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TMI Blog2020 (12) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... f notice u/s 148 of the Act by assessing officer having no jurisdiction upon assessee. c. upholding the impugned reasons recorded by the non-jurisdictional AO u/s 147 of the Act. 4. Under the facts and the circumstances of the case and in law, the Ld. CIT(A) is not justified in upholding the impugned addition of Rs. 3,28,35,754/- u/s 50C of the Income-tax Act, 1961. 5. Under the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred: a. in taking cognizance of the report of the DVO and in considering the computation/valuation made by the ld. DVO in its report, b. in not considering the objections of the Appellant against Ld. DVO report. c. in not providing adequate opportunity of being heard to the Appellant. 6. Under the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in levying interest u/s 234A, 234B and 234C of the Act. 7. The appellant company craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing." 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3. Facts in brief are that the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions as well as material placed on record given part relief to assessee on merit and dismissed the grounds of proceedings being without jurisdiction and upholding the impugned addition made u/s 50C of the Act on the basis of report of Ld. DVO. Against the impugned order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT by taking the grounds mentioned above. 6. Grounds No. 1 and 2 of the appeal are interlinked and interrelated and relates to challenging the order of the ld. CIT(A) in upholding the assessment order without jurisdiction, therefore, we have decided to adjudicate these grounds by this consolidated order. The ld AR appearing on behalf of the assessee reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the ld. CIT(A) as well as before the ITAT. The submissions of the assessee according to the written submissions are reproduced as under: 1. The permanent account number of the Appellant falls in the jurisdiction of the ITO ward 2(2), Jaipur. However, notice u/s 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f return u/s 143(1) as well as at the time while notice u/s 143(2) of the Act for verifying return could have been issued. Thus, said information per se is not tangible material for formation of belief to assume jurisdiction u/s 147 of the Act. 9. Proceedings were initiated on factually erroneous and non-existing facts that Appellant filed the return but did not show capital gain income as alleged in impugned reasons. In the ITR, capital gain income has been declared. Mentioning of the erroneous and wrong fact that Appellant did not declare capital gain income in his return of income, also establishes that there had not been any examination of material available on record, including the return of income by AO recording reasons. Impugned reasons based on non-existing facts shows non-application of mind of authority recording reasons. 10. The impugned reasons are based on non-existing facts, which are not sufficient to invoke jurisdiction u/s 147 of the Act. Reliance was placed on judgment of Hon'ble Bench in case of Narayan Dutt Sharma available in case compilation. 11. The ITO Ward 2(2), Jaipur did not record the reasons u/s 147 of the Act. Further he did not issue notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 11.04.1955, which requires the assessing authority to be best advisor and guide to Assessee. Therefore, even if reasons were not asked by Assessee, this does not authorize AO to not provide the same to Assessee during assessment proceedings. Even otherwise, AO is not authorized proceed to make assessment on non-est and void proceedings as very notice u/s 148 was issued by ITO ward 2(3), having no jurisdiction. 16. In addition to the above, when the reasons recorded were provided during the appellate proceedings, then on the bare perusal of the reasons it is evident that reasons are not inconsonance with the law, erroneous and bad in law on the following counts: 1. The said reasons were recorded by incompetent officer having no jurisdiction upon Assessee 2. The information available in AIR/CIB data was already available with the department at the time of original proceedings, however, no proceedings were taken u/s 143(2). 3. Reasons are based on non-existing facts and does not establishes failure to disclose full and truly the information in the return of income furnished by Assessee. 