TMI Blog2011 (6) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... Vijaykumar for the Respondent. ORDER A.L. Gehlot, Accountant Member. These are cross appeals and are directed against the order dated 28-3-2007 passed by the CIT(A)-IV, Rajkot for the assessment year 1999-2000. 2. The effective grounds raised in the appeals are as follows: ITA No. 352/Rjt/2007 - Appeal by Assessee: "2. The learned Commissioner of Income-tax (Appeals)-IV, Rajkot [hereinafter referred to as the 'CIT(A)'] erred on facts as also in law in dismissing the appellant's ground of appeal relating as to validity of issue of notice under section 148 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") and consequent assessment made by the Assessing Officer. The notice under section 148 of the Act and the assessment may kindly be held as invalid and void-ab-initio and may kindly be quashed. 3. The learned CIT(A) further erred on facts as also in law in confirming the action of the Assessing Officer in rejecting the valuation report and estimating fair value as on 1-4-1981 at Rs. 1,750 per sq.ft. as against value determined at Rs. 2,200 by the registered valuer as per the valuation report and directing the Assessing Officer to adopt such value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sources Dividend income Rs. 3,400 exempted Interest income as per statement: Rs. 13,33,458 Less : Deduction under section 80L Rs. 2,837 Total Income Rs. 18,32,836 From the above revised return it was noticed by the Assessing Officer that the assessee has claimed deduction under section 54F on account of purchase of house boat at Srinagar, Kashmir. The Assessing Officer was of the view that the assessee is not eligible for exemption under section 54F against the investment in house boat. Further, the deduction claimed on account of expenditure incurred in connection with transfer is inclusive of valuation charges for the purpose of computation of capital gain which is not the expenditure in connection with transfer. The Assessing Officer found that the case of the assessee falls under Explanation 2 of section 147 of the Act. The Assessing Officer accordingly issued notice under section 148 on 6-7-2004. 4. During the assessment proceedings, the Assessing Officer noticed that the assessee has claimed expenditure of Rs. 3,50,000 against the sale consideration in computation of long term capital gain, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the registered value is to be given due weightage but still the case of the department is that if value given by the assessee on 1-4-1981 is adopted, it hardly shows any increase in market value of property in 17 years. While in reality this is not the case. Under the circumstances, in my opinion, the Assessing Officer in principle was correct in making a fresh estimate. Even while making this estimation, the Assessing Officer made this valuation on the basis of estimate made by the valuers. However, in the instant case, while adopting the value, the Assessing Officer has adopted the carpet area instead of built-up area. On this issue, I do not agree with the Assessing Officer as valuation is ordinarily done on the basis of built-up area only in the city like Mumbai as all the sale transactions till recently were being done on the basis of built-up area. Therefore, I direct the Assessing Officer to adopt the rate of Rs. 1,750 per sq.ft. but the same should be adopted for 1675 sq.ft. as it is a question of fact. I direct the Assessing Officer to re-compute the value as on 1-4-1981 after taking the area at 1675 sq.ft. against the 1314 sq.ft. and then take the rate per sq.ft. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done directly cannot be done indirectly by taking recourse to provisions of section 147 of the Act. He submitted that in the case of ITO v. Mast Keshav Suri 228 ITR (St.) 156 (SC), the Apex Court dismissed the SLP filed by the department against the judgment of Delhi High Court in CM No. 1162 of 1997 in Civil Writ No. No. 664 of 1997 in Civil Writ No. 664 of 1997 holding that action permissible under section 143(2) on the basis of the information available in the return but not taken in respect of which limitation expired, cannot be legally taken under section 147 if the Assessing Officer had reason to believe that income chargeable to tax had escaped the assessment. The ld.AR has also relied upon the order of Nagpur Bench of the ITAT in the case of Asstt. CIT v. Malli Chand Baid [2006] 99 TTJ (Nag.) 1016/[2008] 19 SOT 1 (URO). It is also the submission of the ld.AR that there was no reason to believe with the Assessing Officer that there is escapement of income. In the absence of such belief, the Assessing Officer cannot reopen the assessment. He relied upon the judgment of the Supreme Court in the case of Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538/87 Taxman 315. The ld.AR ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd (supra). He submitted that by mere filing of particulars the assessee cannot make a wrong claim. It is also the submission of the ld.DR that the Assessing Officer has given reason for reopening and the assessee appeared before the Assessing Officer but did not object to the reopening which indicates that the assessee has accepted the reopening. On merit, the ld.DR submitted that the Assessing Officer is empowered to modify the valuation estimated by the registered valuer and he accordingly referred the valuation to the DVO and has correctly modified. The ld.DR submitted that the Assessing Officer has rightly observed that there is a long period in between the property purchased and the valuation adopted as on 1-4-1981 and the assessee has not shown reasonable increase in the rate of the property. The ld.DR submitted that the CIT(A) without basis directed the Assessing Officer to adopt the carpet area. 9. In respect of expenses, the ld.DR submitted that in the books of account, the expenditure was only about Rs. 51,000 whereas the assessee has claimed the remaining amount of Rs. 1,90,000 without any basis. In respect of claim under section 54 the ld.AR submitted that hou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich he is required to entertain the belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the ITO could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. The proviso to section 147 of the Act provides that in case the assessment completed under section 143(3) or 147 of the Act is to be reopened after the expiry of four years from the end of the relevant assessment year, the Assessing Officer could take recourse to such action only if the escapement of income chargeable to tax was on account of assessee's failure to disclose fully and truly all material facts necessary for assessment. 12. If we apply the facts of the case on hand to the above discussion we find that the reopening is beyond four year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which he was required to frame the assessment insofar as the order of the Assessing Officer can be pursued have no nexus to the rationality for the purpose of reason to believe. To put otherwise, the information which formed the basis for the 'reason to believe' for the Assessing Officer lacked specific, relevant and reliable criteria which material are liable to be rejected only on the ground that they may be reason to escape (suspect) but not reasons to believe as was not considered by the Hon'ble Apex Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 113 CTR (SC) 436 : [1993] 203 ITR 456 (SC). It was not the case of the Assessing Officer that the return indicated possible escapement of income and he was not sure about it to initiate proceedings under section 147. When proceedings under section 147 are initiated, the proceedings are open only qua items of under-assessment. The finality of assessment proceedings on either (other) issues remains undisturbed. It makes no difference whether the assessment proceedings have become final on account of framing of an assessment under section 143(1) of the Act or on account of non-issue of notice under section 143(2) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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