TaxTMI 
TaxTMI 
2023 (8) TMI 19
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....ssed by learned AO u/s 147 of the Income Tax Act, 1961 which is void ab-initio deserves to be quashed. 2. Under the facts and circumstances of the case the learned CIT (A) has erred confirming the addition of Rs. 11,28,325/- account of alleged undisclosed long term capital gain. 3. Under the facts and circumstances of the case the learned CIT (A) has erred confirming the action of AO for not allowing the cost of improvement of Rs. 3,93,791/- incurred by the assessee for constructing the boundary wall on the plot. 4. Under the facts and circumstances of the case the learned CIT (A) has erred confirming the adoption of the sale consideration of Rs. 12,74,000/- as against actual sale consideration of Rs. 5,43,465/- shown by the assessee and taken by the sub-registrar u/s 50C of the Income Tax Act, 1961. 5. Under the facts and circumstances of the case the learned CIT (A) has erred in not giving opportunity of the cross examination of the persons on whose statement the AO has relied upon. 6. Under the facts and circumstances of the case the learned CIT (A) has erred in not providing the complete material on which the AO has relied upon and o....
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....5-2013 and 27-05-2013. In respect to some incriminating documents found and was seized from the possession of Shri Madan Mohan Gupta, allegedly contained dealings in respect of certain properties sold by the assessee. Shri Madan Mohan Gupta during the course of recording the statement stated that the details mentioned at page no. 57 of seized Annexure-A- 1 are related to the plot sold to one Shri Rajendra Kumar Jain of Jaipur by the assessee Shri Siyaram Jat. However, in this case notice under section 148 was issued on 27.03.2017 after obtaining approval from the Principal CIT-3, Jaipur which was served on 29.03.2017 for reopening of the case of the assessee. Thereafter, the case of the assessee was reopened and in response to the notice under section 148, the assessee filed the return of income on 01.12.2017 declaring the income of Rs. 1,24,955/- for the year under consideration as per computation below : Plot 22/05/2009 Value u/s 50C Sales consideration received Rs. 5,43,465/- Less: Indexed cost F.Y. 2001-02 - Rs. 16,662/426x632 Rs. 24,719/- Development Cost F.Y. 2002-03- Rs. 2,78,520/447x632 Rs. 3,93,791/- Rs. 4,18,510/- LTCG ....
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....these facts, I have reasons to believe that income to the tune of Rs. 7,30,535/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961." 2. The perusal of the aforesaid reasons reveals the following:- (a) On the basis of information received from DDIT(Inv)-III, Jaipur the Learned Assessing Officer has guessed that the assessee has sold a plot no. 84 at Jamna Vihar to one Shri Rajendra Jain for a sum of Rs. 15,08,000/- as against registered sale deed amount of Rs. 5,43,450/-. In the opinion of the Learned Assessing Officer the plot no. 84 Jamna Vihar Teelawala sold by the assesssee is the same of which similar particulars are available in the diary seized from Shri Madan Mohan Gupta although the of the seller and purchaser and amount of purchase and date of sale is not mentioned there. The action is totally based on guess work. (b) The sanctioning authority Pr. CIT-III has granted sanction in a mechanical manner without ascertaining whether any enquiry was conducted by the Learned Assessing Officer before reaching to the conclusion that there was any escapement of income. (c) The Learned Assessing Officer has further wrongly held that the entire ....
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....e. It was incumbent upon the Learned Assessing Officer to have caused enquiries and applied his mind whether there was any escapement of income and only then he could have taken action u/s 148. The assesee further quotes following decision which are directly applicable to the facts of the case: - (i) SIGNATURE HOTELS (P) LTD. vs. INCOME TAX OFFICER (2011) 338 ITR 51 (Delhi) Reassessment-Reason to believe-Information received from Director of IT (Inv.) vis-a-vis accommodation entry-For reopening an assessment the AO must have "reason to believe" that certain income chargeable to tax has escaped assessment and such reasons are required to be recorded in writing by the AO-Sufficiency of reasons is not a matter which is to be decided by the writ Court but existence of belief can be subject-matter of scrutiny-Notice under s. 148 can be quashed if the "belief" is not bona fide or one based on vague, irrelevant and non-specific information-Basis of the belief should be discernible from the material on record which was available with the AO when he recorded the reason-There should be a link between the reasons and the material available with the AO-In the instant case, th....
