TaxTMI 
TaxTMI 
2021 (2) TMI 102
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.... 28th March 2018 (Annexure-A to the writ-application) issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short, 'the Act 1961') seeking to reopen the writ-applicant's income tax assessment for the Assessment Year 2011-12 on the ground of being illegal, contrary to law and without jurisdiction. 4. The facts giving rise to this writ-application may be summarised as under : 5. The writ-applicant derived income from a partnership firm, salary, capital gains and income from other sources during the Assessment Year 2011-12, i.e. the year under consideration. 6. It appears from the materials on record that the writ-applicant along with three other co-owners (writ-applicants of the connected writ-applications) sold a parcel of agriculture land bearing Revenue Survey No.203/2, Khata No.2367, old tenure land admeasuring 7000 sq.yards of Draft Town Planning Scheme No.50, Final Plot No.68, situated at village Katargam, Surat, to two individuals, namely, Ankitkumar Gagjibhai Koshiya and Swintubhai Arvindbhai Mavani, vide the sale-deed dated 29th March 2011 for the total sale consideration of Rs. 1,46,33,000=00. 7. It is the case of the writ-appli....
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.... dated 25.03.2011. Total area 5853 Sq. and Meters = 7000 sq. yards. The project "Silverstone River" was developed by M/s. K.Star Corporation upon the said piece of land. The rate of purchase of the above piece of land is Rs. 20,000/- per Sq. yard and the purchase value of the piece of land mentioned in the said working is Rs. 13,08,80,100/- (may be after some deductions) but the sale deed is made for Rs. 1,46,33,000/- only. This proved that the M/s. K.Star Corporation has made unaccounted cash investment of Rs. 11,62,47,100/- (Rs. 13,08,80,100/- less Rs. 1,46,33,000/-) for purchase of the said land piece of land. The actual and sole developers of the project is Kishorbhai Bhurabhai Koshiya. As such, Shri Kishorbhai Bhurabhai Koshiya made unaccounted cash investment of Rs. 11,62,47,100/-, for purchase of the aforesaid land, upon which, the project "Silverstone River' was developed by the assessee group. Similarly, the above unaccounted cash payments and by the assessee also constitute unaccounted income of the seller of the land. The assessee i.e. Shri Kantilal Dharmashibhai Narola was one partner of seller of the land. As per the information, the assessee Shri Kantilal Dharmashibha....
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....ng your Good Self have stated that the assessee being one of co-owners of land and having 25% share received cash of Rs. 2,90,61,775/- which was not shown in return of income. The assessee vehemently objected the alleged receipt of unaccounted cash for the sale of land to M/s K.Star Corporation. However to file detailed objection against your good selves belief of escapement of income i.e. Rs. 2,90,61,775/-, the assessee requested Your Good Self to forward the copy of alleged "seized incriminating document" relied upon to work out the rate of purchase of land. 2. With reference to captioned subject the assessee is in receipt of aforesaid letter wherein your Good Self have forwarded the seized incriminating information received from ADIT (Inv) on the basis of which reopening of the assessee's case for A.Y. 2011-12 was made. The said information/excel sheet is reproduced herein below for ready reference purpose : 2 S.N.203/2, FP-68, TP-50 (KATARGAM), LAXMIVADI, SURAT SILVERSTONE RIVER SQ.FT. AVERAGE TOTAL SOLD 122475 3434 420635489 UNSOLD 33699 4800 185755200 TOTAL 161174 3762 606390689 LAND COST 7000 *....
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....f square feet booked, its average rate, total amount of booked flats, un-booked no. of Sq feets, the estimated rate at which the flats may be booked and its total amount, land cost showing therein the area in Sq. yards, its rate per Square meter and total cost of land. Area of Square foot to be constructed, Average cost of construction per Square Foot and total estimated cost of construction. Working of total estimated cost, total estimated collection and estimated balance amount. Thus as seen above all the figures mentioned in the above reproduced sheet are on estimated basis and therefore the land cost of Rs. 13,08,80,100/- cannot be considered as actual consideration received by the assessee along with his co-owners. 6. Further it is submitted that the assessee had not made any transaction with K.Star Corporation. As informed by Your Good Self in the aforesaid letter the said incriminating document on which Your Good Self is relying upon was seized from the back office of M/s. K.Star Corporation. The assessee had sold the land under reference to Shri Swintubhai Mavani and Shri Ankitbhai Koshiya. In this regard copy of sale deed is enclosed herewith. M/s. K.Star Corporat....
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....ase laws delivered in the context of the above provisions have imparted a clear direction to the A.O. under which circumstances a case can be re-opened and what are the pre-requisites for doing so. It is worthwhile to note that in all the case laws of the Apex Court as elaborately discussed hereunder, it is commonly held that what is required to re-open a case is "Reason to believe" but not to establish facts of escapement of income. The sufficiency or correctness of the material is not to be considered because it is open to the assessee to prove that the facts assumed by the Assessing Officer in the notice were erroneous (Raymond Woolen Mills vs. ITO [(1999) 236 ITR 34 (SC)]. (i) In this case, notice u/s.148 of the I.T. Act is issued after recording reason applicable to the relevant A.Y. As observed by the Hon'ble Supreme Court in the case of "Centre Provinces Manganese Ore Co. Ltd. vs. 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 condition is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, what is required is "Reason to believe" but not t....
