TaxTMI 
TaxTMI 
2022 (7) TMI 1536
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....e 226 of the Constitution of India challenging the impugned notice dated 28.03.2018 issued under section 148 of the Income Tax Act, 1961 (For short "the Act") proposing to reopen the assessment for the Assessment Year 2011-2012. 5.Brief facts of the case are that the petitioner is an individual and is basically an agriculturist. The petitioner, along with three other co-owners, sold an agricultural piece of land bearing Revenue Survey No.203/2, Khata No.2637, old tenure land, admeasuring 0-58-53 hectare (equivalent to 7000 square yards), draft Town Planning scheme No.50, Final Plot No.68, situated at village Katargram, Surat to two persons namely (1) Ankitkumar Gagjibhai Koshiya and (2) Swintubhai Arvindbhai Mavani vide sale deed dated 29.03.2011 for total sale consideration of Rs.1,46,33,000/-. It is the case of the petitioner that such sale consideration was received by cheque. Details as to share-holding of all four co-owners of land in question are as follows: Kantibhai Dharamshibhai Narola : 1/6th Vijaybhai Dharamshibhai Narola : 1/6th Jerambhai Bhikhabhai Khokariya : 1/3rd Ambalal Laljibhai Patel (Petitioner) : 1/3rd 5.1) The petition....
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....ed that the purchase of the above piece of land is at Rs.20,000/- per Sq. Yd. and total purchase value is worked out at Rs.13,08,80,100/- whereas the sale deed is made for only, Rs.1,46,33,000/-. 3&4. Analysis of information collected/received and enquiries made by the AO as sequel to information collected/received:- Not Applicable. 5&6. Finding of the AO/Basis of forming reason to believe and details of escapement of income:- From the details available on record, it is noticed that the assessee has not filed his return of Income for the A.Y. 2011-12 even though the transactions more than the taxable limit, l.e. long term capital gain on transfer of the property discussed above. Since the assessee has not filed his return of income for the year under consideration and this office has not available the actual shareholding of the assessee in he above property, therefore, 1/4th of the property considered to be the assessee's share and accordingly the assessee has received long term capital gain of Rs.3,27,20,025/- (Rs.13,08,80,100 x 1/4th share), therefore, an addition of Rs.3,27,20,025/- is required to be made on account of unexplained long term capital gain and....
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....ondent clarifying that the petitioner and the other co-owners had sold the land in question to Ankitbhai Koshiya and Swintubhai Mavani and that M/s. K Star Corporation (i.e. the person searched) was an unknown entity and the petitioner had not entered into any transaction with the said entity. It was also clarified that it had come to the knowledge of the petitioner that M/s. K Star Corporation was not even in existence at the time of execution of the sale deed in question. 5.9) Being aggrieved by the impugned notice as well as order disposing of the objections, the petitioner has preferred the present petition. 6.Learned advocate for the petitioner submitted that the petitioner has filed return of income for the year under consideration on 17.01.2012 declaring total income at Rs.48,14,499/- (excluding agricultural income) which included long term capital gain of Rs.45,06,219/- arising on account of sale of the land in question. Thus, the initial premise for reopening the case of the petitioner for the year under consideration is erroneous since the petitioner had already disclosed the details of agricultural income which included the long term capital gain arising out of the....
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....terial proves receipt of unaccounted consideration. It was submitted that the belief of the respondent has to be a rational belief which can be drawn by a reasonable person from analysis of the given set of facts which aspect is missing in this case. 6.4) It was submitted that the seized material appears to be merely a rough estimate prepared by M/s. K Star corporation as to some construction project namely "Silverstone river" on the land in question which shows estimated return from the project vis-a-vis total cost of the project including cost of land and cost of construction. It was submitted that on perusal of such paper it reveals that cost of land has been worked out at Rs. 13,08,80,100/- which is only an estimated figure and not supported by any evidence and further it is also mentioned in the said paper that flats/apartments already build up and sold are not less than 1,22,000 sq. ft. and remaining area is unsold and it is a fully developed land and this sheet has been prepared after full development in the year 2014-2015. 6.5) It was further submitted that in the said paper, it is not mentioned anywhere that any cash was ever paid to the petitioner and the land cost ....
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....respondent to provide such details, the respondent furnished the evidence found during the course of search i.e. one sheet of paper. It was submitted that it is a settled law that legality of the proceedings initiated under section 147 of the Act are to be judged on the basis of the reasons recorded for reopening and if reasons suffer from vagueness or any other defects or contradictions, the same cannot be improved by adding something more to the reasons. 6.9) It was submitted that the respondent has acted illegally and without jurisdiction in issuing the impugned notice inasmuch as statutory notice under section 148 can be issued if and only if "an Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment" which implies that an Assessing Officer himself must be satisfied that some income chargeable to tax has escaped assessment and such satisfaction must be of the concerned Assessing Officer himself. It was submitted that in the present case, no such satisfaction has been recorded by the respondent Assessing Officer. In fact, the respondent has merely relied upon the information received from the office of the DCIT, Central Circle 4, Sura....
