AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (8) TMI 19
X X X X Extracts X X X X
X X X X Extracts X X X X
....61 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 opportunity to confront the same before passing the appellate order completion of the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Rs. 1,24,955/- However, it appears that due to inadvertence the return filed by the assessee escaped the notice of the Assessing Officer as he has completed the assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llowing:- (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 sale consideration of Rs. 15,08,000/- is escaped income. He has not considered that the index cost of the plot required to be reduced from the sale consideration. It is submitted that the above facts observed by the Learned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing 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, the first sentence of the reasons recorded by the AO states that information has been received from Director of IT (Inv.) that assessee has introduced unaccounted money amounting to Rs. 5 lacs during the relevant year as per the details given ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 assessment-Proceedings under s. 147/148 rightly quashed by Tribunal-No substantial question of law arises for consideration. (vii) SARTHAK SECURITIES CO. (P) LTD. vs. INCOME TAX OFFICER (2010) 329 ITR 110 HIGH COURT OF DELHI Where the identity of the companies who had invested in the shares of petitioner-c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 possession of Shri Madan Mohan Gupta allegedly contained dealings in respect of certain properties sold by the assessee. The details recorded in the seized diary found from the possession of Shri Madan Mohan Gupta allegedly revealed the sale value of the plot at Rs. 12,74,000/-. The statement of Shri Madan Mohan Gupta was recorded by Investigation Win....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 dated 13/12/2017 in paragraphs No. 6 and 7, which is reproduced as under: " 6. We have considered the rival submissions as well as relevant material on record. The matter revolves around the transaction of purchase and sale of land situated at Village Chainpura, Tehsil Sanganer (behind of Entertainment Paradise) Jaipur. The said land was purchased b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 of which discount of Rs. 1% was allowed for registration of land. Therefore, Rs. 13,30,84,000/- were net payable to the seller and the details of the same have been recorded on page No. 15-18 of Exhibit-1 of Annexure-A, found and seized from his residence. Later on this land was sold to Shri K.G. Kothari. Shri Madan Mohan Gupta further submitted that this land was purchased in the name of M/s Kalyan Buildmart Pvt. Lt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :] 8 5[Provided further that the Central Government may by rules86 made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....see 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, 2006, during the course of which certain incriminating documents were allegedly seized. It is also a matter of record that the Dy. CIT, Central Circle-22, New Delhi intimated the AO of the assessee about seizure of certain documents pertaining to the assessee during search and enclosed copy of those documents requesting him to take appropriate action under s. 153C/148 of the Act. It is after that that during the course of appellate proceedings before the CIT(A) the assessee took an additional ground of appeal to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the learned Departmental Representative is factually incorrect and contrary to the available records of seized documents specifically mentioned in the assessment order dt. 30th Dec, 2008. In view of the above factual discussion, we do not find any merit and substance in the contention of the learned Departmental Representative. Therefore, we uphold the order of the CIT(A) and dismiss the ground Nos. 1 to 4 of the appeal." A similar view was taken by the Visakhapatnam Bench of this Tribunal in case of G. Koteswara Rao vs. DCIT (su....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 only requirement is that there should be a search action u/s 132 or books of account, other documents or any other asset are requisitioned under section 132A. Therefore, we are of the opinion that though, the Assessing Officer from both sections empowered to tax the income escaped from tax, both are works in a different situations, i.e. section 147 comes in to operation where there is an escapement of income chargeable to tax and section 153A comes in to operation where there is search u/s 132. 13. Under the provisions of section 153A, the Assessing Offi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al 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 to assess or reassess the income escaped from assessment, both sections are dealing with different situations. Section 147 comes into operation when, the Assessing Officer believes that there is an escapement of income chargeable to tax, either from the return already filed or through some external material evidence came to his knowledge, which shows the escapement of income. Whereas, section 153A comes into operation when there is search u/s 132 or books of accounts, or any other asset or other documents requisitioned u/s 132A. If Assessing Officer justified in proce....