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....hai Mavani respectively, and not to M/s. K.Star Corporation. M/s. K.Star Corporation is an unknown entity and the writ-applicant had no transaction with the same. 21. Mr.Hemani would submit that there is nothing in the materials collected from M/s. K.Star Corporation to indicate as regards the actual sale consideration over and above the sale consideration mentioned in the sale-deed. 22. Mr.Hemani submitted that the department, on its own, has prepared a rough estimate as regards the cost of the project put up by M/s. K.Star Corporation. While working out the cost of project, the department has come out with the figure of Rs. 13,08,80,100=00 towards the value of the land. 23. Mr.Hemani pointed out that the two individuals named above who purchased the agriculture land in March 2011 from the writ-applicant along with the three co-owners later joined the newly formed partnership firm, namely, M/s. K.Star Corporation, as partners and their respective share in the agriculture land were contributed as share capital. 24. Mr.Hemani would submit that there is absolutely no basis whatsoever or any evidence for the unfounded assumption that the agriculture land was sold for Rs. 1....
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....he above working proved that M/s. K.Star Corporation had made unaccounted cash investment of Rs. 11,62,47,100/- (Rs. 13,08,80,100/- - Rs. 1,46,33,000/-) for purchase of said piece of land. The actual and sole developers of the project were Shri Kishorbhai Bhurabhai Koshiya. So, it is ascertained that Shri Kishorbhai Bhurabhai Koshiya made unaccounted cash investment of Rs. 11,62,47,100/- for purchase of the aforesaid land, upon which, the project "Silverstone River" was developed by the assessee group. The assessee is one of the sellers of the land and was 25% share holder in the land and received Rs. 2,90,61,775/- (25% of Rs. 11,62,47,100/-) and the same is not shown in his return of income for the AY 2011-12. After recording the above reasons and forming satisfaction that the amount of Rs. 2,90,61,775/- escaped assessment, the case was reopened u/s. 147 of the Act. Further, notice u/s. 148 of the Act was issued after following the procedure prescribed as per the Act and obtaining approval from the Competent Authority which was duly served upon the assessee. 6. With reference to para no. 3.3 to 7, this office is in possession of specific information received from the DCIT....
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.... so called seized material was found during the course of search carried out in the case of a third party namely M/s. K.Star Corporation and the same appears to be merely some rough estimates prepared by M/s. K.Star Corporation with respect to some construction project namely "Silverstone river" on the land in question. In this paper, it was also mentioned that flats/apartments already build up and sold are not less than 1,22,000 sq. ft. and remaining area is unsold. It suggests that this is fully developed land and this sheet has been prepared after full development in the year 2014-15. Also the Petitioner has not entered into any transaction with M/s. K.Star Corporation. It is also nowhere stated in the so called seized material that the Petitioner or any of the other co-owners was given any cash towards sale consideration over and above the amount mentioned in the conveyance deed. It has been baselessly stated that the sole developer of the project was Kishore Bhurabhai Koshiya and it has been further baselessly assumed that the said person has made unaccounted cash payment of Rs. 11,62,47,100/-. In any case, this reopening beyond a period of four years and there is no ....
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....come chargeable to tax has escaped assessment, is incorrect. 3. Having regard to the submissions advanced by the learned advocate for the petitioner, Issue Notice returnable on 5th February, 2019. By way of ad-interim relief, the respondent is permitted to proceed further pursuant to the impugned notice; he, however, shall not pass the final order without the permission of this court. Direct service is permitted today." 32. The law as regards the reopening of the assessment under Section 147 of the Act 1961 is well-settled. (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reas....
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....jurisdiction under Section 147 where assessment has been made under sub-section (3) of section 143, two conditions are required to be satisfied; (i) The Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment; (ii) Such escapement occurred by reason of failure on the part of the assessee either (a) to make a return of income under section 139 or in response to the notice issued under sub-section (1) of Section 142 or Section 148 or (b) to disclose fully and truly all the material facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has esca....
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....before proceeding for reassessment under Section 147 of the Act. (xviii) The "full and true" disclosure of the material facts would not include that material, which is to be used for testing the veracity of the particulars mentioned in the return. All such facts would be expected to be elicited by the Assessing Officer during the course of the assessment. The disclosure required only reference to those material facts, which if not disclosed, would not allow the Assessing Officer to make the necessary inquiries. (xix) The word "information" in Section 147 means "instruction or knowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure....
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.... DCIT, CC-4, Surat, and that too, based on a search and survey carried out at the residential and business premises in the case of K.Star Group. 35. The power to reopen a completed assessment under Section 147 of the Act 1961 has been bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. On the basis of the information by itself received from another agency, there cannot be any reassessment proceedings. However, upon receipt of the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee by applying his mind and thereafter is required to form an independent opinion on the basis of the material on record that the information has bearing on the income of the assessee and such income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there ca....
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....at the conclusion that there was of failure on the part of the assessee to disclose fully and truly all the material facts. In other words, mentioning by the Assessing Officer that the assessee has failed to disclose all material facts in the reasons recorded is not sufficient enough. Rather the Assessing Officer is under the obligation to arrive at such conclusion that the assessee failed to disclose all material facts necessary for the assessment after applying his mind and verification of the facts. But the Assessing Officer has not done so. In holding so we draw support and guidance from the judgment of the Bombay High court in case of Gateway Leasing (P.) Ltd vs. ACIT reported in 117 taxmann.com 442 where it was held as under: "35. Having discussed the above, we may once again revert back to the reasons furnished by Respondent No. 2 for re-opening of assessment under Section 147 of the Act. After referring to the information received following search and seizure action carried out in the premises of Shri Naresh Jain, it was stated that information showed that Petitioner had traded in the shares of M/s. Scan Steels Ltd., and was in receipt of Rs. 23,98,014.00 ....