4. Reasonable nexus between the information available with material available as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 142 or after completion of assessment whichever is earlier. In this regard, we also draw strength from the decision relied upon by the ld DR in the case of CIT Vs British India corporation 337 ITR 64 (All) wherein it was held as under: "Section 124 of the Income-tax Act, 1961-Assessing officer- Jurisdiction of- Assessment year 1974-75- Where Income-tax Officer, had jurisdiction when assessment proceedings commenced and a draft assessment order was submitted to IAC, subsequent change in jurisdiction, if any, unless brought to notice of authority concerned, would not in any manner vitiate assessment order passed by such ITO in absence of any objection with regard to lack of jurisdiction by assessee [In favour of revenue]. The Hon'ble Delhi High Court in the case of Abhishek Jain Vs ITO (2018) 94 taxmann.com 355 (Delhi) has held as under: "Section 124, read with sections 68 and 120, of the Income-tax Act, 1961 - Assessing Officer Jurisdiction of (Objections) - Assessment year 2009-10 - Based on 'Annual Information Return' filed by a bank, located in Noida, information was forwarded to Income-tax Officer, Noida regarding cash deposits of certain amount in account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal proposition on this ground, therefore, we find no reason to interfere into or deviate from the findings so recorded by the ld. CIT(A). Hence, we uphold the same. Both these grounds of assessee stand dismissed. 11. Ground No. 3(a) to 3(c) of the appeal raised by the assessee relates to challenging the order of the ld. CIT(A) in upholding the proceedings U/s 147 of the Act. The ld AR appearing on behalf of the assessee has submitted that the ld. CIT(A) has erred in upholding the proceedings U/s 147 of the Act, as the reasons recorded in the present case was by non-jurisdictional A.O., therefore, the said A.O. had no jurisdiction upon the assessee. The ld AR has also relied upon the written submissions submitted before the ld. CIT(A), which is as under: 1. At the outset, it is submitted that the Ld. AO has mechanically invoked the provision of the Section 148/147 of the Act and therefore the very assumption of jurisdiction is bad in law. For initiation of the reassessment proceedings under Section 147 of the Act, the Assessing Officer should have "reason to believe" that income chargeable to tax has escaped assessment for the assessment year under consideration. The word 're ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Del) 64 "It is well established that reasons to believe that income had escaped assessment is a necessary precondition for the AO to assume jurisdiction. Clearly it would be difficult to sustain that this precondition is met if such reasons to believe that income of an assessee has escaped assessment are based on palpably erroneous assumptions. The reason to believe must be predicated on tangible material or information." 4. In view of the aforesaid it is submitted that the very foundation/basis adopted for issuing the impugned notice u/s 148 of the Act dated 30.03.2017 is illegal and bad in law as no reasons were recorded in the said notice while initiating the assessment/re-assessment proceedings u/s 148 of the Act. * 'Reason to believe' versus 'reason to suspect' 5. In assessment order, it has been stated that the proceedings in the case of the Appellant have been initiated on the basis of the information obtained from AIR/CIB that the Appellant has sold immovable properties in FY 2009-10 at Rs. 3,59,76,254/- (actual sales consideration is Rs. 2,28,65,500) where stamp value of the property is Rs. 5,56,91,254/-. Merely on the basis of the information of AIR/CIB, the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statute are "reason to believe" and not "reason to suspect". 7. In view of the above, at most there can be reasons to suspect on the basis of the information obtained by the Ld. AO trough AIR/CIB and thereafter enquiry could have been initiated, which is general in nature and initiating proceedings u/s 147 of the Act on the basis of suspicion is not permissible under the law and the same cannot constitute 'reason to believe' that income chargeable to tax of the Appellant has escaped assessment'. * Provisions of Section 147/148 cannot be invoked for making fishing and roving inquiries 8. It is submitted that for invoking the provisions of Section 147 of the Act there should be definite information/basis for the formation of requisite belief before the initiation of the proceedings. Furthermore, provisions of Section 148(2) of the Act states that before issuing notice under Section 148 the AO is required to record reasons for the basis of formation of belief that, income chargeable to tax has escaped assessment. However in the case of the Appellant, no reasons were recorded in the notice u/s 148 of the Act on the basis of which the Ld. AO has initiated the reassessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded did not even mention the bank in which such savings bank account was maintained. The