TMI Blog2018 (6) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... 13 said to be issued under section 148 of the 'Act'. 2. BECAUSE, the authorities below had omitted to consider that purported 'Reasons' are No 'Reasons' in the eyes of Law in the light of fact that no amount of escapement is quantified in the so called 'Reasons Recorded' and as such re-opening is bad in law in view of the binding decision of Hon'ble Allahabad High Court in the case of Mahesh Kumar Gupta Vs CIT in Writ Tax No.1086 of 2007. 3. BECAUSE, the so called 'Reasons' are purely 'reasons to suspect'. Notice having been issued only for the purpose of verification, on the wrong assumption of material facts with no evidence on records before recording reasons about the facts of assesses case and as such 'reasons' do not show any application of mind on part of the 'AO' to show that any Income liable for Tax has escaped Assessment warranting recourse to Notice under section 148 of the Act. WITHOUT PREJUDICE TO THE ABOVE 4. BECAUSE, the computation of Total Income by the 'AO' at ₹ 19,64,890/- as against ₹ 7,39,730/-fairly Returned by the 'appellant' is erroneous, ille ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving any idea about the purchase cost, or the year in which purchase was made and without which, no working of capital gain could have been arrived at by any person of ordinary prudence and reasonable intelligence and, therefore, no allegation can be made that sale of property resulted into capital gain, which capital gain, whether it was long term or short term and which represents income that had escaped assessment. 6. It has further been submitted that the Hon ble jurisdictional Allahabad High Court, in the case of Mahesh Kumar Gupta Vs CIT , (supra) quashed the notice under section 148, which was issued on the basis of reasons recorded where the reopening was beyond 4 years and there was no allegation in the reasons recorded that the amount of escapement was of more than ₹ 1,00,000/-; that it was duly submitted before the AO that in the facts of the present case, the rationale of the said decision fully applies; that in the case at hand, while recording the reasons, the AO had only mentioned the sale consideration as mentioned in the sale deed alongwith deemed consideration under section 50-C of the Act; that however, in the reasons recorded, nowhere the amount of esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice dated 20.03.2014, issued under section 148, the assessee intimated the AO vide letter dated 22.04.2014, that the original return stood filed on 30.03.2008 and enclosed copy of the acknowledgment of the return originally filed, in which, long term capital gain was duly shown at ₹ 6,07,538/- (APB-74). Thus the re-opening is based on incorrect assumption of facts and even the sanction obtained, if any, under section 151 of the Act stood vitiated. This specific objection, raised by the assessee vide letter dated 04.03.2015 (APB-51-53), was not rebutted by the AO in his letter dated 05.03.2015 (APB54-55). Even the notice issued under section 148 of the Act does not mention about any sanction having been obtained by the AO before issuing the notice under section 148 of the Act to the assessee and Grounds of Appeal Nos. 4 5 challenge the action of the AO in not allowing the cost of acquisition alongwith improvement, as claimed by the appellant evidenced by the balance sheet(s) filed on an year to year basis with the Department, purely on consideration of suspicion and surmises, without any evidence to negate the claim of the assessee based on the income tax return and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow cause as to why Long Term Capital Gain ( LTCG ) be not computed at amount of ₹ 18,31,965/- In this connection it is respectfully submitted as under:- 2. That in this case proceedings came to commenced by issuance of Notice under section 148 of the Act based on reasons that The information has been received from Jt. CIT, Range-4, Agra that Smt Usha Agarwal,95, Kaveri Kunj, Phase-2, Kamla Nagar, Agra sold the property on 02-12-2006 for Rsl.14,00,000/- whereas its valuation for the purpose of stamp duty was at ₹ 17,40,000/-, thus taking into the value according to section 50-C of the Act, taking its purchase cost , the net capital gain does arise above the taxable limit prevailing in the year in question. From the record available in this office, the assessee has not submitted its return for the year under consideration, Since, the assessee is not assessed to tax and therefore the income as a result of capital gains resulted into escapement of assessment and to assess it, issuance of notice under section 148 is considered necessary as it is a case of income escaping assessment, under the provision of section 147 of the Act (emphasis supplied) 3. From the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the root of jurisdiction can be raised at any stage even at the stage of Hon ble ITAT as has been held by the Hon ble Allahabad High Court in the case of Abdul Majid Vs CIT (2005) 199 CTR (All) 364. 14. The AO disposed of the assessee s aforementioned objections vide order (APB 54-55) dated 03.03.2015, as follows: Please refer to written submission dated 4.03.2015, which has been received at very late stage when the assessment proceedings are going to be barred by limitation, objecting income escaping assessment proceedings u/s 147 in the case cited as above for A.Y. 2007-08. 