TaxTMI 
TaxTMI 
2019 (7) TMI 21
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....the assessee as raised in this appeal is with respect to the validity of the re-assessment proceeding. The said grievance is articulate by ground No.1 which is as follows: "1. The Ld. CIT (A) erred on facts and in law in upholding action of Assessing Officer in issuing notice u/s 148 and making consequential assessment u/s 147 without appreciating that neither notice issued u/s 148 was valid nor conditions specified to assume jurisdiction to make assessment u/s 147 were satisfied in as much as there was no independent recording of reasons by Assessing Officer within the meaning of section 148(2)." 4. The brief facts leading to this case is this that the assessee being an individual filed its return of income on 25.03.2008 along with computation of income at Rs. 2,65,840/- which was processed u/s 143(1) of the Act. Subsequently, the case was reopened by issuance of the notice dated 27.03.2014 u/s 148 of the Act. The reason recorded by the Income Tax Officer, Ward-10(3), Ahmedabad for such reopening is as follows: "The Commissioner of Income Tax Ahmedabad -III, Ahmedabad vide letter No. HQ.Tech.III/263/PK Desai/2013-14 dated 21.03.2014 addressed to the Commission....
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....ered in the assessee return of income for A.Y. 2007-08 as the whole sales consideration received by the assessee during the assessee during the F.Y. 2006-07. In view of the above fact and findings therefore I have firm reason to believe that the income chargeable to tax to the extent not less than Rs. 1,00,000/- has escaped assessment for the AY 2007-08 due to the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Thus, the case needs to be re-opened by issuing notice u/s. 148 of the I.T. Act, 1961. The time limit for issue of notice u/s. 148 for A.Y, 2007-08 expires on 31/03/2014." The assessee further made a request by a letter dated 28.05.2014 to treat the original return dated 25.03.2008 as return filed in response to notice u/s 148 of the Act. Subsequently, in reply to the show-cause dated 12.03.2015, the assessee inter alia submitted as follows: "Without prejudice to other rights and entitlements of the assessee, it is to submit that the reassessment proceedings initiated u/s 147 is bad in law as it is solely based upon mere change in opinion and the revenue has not brought on ....
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....at both the conditions must be fulfilled if case falls within the ambit of provisio to section 147. From the above it is evident that even in case of order passed u/s 143(1) and no regular assessment made u/s 143(3), The Ld Assessment Officer only assumes jurisdiction u/s 147, if he has reason to believe that income has escaped assessment. Before assume jurisdiction u/s 147, it is important condition that Ld. Assessing Officer must have reasons to believe that particular income otherwise taxable in particular year has been escaped from assessment. Now what is reason to believe REASONS TO BELIEVE :- For re-opening of assessment after amendment of Section 147 with effect 01.04.1989. The only condition is required to be fulfilled is as follow :- "The Ld Assessing Officer must have reasons to believe that income Profit or Gain chargeable to Income-tax have escaped assessment." In this condition the important words are reason to believe. The Hon'ble Supreme Court as well as various High courts have made afford to interpret the word. Reason to Believe : - The Hon'ble Supreme Court in case of Lakhmani Meval Das interpr....
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....nts of the law should be satisfied. The live link or close nexus which should be there between the material before the ITO in the present case and the belief he was to form regarding the escapement of the income of the assessee from the assessment because of the letter's failure or omission to disclose fully and truly all material facts was missing in the case, in any event, the majority of the learned judges in the high court, in our opinion, were not in error in holding that the said material could not led to the formation of the belief that the income of the assessee respondent had escaped assessment because of the failure or omission to disclose fully and truly material fact, We would, therefore uphold the view of the majority and dismiss the appeal with costs. The copy of impugned judgment is attached herewith as (Annexure 3). The Hon'ble Gujarat High Court in case of Sheth Brothers v/s Joint Commissioner of Income-Tax ( 251 ITR 270) has very well tried to interpret. The words reasons to believe in the fallowings words Para 11 of the impugned judgment reads as under :- Thus, The settled legal position can be summarized, that: - a) There must ....
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....elopers Pvt. Ltd. in the Year 2006-07 bring but he did not bring iota of evidences regarding the description of land and if sold by which document, whether registered or unregistered. 3. It sale of land was taken place on which date it was transferred in favor of Pacifica Developer Pvt. Ltd. Though sale of Immovable Property is not defined in Income-tax Act, but sale is defined in the Transfer of Property Act, 1882. The Section 54 of the said Act reads as under: Section 54 of Transfer of Property Act: - " Sale is a transfer of ownership in exchange for a price paid or Promised or Part Paid & Part Promised. Sale How Made: - Such transfer in the case of Tangible Immovable Property of the value of one hundred rupees and upwards and in the case of a reversal or other Intangible thing can be made only by registered instrument. From the above definition of sale, it is evident that transfer of Immovable property cannot he made unless registered instrument is executed While Basic requirement of Sale of land namely registered instrument was not available at all, how the Ld. Assessing Officer-believed that sale of land in favour ....
