as unexplained investment/ u/s 69 of the Act. The ld. CIT(A), upheld the said addition by passing a detailed and speaking order. We consider it essential to reproduce the findings of the ld. CIT(A) on the issue in question for the purpose of proper appreciation of the same : "I have carefully considered the entire material on record. The main contention of the assessee is that agreement dated 14.10.1999 is not genuine. The sequence of events and surrounding circumstances would reveal that the information/documents in possession of the department can be relied upon. The following factors are relevant: i) "Original" attested true copy by ....
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....ment. It is despite that total consideration is Rs. 85 lacs. 2 Buyers & Sellers had great faith in Shri J.D.Gupta and signed on dotted lines The buyers would not sign blindly. The price of the property is the first thing which is asked and noted. Atleast, price mentioned in the agreement is checked. Even otherwise, the department has to take decision as per evidence on record. 3 The agreement showing consideration of Rs. 85 lacs never existed. The complainant created agreement The assessee has been showing a true copy of agreement. The assessee himself accepted that agreement was torn. That means the agreement existed. 4 The signatures on the agreement has same spacing & chronology This fact will not affect the validity of agreement. 5 Shri Arun Goyal put signature on stamp. It is not possible. The stamp is generally put on the paper without at times, looking on the signature. This fact will not invalidate the agreement. 6 The agreement to sell is not Rs. 3 stamp paper As far as Income Tax is concerned, this fact is not material 7 Record of Notary Public not examined No need of seeing the record of Notary Public. Statement of No....
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....he same in the original Agreement to Sell dated 14.10.1999 and then claim that such drafts were purchased in pursuance to the Agreement to Sell dated 03.02.2000, which was executed subsequent to the original Agreement. As indicated earlier, the Agreement to Sell dated 03.02.2000, existed in the womb of futurity, and, hence, said drafts dated 12.10.1999 cannot be purchased in pursuance of such Agreement to Sell. The time latches between the original Agreement dated 14.10.1999 and the purchase of said drafts is just two days. Whereas it is almost four months in respect of subsequent Agreement dated 03.02.2000. The sequence of events in the case runs contrary to the probability of human conduct and surrounding circumstances of this case. The assessee failed to explain and rebut such documentary evidence to prove the genuineness of Agreement to Sell dated 03.02.2000 and to prove the non-genuineness of agreement dated 14.10.1999. 14. The AO, as also the CIT(A), appreciated the existence of documentary material to support their findings. It is undisputed fact that original attested true copy by Notary Chandigarh was confronted to the assessee. The Nota....
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....eas the consideration of the same property has been recorded as Rs. 16 lacs in the subsequent agreement dated 03.02.2000. The subsequent agreement dated 03.02.2000 was executed after four months of the original Agreement to Sell, dated, 14.10.1999. Such a drastic decline in the sale consideration viz-a-viz these two agreements remains inexplicable and unrebuttable by the assessee appellant. In this context, it is pertinent to mention here that the assessee appellant admits the existence of the original agreement dated 14.10.1999 and also admits that the said original agreement was torn by him. Bare assertions on the part of the assessee that he has not seen the contents of the original agreement dated 14.10.1999 and signed the same accordingly is a specious and self-serving explanation, unsupported by any evidence brought on record by the assessee. No rational person would appreciate that the impugned Agreement to Sell dated 14.10.1999 has been signed without even knowing contents of the same. However, such assertions cannot substitute the cardinal material on the basis of which the CIT(A) has upheld the findings of the AO. The ld. CIT(A), has passed a detailed and spea....