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....) followed). (iv) ACIT vs. Devesh Kumar (ITAT Delhi) dt. 31.10.2014 Reopening solely on the basis of information received from the investigation wing & without independent application of mind is void. (v) Unique Metal Industries vs Income Tax Officer (ITAT Delhi) dated 28.10.2015 Reopening solely on the basis of information received from another AO that the assessee has booked bogus bills but without independent application of mind to the information renders the reopening void. (vi) CIT Vs. SFIL Stock Broking Ltd. (2010) 41 DTR 98 (Del) Reassessment-Reason to believe-Reopening on directions of superior officers-50-called reasons recorded by the AO for reopening assessee's assessment comprises mere information received from Dy. Director of IT (Inv.) followed by directions of the very same officer and the Addl. CIT to initiate proceedings under s. 147- These cannot be the reasons for proceeding under s. 147/148-From the so-called reasons it is not at all discernible as to whether the AO has applied his mind to the information and independently arrived at a belief on the basis of the material before him that income had escaped ....
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....fice on 10.1.2014 vide No. 1415 dated 7-1-2014. A search action u/s 132 was carried out in the case of Shri Madan Mohan Gupta on 23-5-2013 at Jaipur when certain incriminating documents were found and seized. As per page-57 of seized Annexure A-1, plot No. 82 of Jamna Vihar was sold @ Rs. 4,900 per Sq. yard i.e. for Rs. 12,74,000/- to one Shri Rajendra Kumar Jain of Jaipur. However, in the registered sale agreement dated 25-5-2009, consideration of this plot was shown to be Rs. 5,43,465/- only. Thus the consideration to the extent of Rs. 7,30,535/- was not disclosed by the assessee. In view of these facts, I have reasons to believe that income to the tune of Rs. 7,30,535/- has escaped assessment within the meaning of section 147 of the I.T. Act, 1961." Thus the Assessing Officer has proceeded on the premises that the assessee has sold the property by showing lesser amount of Rs. 5,43,465/- in the registered sale deed dated 23.05.2009 whereas the impugned plot was actually sold for a consideration of Rs. 12,74,000/- as per noting on the seized incriminating documents found mentioned in the diary found in possession of Shri Madan Mohan Gupta. The diary found from the poss....
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....ken into consideration nothing has come out to be regarded as any incriminating material or fact to reveal any higher consideration received by the assessee for selling of the plot land in question. The addition made by the AO is solely on his own presumption that the assessee has received sale consideration over and above the amount mentioned in the sale deed without any tangible material or evidence in support of his decision. When the seized material found from Shri Madan Mohan Gupta as well as other material gathered during post search inquiry has not established any direct or proxy connection with the transaction of sale of land by the assessee then the assumption and presumption of the AO that the assessee might have received amount over and above the consideration shown in the sale deed is only surmises and conjectures. Thus the addition so made has no legs to stand in the absence of any incriminating material but the said addition is merely based on assumption of the A.O. We further note that an identical issue of reopening of the assessment in the case of Shri Navrattan Kothari Vs. ACIT in ITA No. 425/JP/2017 has been considered and decided by this Tribunal vide order date....