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....016 and during the course of search at the back office of M/s. K. Star Corporation located at opposite Nilkanth School, the digital data imaging was done. From the analysis of data, it was found that it contains working in respect of various aspect of the project "Silverstone River" like numbers of units constructed, sale value, sold area, unsold area, average cost of construction, land cost, etc. of various projects of the group which was seized. It was submitted that from the incriminating documents impounded during the course of search in the case of M/s. K. Star Corporation, it is found that the petitioner along with other three co-owners has sold above said agricultural land for Rs. 13,08,80,100/- and since the petitioner was having 1/4th share in the above property, therefore Rs.3,27,20,025/- is considered as sale value of his share. However, in the return of income, the petitioner has shown total sale consideration at Rs.48,77,000/-. Accordingly, after claiming deduction for "indexed cost of acquisition" Rs.3,70,781/- being expenditure on transfer and Rs.26,50,000/- being claim of exemption under section 54 of the Act, the petitioner has calculated long term capital gain at ....
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....) It was submitted that the from sequence of proceedings being taken before and after the issuance of notice under section 148 of the Act by the respondent, it is evidence that the reopening proceeding is within the prescribed time limit as prescribed in the Act and therefore, the proceedings started under section 147 of the Act by the respondent is proper and as per the procedure laid down by the Hon'ble Apex Court in the case of GKN Drvieshaft (P)Ltd reported in 259 ITR 19 (SC). 7.6) Learned advocate Mr. Raval submitted that the petitioner has filed his return of income on paper mode, however before proceeding for reopening the respondent verified with e-filing mode and therefore, it was observed by the respondent Assessing Officer that the petitioner has not filed his return of income. It was submitted that on verification of the return of income filed on 17.01.2012 it was noticed that the petitioner has declared total income at Rs.48,14,499/- whereas in response to notice issued under section 148 of the Act, the petitioner has filed his return of income on 21.04.2018 declaring total income at Rs.21,64,500/- (by way of e-filing) and claimed refund of Rs.5,86,510/- without....
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....acie material that income has escaped assessment. The crucial link between the information made available to the AO and the formation of belief should be gathered. The reasons must be self evidenced and they must speak for themselves so as to enable on perusal of the reasons that tangible material which forms the basis for the belief that income has escaped assessment must be evident. 9. In the facts of the case, the original assessment is processed under section 143(1) of the Act and not under section 143(3) of the Act and therefore, provision to section 147 of the Act would not apply. Reopening of the assessment under section 147 of the Act is a potent power and should not be lightly exercised and it can never be invoked casually or mechanically. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. 10. It is true that report of the investigation wing might constitute the material, on the basis of which, the AO forms reason to believe, however the process of arriving at such satisfaction should not be mere repetition of the report of the investigation. The AO must demonstrate some link between tang....
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....6 of the Constitution of India, the writ-applicant seeks to challenge the legality and validity of the notice dated 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 writapplication 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 (writapplicants of the connected writapplications) 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....
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.... amounting to Rs.1,46,33,000/-, situated at moje. Katargam, Dis: Surat, having F.P. No. 68, T.P. No.50, R.S. No. 203/2, sale deed registration no. SRT/4/KTG/7068/2011 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 l....
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....ceived cash of Rs.2,90,61,775/- [116247100 (130880100-14633000) * 25%] which was not shown in return of income. On the basis of said alleged working 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 SILVERSTON E RIVER SQ. FT. AVE....
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....f K.Star group. In this regard it is submitted that the said sheet seems to be the estimate sheet prepared by the K.Star Group. This sheet shows the estimated working of project of Silverstone river showing thereof the no. of square feet booked, its average rate, total amount of booked flats, unbooked 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 coowners. 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....
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....that income has escaped assessment within the meaning of section 147 of Income-tax Act, 1961 and accordingly the case was reopened. The provision of Section 147 of the I.T. Act and ratio of various case 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 ....
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.... received was Rs.13,08,80,100=00 as against the sale consideration of Rs.1,46,33,000=00 as mentioned in the sale-deed. 20. Mr.Hemani pointed out that the land was sold to two individuals, viz. Ankitkumar Koshiya and Swintubhai 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 a....
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....d. The rate of purchase of the above piece of land was Rs.20,000/- per sq. yard and the purchase of the above piece of land mentioned in the said working was Rs.13,08,80,100/- (may be after some deductions) but the sale deed was executed for Rs.1,46,33,000/- only. The 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 followin....
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....vindhbhai Mavani) and not to M/s. K.Star Corporation. There is no involvement of any unaccounted cash investment over and above the sale consideration recorded in the conveyance deed. The project 'Silverstone river" has not been developed by the Petitioner. The 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 sol....
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....as seized during the course of search in the case of M/s. K.Star Corporation, however, the petitioner has not sold the land in question to M/s. K. Star Corporation but to two other persons, and hence also, the very basis for the formation of the belief that income 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 ref....
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.... years from the end of the relevant assessment year, yet it would not be necessary for the Assessing Officer to show that there was any failure to disclose fully or truly all the material facts necessary for the assessment. (ix) In order to assume 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 ar....
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....n received believes in good faith that the assesee's profits have escaped assessment or have been assessed at a low rate. However, nothing would preclude the Income Tax Officer from conducting any formal inquiry under Section 133(6) of the Act 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 accep....