assessee, as available from the first page of the assessment order, was issued a notice u/s 148 of the Act, in pursuance to the aforesaid reasons. The assessment order under section 143(3) of the Act is dated 25.03.2013. The assessee had filed the return of income on 05.10.2005 and it had been stated in response to the notice u/s 148 of the Act that this return be treated as having been filed in response to this notice. In 'Bir Bahadur Singh Sijwali' (supra), like in the present case, the reasons Assessment year: 2005-06 recorded indicated that cash deposits had been made in the bank account of the assessee. The Tribunal held that the mere fact that the deposits having been made in a bank account does not indicate that these deposits constitute an income which has escaped assessment. It was observed that the reasons recorded did not make out a case that the assessee was engaged in some business and the income from such a business had not been returned by the assessee. In the case at hand also, the reasons recorded do not contain any such recital. The Tribunal held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue authorities. Although, we have dismissed grounds No. 1 and 2 of appeal raised by the assessee by holding that there was no fault of jurisdiction in the notice issued by the A.O. U/s 148(1) of the Act, however while dealing with the present grounds and after evaluating the facts of the present case, we found that the reasons recoded by the ITO Ward-2(3), Jaipur are based on wrong and incorrect facts while recording the said reasons it was categorically mentioned by the A.O. that the assessee had not declared capital gain income in his returns. However, this fact goes to the very root of the matter as on the basis of these facts, the A.O. had formed the basis of recording reasons U/s 147 of the Act. 14. After having gone through the return filed by the assessee, we found that the assessee had declared capital gain income in return which clearly shows that there is non-application of mind on the part of the A.O. while recording the reasons as he did not consider the return furnished by the assessee wherein capital gain income has been shown. Thus, non-existing facts/basis does not lead to formation of belief U/s 147 of the Act which is a condition precedent U/s 147 of the Act as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidering the objections of the assessee against the report of the DVO and not providing adequate opportunity of being heard to the assessee. The ld AR also relied on the written submissions filed before the ld. CIT(A) as well as before the ITAT. The submissions of the assessee according to the written submissions before this Bench are reproduced as under: 01.Agreement to sale two ancestral immovable properties were executed in FY 2004-05 and due to some dispute, sale deeds were executed in FY 2009-10. The Ld. CIT(A) took the stamp duty valuation as on the date of sale deeds given by Ld. DVO without appreciating the existing of prior agreements and disputes and rather giving factually incorrect findings as to existing of prior agreements, which fact is duly mentioned in sale deed(s) and supported by agreement to sale. 02. Denial of benefit of proviso to Section 50C on the basis that advance payment of consideration was received in cash is also not justified as when the agreement to sales were executed, there was no restriction of acceptance of part consideration in cash. Reliance is placed on Hon'ble Tribunal judgment in case of Indexone Indexone Tradecone (P.) Ltd. vs. Deputy C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear in which the agreement to sale was entered for the purpose of applying Section 50C(1) and taking stamp valuation. Brief rebuttal of the Appellant against the arguments of Ld. DR on issue of addition of Rs. 3,28,35,754/- u/s 50C of the Act. 09. During the hearing, the Ld. relied upon findings of CIT(A) in the appellate order, wherein existence of prior agreement to sell with respect to the properties has merely been doubted and alleged that since the part consideration was received in cash therefore, the appellant is not entitled for benefit of adopting stamp valuation as on date. 10. In this regard, it is humbly submitted that the existing of prior agreement to sale is very much evident from sale deeds executed and agreement to sale given. It is pertinent to mention here that during the reassessment proceedings, the Ld. AO never asked to the Appellant to submit the agreement to sale. Thus, the Appellant was not provided an opportunity to furnish the same, accordingly, it were submitted for verification by Ld. CIT(A). 