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....ct. The Assessing Officer analyzed the statement and the seized material for his satisfaction as recorded in paras 4 and 5 of the assessment order as under:- "4. In his statements, recorded during the course of search/post search proceedings, Shri Madan Mohan Gupta submitted that the following pagers of various exhibits are related to land transactions at Chainpura behind Entertain Paradise, Jaipur. Sr. Annexure No. & Exhibit No. Page No. Found/seized from 1 Annexure A Exhibit-1 15 to 24,27,38,43,44, and 69 to 74 Residential premises 2 Annexure A Exhibit-2 47 and back side of 48, 50 to 54 Residential premises 3 Annexure A Exhibit-5 1 to 77 Residential premises 4 Annexure AS Exhibit-1 1 to 3,7,9,10 Office premises 5. Further in the statements of Shri Madan Mohan Gupta, he submitted that on the above page, details w.r.t. a land transactions at Village chainpura behind entertainment Paradise, Jaipur has been recorded which was purchase by Shri Rajendra Kumar Jain resident of D-25, Lal Bahadur nagar, Jaipur, through him i.e. Shri Madan Mohan Gupta. The deal was finalized at Rs. 12,43,27,000/- out ....
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....d therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person] ^82[and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person ^82a[for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in sub-section (1) of section 153A] :] ^8 ^3[Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to ^84[sub-section (1) of] section 153A shall be construed as reference to the date of receiving the books....
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....isions of section 153C of the Act, the AO cannot resort to invoke the provisions of Section 147/148 of the Act to assessee or reassess income of the assessee. The action of the AO to initiate the proceedings Under section 147/148 of the Act vitiates the entire reassessment proceedings and the assessment order. Once, the AO is satisfied that the documents seized belong to the persons other than the searched person, the Assessing Officer shall proceed against such other persons and issued notice u/s 153C and assessee or reassess income of such other persons in accordance with the provisions of section 153A of the Act. Therefore, it is mandatory for the AO to proceed u/s 153C if he is satisfied that the seized material reveals the income of such other persons to be assessed or reassessed. The Amritsar Bench of this Tribunal in case of ITO vs. Arum Kumar Kapoor (supra) while deciding an identical issue of validity of initiation of proceedings u/s 147/148 on the basis of seized material has held in paras 7.2 and 8 as under:- "7.2. The undisputed facts are that a search was conducted under s. 132 of the Act in the case of M/s. Today Homes & Infrastructure (P.) Ltd. on 28th March....
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....void ab initio. In view of the provisions of s. 153C of the Act, s. 147/148 stands ousted. In the instant case, the procedure laid down under s. 153C has not been followed by the AO and, therefore, assessment has become invalid. We also observe that the CIT(A) was justified in following the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari v. Asstt. CIT [2007] 289 ITR 341 / 159 Taxman 258 wherein it has been held that if the procedure laid down in s. 158BD is not followed, block assessment proceedings would be illegal. The CIT(A) has correctly observed that the provisions of s. 153C are exactly similar to the provisions of s. 158BD of the Act in block assessment proceedings. Thus, considering the entire facts and the circumstances of the present case, we hold that the CIT(A) was fully justified in quashing the reassessment order. We also do not find any merit in the submissions of the learned Departmental Representative that during the course of search, it was found at premises of M/s. Today Homes & Infrastructure (P.) Ltd. pertaining to M/s. P.R. Infrastructure Ltd. and not the assessee. In this regard, we may point out that the contention raised by....
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.... assessment is separate provisions created for assessment of search cases where the search is conducted u/s 132 or requisition was made u/s 132A of the Act. 12. Under the provisions of section 147, the Assessing Officer is having power to re-open the assessment, if he is of the opinion that the income chargeable to tax has escaped assessment. Before doing so, the Assessing Officer should satisfy himself that, there is material which suggests that there is an escapement of income. The AO can exercise these powers with a reasonable belief coupled with some material which suggest the escapement of income. Once the conditions precedent for assumption of jurisdiction to commence the reassessment proceedings, he has to cross the hurdles attached with reassessment by way reasons for reopening of assessment, time limit for issue of notice and provision for obtaining sanction of higher authority in certain circumstances. Under the provisions of section 153A to 153C these hurdles are cleared by using the non abstante clause in the said section. In other words, under the new provisions of section 153A, the AO is not required to satisfy these conditions before issue of notice. The onl....
