9911796707
TMI Blog2014 (10) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... District Magistrate, Allahabad on 2nd August, 1997. The petitioner deposited the necessary charges as demanded by the State Government and, thereafter, a free hold sale deed dated 25th March, 1998 was executed by the District Magistrate, Allahabad. The petitioner sold a portion of the property during the Financial Year 1999-00 relevant to the assessment year 2000-01 for a sum of Rs. 5,26,694/-. The petitioner received a notice dated 13th March, 2007 under Section 133(6) of the Act directing the petitioner to furnish certain information. The petitioner vide his letter dated 16th March, 2007 furnished the requisite information, inspite of which, the Assessing Officer issued the impugned notice dated 26th March, 2007 under Section 148 of the Act. The petitioner vide letter dated 4th April, 2007 approached the Assessing Officer to supply a copy of the reasons, which was supplied. The reasons so recorded by the Assessing Officer is reproduced in paragraph 24 of the writ petition, which is extracted hereunder:- "REASONS FOR INITIATING PROCEEDINGS u/s 148 OF THE I.T. Act, 1961 During the F.Y. 1999-2000 relevant to A.Y. 2000-2001 Shri Amar Nath Agarwal, S/o Vishweshwar Prasad Agarwal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubstituted. We have heard Sri Nikhil Agrawal along with Rahul Agarwal, the learned counsel for the petitioner and Sri Shambhu Chopra, the learned counsel for the department. The learned counsel for the petitioner contended that the notice issued under Section 148 of the Act was without jurisdiction. The learned counsel contended that admittedly four years had elapsed from the end of the relevant assessment year and, consequently, it was imperative for the Assessing Officer to record in his reasons, as per Section 149(1)(b) of the Act that income chargeable to tax, which has escaped assessment amounts to or in likely to amount to Rs. 1 lac or more for that year. Since no reasons to that effect was given, the satisfaction recorded by the competent authority under Section 151 of the Act was wholly illegal and that the notice issued under Section 148 of the Act was barred by time. The learned counsel consequently submitted that the proceedings initiated under Section 148 of the Act was barred by limitation. It was further contended that the reasons to believe recorded by the Assessing Officer was nothing else but a change of opinion based on a decision of the Karnataka High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 : Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2 : For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) Where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) Where an assessment has been made, but - (i) Income chargeable to tax has been under assessed; or (ii) Such income has been asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. Explanation. - For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so." Section 149 provides a time limit for issuance of a notice under Section 148 of the Act and, if a notice after four years but before six years is issued, the same could only be issued if the income chargeable to tax has escaped assessment amounts to or is likely to amount to Rs. 1 lac or more for that year. For facility, Section 149(1(b) of the Act is extracted hereunder:- "Time limit for notice. 149.(1) No notice under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he effect that the escaped income is likely to be Rs. 1 lac or more except for the assessment year 2001-02. In Mahesh Kumar Gupta and others Vs. Commissioner of Income Tax and another, 363 ITR 300 a coordinate Bench of this Court held that it is imperative for the Assessing Officer to record in his reasons that the escaped income is likely to be Rs. 1 lac or more so that the Chief Commissioner or Commissioner may record his satisfaction under Section 151 of the Act. The Court further held that if the said reason has not been recorded by the Assessing Officer, the initiation of the reassessment proceedings after more than four years would be clearly barred by time. A similar provision, namely, Section 34(1A)(ii) existed under the Income Tax Act, 1922. A Full Bench of this Court in Jai Kishan Srivastava Vs. Income-Tax Officer, Kanpur and another, 40 ITR 222 held that non-recording of the reason by the Assessing Officer that the escaped income was likely to be Rs. 1 lac or more was fatal to the issuance of the notice for reassessment. In K.S. Rashid & Son and others Vs. Income Tax Officer, 52 ITR 355 a Constitutional Bench of the Supreme Court held: "The second point which is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being an improvement of the title, does not have any effect on the taxibility of profits as short term capital gains. Reliance by the Assessing Officer in his reasons to believe on a decision of Karnataka High Court in Dr. V.V. Mody (supra) case is misplaced. In that case, the assessee was allotted a site by the Banglore Development Authority. The assessee had no transferable right. Subsequently, a sale agreement was executed pursuant to which the assessee became the owner and landlord and thereafter, within a period of three years, the said assessee sold the land. In that scenario, the Assessing Officer held that it was a case of short term capital gains since the assessee had sold the same within three years from the date of becoming the owner. The order of the Assessing Officer was upheld by the Karnataka High Court. The said decision is clearly distinguishable and is not applicable in the instant case. Similarly, reliance by the department on the decision of the Bombay High Court in Commissioner of Income Tax Vs. Dr. D.A. Irani, 234 ITR 850 is also misplaced and is clearly distinguishable, in as much as in the instant case, the petitioner continued to remain in possession of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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