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TMI Blog2013 (1) TMI 365X X X X Extracts X X X X X X X X Extracts X X X X ..... n u/s 148 of the Act did not exist and have not been duly complied with; & (2) that the authorities below were not justified in assessing the capital gains in the hands of the assessee. 3. Briefly stated, the facts of the issues are as under: The assessee, an individual, had filed her return of income for the assessment year under consideration, declaring a total income of Rs.1,37,990/- which was initially processed u/s 143(1) of the Act. In the meanwhile, the AO was in receipt of information from his counter-part in Ward 3(2), Bangalore, to the effect that during the course of assessment proceedings for the AY 2005-06 in the case of Shri V.S. Balasubramanyam (incidentally the assessee's spouse), it was noticed that the assessee (Smt. Kalavathi) had received a sum of Rs.2.9 crores during the financial year 2004-05 from Srihari Khoday as sale consideration for the transfer of property situated at Survey No.43, Ittemadu village of Uttarahalli Hobli. The property was being non-agricultural land admeasuring 5 acres and 9 guntas. After duly recording the reasons, a Notice u/s 148 of the Act was issued on the assessee. Subsequently, notices u/s 143(2) and 142(1) wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; "2.5. Applying the ratio laid down by the Apex Court in the aforesaid case [ACIT v. Rajesh Jhavery Stock Brokers P. Ltd reported in (2007) 291 ITR 500], it can be seen in the light of the facts narrated above in the present case that the AO was fully justified in forming a belief that income chargeable to tax had escaped assessment. 2.6. As regards the appellant's objection in ground No.2(b) that the re-assessment order passed by the AO is bad in law in the light of the Hon'ble Supreme Court's decision in the case of GKN Driveshafts reported in 259 ITR 19, I find that the AO had communicated the reasons for reopening the assessment vide his letter dated 3/2/2010 and 4/3/2010 in response to which the appellant had submitted her detailed reply dated 17/3/2010, requesting that the return submitted on 29/7/2005 be treated as a return filed in response to the notice u/s 148 of the Act. 2.7. It is clear, therefore, that the ratio of the decision of the Hon'ble Supreme Court in the case of GKN DRIVESHAFT (supra) has been followed in sum and substance and the appellant has been communicated the reasons for reopening the case for which she has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account in the name of such alleged firm was opened since its alleged formation on 23.12.1988 showing thereby that no business was carried out or intended to be carried out; (vi) the alleged partnership firm has been registered only on 23.7.2003 at around the time when the transfer had taken place and the payments had been received; (vii) the value of alleged capital contribution of Rs.2.2 crores worth of land on 23.12.1988 is totally wrong. As pointed out by the AO, if the same had actually taken place on 23.12.1988, the could at best have been Rs.38000/- (or Rs.80500/- if cost inflation index as on 1.4.1981 is taken into consideration) and not Rs.2.2 crores. This only shows that this has been framed only at the time of registration of the deed when the said transaction was envisaged and not in 1998 (sic) 1988 as claimed by the appellant and for the sole purpose of avoiding tax on capital gains by the arrangement; (viii) the appellant has also filed a criminal complaint in the Court of Chief Metropolitan Magistrate bringing out that the partnership deed was farce vide PCR NO.135/06 dated 8/1/2007. This is evident from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready discussed at para 3.3. (ix)(supra) that this judgment does not mean that the High Court has held that the partnership is valid or genuine as this issue was not before the Hon'ble High Court; 3.8. As per s. 6 of the Indian Partnership Act, there shall be a provision for share of profit in a partnership deed. However, in the present case, the share of contribution vis-à-vis the share of profit of the partners was as under: Name of the partner Share of contribution Profit sharing ratio Shri V.S Balasubra-manyam Smt.Kalavathi 50% 50% 100% 3% M/s. L.K. Trust 0% 97% 3.9. This is totally against the requirements of a partnership firm as envisaged in the Indian Partnership Act and, therefore, not valid. 5.2 With regard to the assessee's contention that since an amount of Rs.2.85 crores was received on retirement from the partnership firm, it is not exigible to capital gains tax, the CIT (A) had observed that the AO examined the assessee's contentions and considered that the amount was taxable u/s 45 of the Act. The CIT (A) had, by extracting the ruling of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espective shares during the period relevant to the assessment year in question. Besides, it is seen from the records that the value of the property in question was taken at Rs.2 crores as on 31.3.1989 artificially and without any basis and since the firm has not filed its returns, there is no scope for the Department to ascertain the correctness of the value adopted by the appellant. 