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....hich is falling within those six assessment years immediately preceding the assessment year in which search is conducted. The assessee case falls within the provisions of section 153C, as the incriminating document seized in the case of search in another case. The Assessing Officer, on satisfying the above condition is under obligation to issue notice to the person requiring him to furnish the return for the six assessment years immediately preceding the assessment year in which search is took place. Thereafter, the Assessing Officer has to assess or reassess the total income of those six assessment years. The word "shall" used in section 153A made it clear that the Assessing Officer has no option, but to issue notice and proceed thereafter to assess or reassess the total income. In the instant case, the Assessing Officer issued notice u/s 148 to reopen the assessment. Therefore, in view of the non-abstante clause begin with section 153A, the Assessing Officer has no jurisdiction to issue notice u/s 148 reopen the assessment of those six assessment year which falls within the exclusive jurisdiction of section 153A. Though, both provisions of the Act empowers the Assessing Officer t....
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.... it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made u/s 153A (1)(b) and the first proviso. It also means that only one assessment will be made under the aforesaid provisions as the two proceedings i.e. assessment or reassessment proceedings and proceedings under this provision merged into one. If assessment made under sub-section (1) is annulled in appeal or other legal proceedings, then the abated assessment or reassessment shall revive. This means that the assessment or reassessment, which had abated, shall be made, for which extension of time has been provided under section 153B. 53. The question now is - what is the scope of assessment or reassessment of total income u/s 153A (1) (b) and the first proviso? We are of the view that for answering this question, guidance will have to be sought from section 132(1). If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and found in the course of search in our humble opinion such books of account or other documents have to be taken into account while making assessment or reassessm....
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....was to be passed, the undisclosed income was to be assessed in the different assessment years to which it related. But all this had to be made in a single assessment order. The block assessment so made was independent of and in addition to the normal assessment proceedings as clarified by the Explanation below Section 158BA(2). After the introduction of the group of Sections namely, 153A to 153C, the single block assessment concept was given a go-by. Under the new Section 153A, in a case where a search is initiated under Section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2003, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the ....
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....sessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate'. The reason is not far to seek. Under Section 153A, there is no room for multiple assessment orders in respect of any of the 'six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the same assessment year determining....
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....ratio of the above decisions to the facts of the present case, we find that there is no dispute that the original assessment for the A.Y. 2001-02 was completed u/s 143(3) on 13-2-2004 determining the total income at Rs. 26354942360/-. Thereafter, a search and seizure action was initiated in assessee's case by the Department on 2-7-2005 on which date the assessment for the A.Y. 2001-02 was not pending. Therefore, in view of the non- obstinate clause with which sub section (1) of section 153A opens, the A.O. has no jurisdiction to issue notice u/s 148 of the Act in respect of those six assessment years which falls within the exclusive jurisdiction of section 153A of the Act and accordingly the A.O. was not justified in issuing notice u/s 148 on 28-8-2006 and in completing the impugned assessment u/s 143(3) r.w.s. 147 of the Act on 31-10-2006. The A.O. instead of complying with the requirement of section 153A proceeded with the provisions of section 147/148 which are not applicable in the assessment u/s 153 A of the Act, therefore, the impugned assessment completed u/s 143(3) r.w.s. 147 of the Act is a nullity and as such the assessment order dtd. 31-10-2006 passed u/s 143(3) r.w.....
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....er sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur - 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed." Therefore, in conjoi....
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....ot purchase any land as it remained with M/s Shri Kalyan Buildmart Pvt. Ltd. and there is no change of the ownership of the said land as belong to M/s Kalyan Buildmart Pvt. Ltd. We find that there is no transaction of sale and purchase of land in question between the assessee and Shri Madan Mohan Gupta. What was transferred by Shri Madan Mohan Gupta and his wife Smt. Shashi Kala Gupta were the shares of M/s Kalyan Buildmart Pvt. Ltd. which owned the land in question. There may be a case of under valuation of shares and understatement of consideration paid by the assessee however, it is not a case of purchase of land. The purchase consideration of shares was accepted by the AO while completing the assessment u/s 143(3) r.w.s. 153A and therefore, the AO is precluded to reassess the income on the basis of non existing transaction of purchase of land. Further, the AO himself was not sure about the escapement of income and assess the income in the hands of the assessee only on protective basis. The very basis of invoking the provisions of section 147/148 is contrary to the facts and record that it was a transaction of purchase of shares of M/s Kalyan Buildmart Pvt. Ltd. and not purchase....