11. Further, on the bare perusal of page no. 2 of the sale deed i.e. "Vikray Patr" enclosed at page no. 25 of paper book, it is clearly mentioned that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the date of sale deed by Ld. AO on account of two factors, first disputed property, second, prior agreement to sale. The Ld. AO passing the impugned Order and rejected the explanation of the Appellant arbitrarily by saying that there is no provision in the law to consider stamp duty as on date of agreement. The Ld. AO referred the matter to DVO after passing of impugned assessment order, therefore making incomplete assessment order which is not permissible under the law. 15. The receipt of DVO report post assessment and assessing the Appellant basis that report is itself nullity in the eyes of law as there is no provision in the income tax law, which provides passing of provisional assessment order and thereby extending the time limit which is otherwise not available to Assessing Officer. The appellant places reliance on Para No. 9 and 10 of judgment in case of Darshan Buildcon vs. Income-tax Officer [2019] 111 taxmann.com 12 (Gujarat), wherein Hon'ble Gujrat High Court held that there is no provision in the income tax law to make provisional assessment subject to DVO report. Thus impugned assessment order making addition u/s 50C is invalid and bad in law on this ground also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. Counsels of both the parties and have perused the material placed on record. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. After evaluating the facts, we found that the A.O. passed provisional order of assessment after making reference to the DVO which according to us is not allowed as per the scheme of the Act as there is no provision in the law to pass provisional assessment order subject to receipt of DVO report. In this respect, we draw strength from the decision of Hon'ble Gujrat High court relied upon by the ld AR in the case of Darshan Buildcon vs ITO (2019) 111 taxmann.com 12 (Guj) wherein it was held as under: "9. As can be seen from the assessment order dated 31.03.2014 made under section 143(3) of the Act, the Assessing Officer has recorded thus: "The assessee has shown profit from construction at very higher scale by showing lower cost of construction to take benefit of exempted income U/s. 80IB(10) of the Income Tax Act. Hence, a reference it made to District Valuation Officer to determine the cost of construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) is liable to be set aside as there cannot be any provisional assessment order under the income tax law. 20. Now while dealing with upholding of addition U/s 50C of the Act is concerned, it is clear from the record that the DVO report was received after assessment which makes valuation as per stamp duty valuing as on the date of sale deed. Ld AR in this respect has submitted that while holding the addition, ld. CIT(A) rejected the assessee's explanation on doubt of reliability of sale agreement which was available for his perusal and it was ld. CIT(A)'s findings wherein it was mentioned that details of sale agreement has not been mentioned in the sale deed though part consideration of Rs. 11.00 lacs was received in F.Y. 2004-05 which is an undisputed fact. It was also submitted by the ld AR that adoption of stamp valuation for F.Y. 2004-05 was not considered after giving finding that consideration in part was received in F.Y. 2004-05 in cash only. 21. We have meticulously gone through the facts pertaining to the grounds in question as well as the DVO report. From the record, we noticed that the DVO had made no attempt except to adopt the stamp valuation as on the date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on suspicion. The fact that the assessee received advance payment of Rs. 11.00 lacs in F.Y. 2004-05 and 2005-06 is undisputed. However, merely receipt of advance payment in cash and doubt on reliability of agreement to sell without any valid basis does not justify addition. 23. As far as issue of receipt of consideration in cash mode and not through cheque is concerned, in this respect, we noticed that requirement of receipt of consideration in cheque only was made effective later on by inserting proviso to Section 50C of the Act. However, at the time of execution of agreement to sell, there was no such restriction of receiving cash consideration against agreement to sell, thus, having regard to the decision of the Coordinate Bench in the case of Indexone Tradecone (P.) Ltd. vs. Deputy Commissioner of Income-tax, Central Circle- 2, Jaipur IT Appeal No. 470/JP/2018, the said basis is not a valid basis to deny benefit of taking stamp duty valuation considering DLC rates of FY 2004-05 for the purpose of section 50C of the Act. Therefore, the findings of ld. CIT(A) are set aside, therefore, on the basis of discussion and the reasons mentioned above, we set aside the findings of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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