3.13. In view of the foregoing, the action of the AO in bringing to tax the sum of Rs.2,87,60,000/- as long-term capital gains is confirmed." 6. Aggrieved, the assessee has come up with the present appeal. 7. During the course of hearing, the learned AR pleaded that the submissions made in the case of the assessee's husband Shri V.S. Balasubramanyam [ITA No.189/B/10] hold good in respect of bringing to tax Rs.2.87 crores by way of LTCG in the hands of the present assessee as the issue is identical in both the cases. 7.1 With regard to the re-opening of the assessment in the present assessee's case, it was submitted that the reasons recorded by the AO do not show that there was reason to believe that income has escaped assessment. It was, further, submitted that though the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see also as the issue involved in both the cases is identical. 9. We have carefully considered the rival submissions, perused the relevant materials on record and also the case laws on which the learned AR had placed strong reliance. The issues raised by the assessee are dealt with chronologically as under: (i) Re-opening of the assessment u/s 147 of the Act; 9.1 The prime contention of the assessee was that the reassessment concluded u/s 143(3) r.w.s 147 of the Act was bad in law for want of requisite jurisdiction etc. In this connection, we would like to point out that in the present case; no assessment order u/s 143(3) of the Act was passed. However, the return of income filed by the assessee was, initially, processed u/s 143(1) of the Act. As per the said section, the role of the AO is confined as much as that when a return is made u/s 139 or in response to a Notice u/s 142(1) of the Act, such return shall be processed in the following manner: (a) the total income or loss shall be computed after making the following adjustments, namely: (i) any arithmetical error in the return; or (ii) an incorrect claim, if such in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch she had stated that - "1. I have originally filed my return of income on 29.07.2005 reporting an income of Rs.1,38,320/- which consisted of income from house property and income from other sources and no income from capital gains was reported by me as no capital gains in fact and law arose to me liable to tax in my hands. Later, there was a notice issued to me u/s 148 of the Act dated 11.5.2009 and in response to the said notice, I have submitted my letter dated 24.7.2009 that I had already filed my return on 29.7.2005. I had also enclosed along with the said letter the copy of the return filed by me earlier. 2. Later, on certain clarification, I have submitted by me letter dated 16/2/2010 filed in your office on 17/2/2010 that the return filed by me earlier on 24.7.2009 could be taken as one filed in response to notice issued u/s 148 of the Act which return is nothing but the return filed by me earlier on 29.7.2005 and this return could be considered as one filed 'under protest' and I have also sought the reasons recorded in writing before issuance of notice u/s 148 of the Act." 9.5 In this connection, we would like to emphasize that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were conditions precedent to be satisfied before the A O could have jurisdiction to issue notice u/s 148 rws. 147(a). But under substituted s. 147 existence of only the first condition suffices. In other words, if the AO for whatever reason has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment....." [Paras 17,18 & 20] 9.7 In consonance with the ratio laid down by the Hon'ble Supreme Court referred above, we are of the firm view that the CIT (A) was justified in upholding the stand of the AO on this point. Accordingly, this ground is decided against the assessee. (ii) Bringing to tax a sum of Rs.2.87 crores by way of LTCG: 9.8 At the outset, we would like to reiterate that an identical issue to that of the present one has been elaborately dealt with by this Bench in the case of the assessee's husband Shri V. S. Balasubramanyam [ITA No.189/B/10 of even date]. The findings recorded therein hold good for the present case also; as admittedly, the issue raised by the assessee is akin to the issue considered in the case of the assessee's husband. Accordingly, this issue goes against the assessee. In essence, the CIT (A) was justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X
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