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....Y. 2007-08. Further in this Para the Ld. Assessing Officer mentioned that land was transferred within the meaning of section 53 A of Transfer of Property Act to Pacifica Developers Pvt. Ltd. and possession of the land was also given to impugned party and as per section 2(47) of Income-tax Act & Transfer of Property Act. The Assesses must be offered income arised on sale consideration received in the FY 2006-07. The reasons recorded, itself was contradictory. On the one land. The Ld. Assessing Officer believed that sale of land has taken place in FY. 2006-07, on the other land, he believed that transfer of land has taken place within the meaning of section 53A of Transfer of Property Act. However in both cases there was no iota of evidences or information for forming the belief that income has escaped assessment. The Ld Assessing Officer believed that possession of land was given to purchasing party M/s Pacifica Developers Pvt. Ltd. This belief also created many doubts such as follows. (1) No description of land, which land transferred. (2) Transaction placed as per section 53A of Transfer of Property Act by which document as No banakhat,....
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.... impressed that the Ld. Assessing Officer has not applied his mind. What the Ld. Commissioner of Income-tax, 3 Ahmedabad communicated his suspicion that land has been sold by the assessee to Pacifica Developers Pvt. Ltd. without passing any proof or even iota of evidence for such belief to Assessing Officer. Without obtaining any further information, evidence or proof. He simply took superiors authority as god's version as truth. The belief of Assessing Officer is suspicious. On the one hand he believed that land was sold and on other hand he believe that section 53A of Transfer of Property Act was applicable to cover , transaction of 2(47)(v) of Income Tax Act. A single transaction cannot be covered under both sections i.e. 2(47)(i) as well as 2(47)(v) of Income-tax Act., The Section 2(47)(i) referred to sale, exchange or relinquishment of the Assets. Where as 2(47)(v) referred of transaction cover under section 53A of Transfer of Property Act, 1882. In the first Para of reason recorded, he believed that sale has taken place. Where as section 2(47)(v) referred following :- "Any transaction involving the allowing of the possession of any Immo....
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....saction. Even description of Land, Measurement, Price etc. Not available even date or year of transaction not available. No iota of evidence regarding hand over of possession, then how it can be called dish for dinner. It was not a dish at all. Over and above various judgment cited above the following judgments would be helpful to decide that there was no reason to believe that any income has escaped assessment. * Chhugamal Rajpal v/s S. P. Chaliha & Other (79 ITR 603 ( Supreme) (Annexure : 7 ) * Bombay Pharma Products v/s Income-tax Officer (237 ITR 614 ) (Annexure 8) In nutshell, The notice issued u/s 148 is illegal, ultravires and without any base further these was no iota of information on the basis of which, The Ld. Assessing Officer formed the belief that in this case a legitimate capital gain otherwise liable to tax has been escaped from assessment.. Even in reassessment. The Ld. Assessment Officer failed to prove sale of land in AY. 2007-08 as no registered stamped document was brought on record to prove sale within the meaning of sec. 2(47)(i). inter alia, The Ld. Assessing Officer failed to produce any Banakhat, Chitthi or any other wri....
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....ing Officer to reopen the assessment made u/s 143(1) of the Income Tax Act. Further that since the reopening was made without approval of ACIT/JCIT the provision of section 151 of the Act has not been complied with. Hence, the reopening is bad and liable to be set aside as also submitted by the Learned AR. On the other hand, Learned DR relied upon the order passed by the authorities below. 5. Heard the respective parties, perused the relevant materials available on record. The moot point involved in this particular matter as to whether the Learned AO has invoked jurisdiction u/s 147 in due process of law i.e. with the approval of the higher authority and consequently whether the reason was recorded independently upon application of mind by the Learned AO or is a product of borrowed satisfaction. We would like to address the first point regarding the approval for initiating proceeding u/s 148 of the Act. Sanction of issuance of notice is the first and foremost condition rather the precondition to be complied with by the Assessing Officer before invoking section 147 for reassessment proceeding. Section 151 reads as follows: "151. (1) No notice shall be issued under sec....
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....or reopening the assessment of the assessee u/s 148 of the Act though in terms of the provision of section 151 it is the pre-condition for initiating proceeding u/s 148 of the Act. Non-compliance of the same remains a defect which is admittedly not curable. We find that the Learned DR failed to controvert this particular aspect of the matter at the time of argument advanced before us during hearing. In that view of the matter in the absence of the very basis or foundation of the reopening being the "sanction of the higher authority" renders the entire proceeding void in law and thus liable to be set aside. The second issue relating to the reasons to belief "is also required to be addressed". It is a well settled principle of law that the reasons for the confirmation of the belief must have rational connection with a relevant bearing confirmation of belief. There must be a direct nexus or live link between the material giving to the notice of the ITO and formation of this belief that there has been escapement of income of the assessee from the assessment in that particular year because of his failure to disclose fully and truly materials of facts. Such reasons for the formation o....
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....reason to believe. The Third Para some incorrect and false information has been mentioned which was contrary to the contention given in Para above. In the Para 2 only income shown was Rs. 70 only from other sources where as in third Para. It was mentioned that capital gain in respect of residential units sold was show in return of income for AY 2007-08. In fact No Capital gain was show in AY. 2007-08 and in immediate succeeding year for sale of residential units because no capital gain whatsoever arouse in AY. 2007-08. Further in this Para the Ld. Assessing Officer mentioned that land was transferred within the meaning of section 53 A of Transfer of Property Act to Pacifica Developers Pvt. Ltd. and possession of the land was also given to impugned party and as per section 2(47) of Income-tax Act & Transfer of Property Act. The Assesses must be offered income arised on sale consideration received in the FY 2006-07. The reasons recorded, itself was contradictory. On the one land. The Ld. Assessing Officer believed that sale of land has taken place in FY. 2006-07, on the other land, he believed that transfer of land has taken place within the meaning of sect....