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 reassessment of total income under the aforesaid provision. Similar position will obtain in a case where undisclosed income or undisclosed property has been found as a consequence of search. In other words, harmonious interpretation will produce the following results :- (a) In so far as pending assessments are concerned, the jurisdiction to make original assessment and assessment u/s 153A merge into one and only one assessment for each assessment year shall be made separately on the basis of the findings of the search and any other material existing or brought on the record of the A.O. (b) in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3, 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 normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section is that the Assessing Officer is empowered to assess or reassess the "total income' of the aforesaid years. This is a significant departure from the earlier block ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iso 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 the total income of the assessee. In order to ensure this state of affairs namely, that in respect of the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Section (1) of Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those proceedings abate, the decks are cleared, for the Assessing Officer to pass assessment orders for each of those six years determining the tota....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 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.s. 147 of the Act is illegal, arbitrary, wholly without jurisdiction and, hence, the same is quashed." 17. Considering the facts and circumstances of the case and also applying the ratios of the above mentioned decisions, we are of the considered opinion that the Assessing Officer, has no jurisdiction to issue notice u/s 148 of the Act to reopen the assessments in respect of those six assessment years immediately preceding the assessment year in which search is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in anothe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 conjoint reading of provisions of section 153A, 153C and 147/148 of the Act as well as a consistent view taken by this Tribunal in a series of decision cited (supra) we hold that the assessment or reassessment of income of the person other than search persons based on seized material can be only be made u/s 153C r.w.s. 153A and the provisions of section 147/148 of the Act are not applicable in such cases. No contrary decision has been brought to our notice. Accordingly, we hold that initiation of proceedings u/s 147/148 by the AO to reassess the income is illegal being without jurisdiction and consequently the reassessment order passed u/s 147 r.w.s. 143(3) is also illegal and void abiniti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng 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 of land owned by the said company. Even if the purchase consideration of share is under stated the reasons for reopening do not state so and therefore, the reopening on the basis of non existing transaction is not permitted. Once, the transaction of purchase of shares was revealed during the assessment u/s 143(3) r.w.s. 153A and the same was considered and accepted by the AO then the AO is not permitted to reopen the assessment to review its order as it would amount to change of opinion. The Hon'ble Madras High court in case of CIT vs. Remedies Ltd. (Supra) has held in paras 10 to 12 as under:- "10. We find from the order of the Tribunal and also on the facts as has been culled out from ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Assessing Officer has power to reopen the assessment, provided there is "tangible material" to come to a conclusion that there was an escapement of income from assessment. For better appreciation, the relevant portion of the said decision reads as follows: "6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sion 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 supplied) 18. Similar view has been taken by this Court in the decision reported in Commissioner of Income-tax v. Cholamandalam Investment and Finance Co. Ltd. [2009] 309 ITR 110 , wherein it was held as follows: "In those circumstances, it could not be regarded that the assessee had failed to disclose fully and truly all material facts relevant for the assessment. As the facts revealed that the Assessing Officer who made the original assessment order has called for all the details regarding the case where 100 per cent. depreciation were claimed and the assessee had furnished the invoices for purchase of assets on which 100 per cent. depreciation were claimed, there was no failure on the part of the assessee and if at all there was any failure,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147.... . . . . . . . . . . . . . . ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 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 a proper return. In the present case, no such case is made out on the record. 8. In the circumstances, we allow this petition in terms of prayer (a) and quash and set aside the notice dated 27th March 2006 directing reopening of the assessment for the year 1999-2000. 21. The above-said view of the Bombay High Court was affirmed by the Supreme Court in Civil Appeal No.5960 of 2012.' 12. In the light of the above, we hold that when the Assessing Officer had failed to record anywhere his satisfaction or belief that the income chargeable to tax had escaped assessment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment. On the contrary, it was the Assessing Officer, who failed to consider the materials placed before him at the time of regular assessment for whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 consideration. We have come to the conclusion that the Assessing Officer having failed to establish that there was a failure on the part of the assessee to disclose fully and truly all material facts for Assessment Year 2005-06, the reopening beyond a period of four years is clearly not valid. There was a finding of fact by the Assessing Officer in the assessment order for Assessment Year 2005-06 that the business activity of the assessee is manufacturing of jewellery in a Special Economic Zone. That finding, as the assessment order notes, was based upon a consideration of the facts of the case and upon examining the contentions of the assessee." When the AO has failed to set out in the reasons recorded as to what facts the assessee has failed to disclose fully and truly then the reopening after 4 years is invalid being without jurisdiction. We do not wish to ....