2. Going by the said submissions dated 4.3.2015, it is considered that the objections raised are not tenable, particularly when the information was in possession that the assessee has not shown capital gains in term of provisions of section 50C of the Act, thus a case of income escaping assessment by not disclosing the full facts necessary for assessment by the assesses herself, secondly, the reasons were property recorded, as per information in possession in the spirit of provisions of section 148(2) of the Act and after having prior permission/ approval from the Range-Head , the notice was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed assessment. The assessing officer need not prove that there was escapement of income at that point of time. The adequacy or sufficiency of reasons could not be gone into at the time of reopening of assessment. 18. Section 149(1)(b) of the Act states that no notice u/s 148 shall be issued for the relevant assessment year, if four years, but not more than six years, have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to, or is likely to amount to, ₹ 1 lac, or more for that year. Thus, the requirement of section 149(1)(b) of the Act clearly is that notice u/s 148 of the Act can only be issued if the income escaping assessment amounts to, or is likely to amount to ₹ 1 lac. In the reasons recorded, as a reading thereof would show, there is no mention that income amounting to ₹ 1 lac or more is believed to have escaped assessment. 19. As is well settled, the reasons recorded are to be considered ipso facto, as they are, without supplementing them, without bolstering them. CIT Vs. Samraj Krishan Chaudhary , 368 ITR 638 (All) handed down by the Hon ble Jurisdictional High Court, am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evident from the above quoted paragraph has no legs to stand. The Joint/Additional Commissioner, Income Tax was not aware about the fact that the income chargeable to tax which has escaped the assessment is ₹ 1 Lakh or more for the relevant Assessment Year. The proviso to section 151 (1) fortifies our view which says that after the expiry of four years from the end of the relevant Assessment Year no notice under section 148 shall be issued or unless the Chief Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of such notice. On a true and proper construction of the proviso it is imperative that the Assessing Officer in his reason should state that the escaped income is likely to be ₹ 1 Lakh or more so that the Chief Commissioner or the Commissioner may record his satisfaction. The sanctioning authority must be aware that it has exercised power of extended period of limitation under 149 (1) (b) of the Act. Exception has been carved out by clause (b) to section 149(1) in respect the income chargeable to tax which has escaped assessment, amounts to ₹ 1 Lakh or more. To fall within exception claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clear that two distinct conditions must be satisfied before the Assessing Officer can assume jurisdiction to issue a notice under Section 148 of the Act, namely, that he must have reasons to believe that the income of the assessee had escaped assessment and, that he must have reasons to believe that such escapement Was by reasons of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions are not fulfilled, the notice issued by the Assessing Officer would be without jurisdiction. 17. Further, from a perusal of Section 149(l)(b) of the Act, it is imperative that the Assessing Officer, in his reasons, should also state that the escaped income is likely to be Rs.l lac or more, which is an essential ingredient for seeking the approval and satisfaction that is to be recorded by the Competent Authority under Section 151 of the Act. 18. Consequently, before taking any action, the Assessing Officer is required to substantiate his satisfaction in the reasons recorded by him. If the conditions mentioned are not satisfied, then the issuance of notice would be invalid. 19. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded that the escaped income is likely to be ₹ 1 lac or more so that the Chief Commissioner or Commissioner may record his satisfaction under section 151, the initiation of reassessment proceedings after more than four years was clearly barred by time. 23. The ratio decidendi of both the decisions of the Hon ble Jurisdictional High Court evidently is that in the absence of anything in the reasons recorded to suggest that the income chargeable to tax which has escaped assessment is one lac rupees or more, the notice issued u/s 148 of the Act beyond four years of the end of the relevant assessment year, is invalid. 24. Both Mahesh Kumar Gupta , (supra) and Amar Nath Agarwal , (supra) have been followed by this Bench in Pataria vs. ITO , vide order (APB 56-72) dated 28.02.2017 in ITA No. 29/Agra/2015 for A.Y. 2006-07, while deciding this issue in favour of the assessee under similar facts and circumstances. 25. The ld. CIT(A), therefore, has clearly erred in not taking into consideration, Mahesh Kumar Gupta , (supra) rendered by the Hon ble Jurisdictional High Court. Raymond Woolen Mills Ltd. vs. ITO , rendered by the Hon ble Supreme Court, as referred to by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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