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....n 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding with out anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 17. The above said decision of the Full Bench of the Delhi High Court was upheld by the Supreme Court in the decision reported in Commissioner of Income-tax v. Kelvinator of India Ltd [2010] 320 ITR 561 (SC)., wherein the Supreme Court held that the concept of "change of opinion" on the part of the Assessing Officer to reopen the assessment did not stand obliterated after the substitution of Section 147 of the Income Tax Act. The Supreme Court also held that the Assess....
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....ression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR (St.) 1,29), which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147.-A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." (emphasis sup....
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....necessary for his assessment for that assessment year. Unless, the condition in the proviso is satisfied, the Assessing Officer does not acquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. The relevant words in the proviso are, ". . . . unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee ... . ." Mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the ....
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.... Court in the case of CIT v. Progressive Engineering [1993] 200 ITR 231 (sic), held that when all the relevant facts were before the court and the law is clear on the subject, it is the duty of the High Court to interfere. That was also a case where the proceedings were sought to be initiated against the assessee under section 147 of the Act. 20. In the case of ICICI Securities Ltd . v. Assistant Commissioner of Income Tax 3(2), Mumbai, the Bombay High Court vide order dated 22.08.2006 in W.P.No.1919 of 2006, while dealing with the issue on the reopening of assessment, held as follows: "7. In the facts of the present case, there is nothing new which has come to the notice of the revenue. The accounts had been furnished by the Petitioner when called upon. Thereafter the assessment was completed under section 143(3) of the Income Tax Act. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make ....
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....d is the order which has been passed on 5 July 2011 for Assessment Year 2007-08. In that order, according to the Revenue, it has been held that the assessee acts as a mere facilitator and is not a manufacturer so as to entitle it to the deduction under Section 10A. The issue, however, before the Court, is as to whether that can form the basis of the reopening of the assessment beyond a period of four years. The reasons which have been disclosed by the Assessing Officer do not set out as to what facts the assessee had failed to fully and truly disclose. Even a prima facie reference to the basis on which it is sought to be inferred that there was a failure to disclose all material facts has not been set out in the reasons. In that view of the matter, we are of the view that the primary jurisdictional requirement for reopening the assessment beyond a period of four years has not been fulfilled in this case. Since the order passed by the CIT (Appeals) for Assessment Year 2007-08 has been passed after the assessment for Assessment Year 2005-06 has been sought to be reopened by the notice dated 29 June 2011, we have, for the purposes of this discussion, kept that circumstance out of cons....
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....idered in the hands of the assessee as a conclusive evidence so as to reopen the assessment and make additions towards long term capital gain in sale of the plot of land. Undisputedly, no other material suggesting receipt of higher amounts was recovered during the search. It is trite law that burden is on the revenue to prove that the price had been under stated and no addition is possible without any inquiry. In this case, there is no cogent material to support the reopening of the assessment within the meaning of section 147 and that the appellant has actually received higher amount than that recorded in the registered sale deed and the AO did not conduct any inquiry to bring some material to corroborate the notings found in the diary allegedly contained dealings in respect of certain properties sold by the assessee, except relying on the statement of Shri Madan Mohan Gupta. Therefore, following the earlier order of this Tribunal in the case of Shri Navrattan Kothari Vs. ACIT (supra), wherein exactly same facts were involved and after considering the various judicial pronouncements on the issue held the issue of notice u/s 147 without jurisdiction, we hold that the reopening of t....