TaxTMI 
TaxTMI 
2022 (7) TMI 1536
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....ng 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 petitioner filed return of income for the Assessment Year 2011-2012 i.e. the yea....
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....ut 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 added to the total income of the assessee. As such, in view of the above facts and material, I have reason to believe that....
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....orporation (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 land in question. 6.1) It was submitted that the so called seized material was collected during the course of search action carried out in the case of M/s. K S....
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....erson 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 may be the estimated market value as on the date of preparing such sheet for the purpose of working out the total cost of the project. 6.6) Learned Senior Advocate Mr. He....
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....at 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, Surat for the purpose of reopening the assessment in the case of the petitioner and the respondent has not at all applied his mind independently so as to reach a conclusion that any i....
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....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 Rs. 18,56,219/-. It was furher submitted that according to the incriminating documents seized, Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani have purchased land bearing....
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....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 pointing out any clarification of the difference or cogent evidences and, therefore, action of the respondent of reopening the assessment is valid. 7.7) It was submitted that during the cours....
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....d 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 tangible material and formation of belief or reason to belief that income has escaped assessment. In the facts of the case merely certain material which is otherwise tangible and enables the AO to form a belie....
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....x 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 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-applicant that the sale consideration was received by cheque. The details as to the share holdings of all the four co-own....
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....on 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 Dharmashibhai Narola has received unaccounted cash receipts of Rs.2,90,61,775/- (as per the assessee share 25% of Rs.11,62,47,100/-) and not shown his retur....
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....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. AVERAGE TOTAL SOLD 122475 3434 420635489 UNSOLD 33699 4800 195755200 TOTAL 161174 3762 606390689 LAND COST 7000*20000 130880100 AVERAGE CONSTR. COST PER SQ. FT 161174 1500 241761000 TOTAL COST 372641100 BALANCE 233749589 SHARE-KB 100 23374....
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....al 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 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 Corporation is an unknown entity for the assessee and the assessee had not executed any agreement or made any transactions with the said firm. It also came to the knowledge of the assessee that M/s. K.Star Corporation was not into existence at the time of execution of ....
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....s 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 to establish fact of escapement of income. At the stage of issue of notice the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement is not the concern at this stage. This is so because t....
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....eration 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.13,08,80,100=00. He submits that there is no tangible material so as to reopen the case of the writ-applicant. 25. In such circumstances referred to above, Mr.Hemani, the learned senior counsel, prays that there being merit in his writ-application, the same may be allowed and the impugned notice be quashed and set-....
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....ya 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, Central Circle which is further based on Investigation Wing and these are the internal limbs of the Department and the decision of the Hon'ble High Court in the case of Aradhana Estate P. Ltd. Vs. DCIT is applicable in this case. It is once again reiterated that there is no change of opinion. Further, impounded material was also received w....
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....lats/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 failure on the part of the Petitioner as to full and true disclosure. Also the issue on hand was threadbare examined at the original assessment stage. Validity of reopening is to be tested strictly on the basis of reasons recorded prior to reopening. Also reopening is based on borrowed satisfaction. Also the share of the Petitioner has been erroneously presumed to be 25%. ....
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....t 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 reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in r....
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....n 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 escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression "tangible material" does not mean the material alien to the original record. (xiii) The order, disposing of objections or any....
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....ord "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, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on recor....