TMI Blog2020 (12) TMI 931X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Act, it has categorically been mentioned that no person shall be entitled to call in question the jurisdiction of an A.O., where he had made a return under Sub-Section (1) of Section 139, after expiry of one month from the date on which he was served with a notice under sub-Section (2) of Section 142 or after completion of assessment whichever is earlier. See BRITISH INDIA CORPORATION LTD. [ 2001 (1) TMI 914 - ALLAHABAD HIGH COURT] Even as per the provisions of Section 124(3) of the Act, the issue of jurisdiction cannot be challenged after completion of assessment and as per the facts of the present case, the assessee himself had filed return of income with ITO Ward -2(3), Jaipur who had recorded the reasons for reopening, therefore, it cannot be held that reasons were recorded by wrong jurisdictional officer. - Decided against assessee. Reasons recorded in the present case was by non-jurisdictional A.O., therefore, the said A.O. had no jurisdiction upon 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 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the sub-registrar as on the date of sale deed, without considering and disposing the objections of the assessee that properties were disputed and prior agreement of sales were executed by the assessee. No fair value has been determined in DVO report, no comparable sale instances relied upon, no correct method applied to determine fair value, no adequate opportunity of being heard given. The information/documents relied upon by the ld. DVO have not been confronted and/or provided to the assessee. Further the very purpose of reference is defeated if stamp valuation is mechanically applied in valuation proceedings. CIT(A) was not justified by simply resorting to DVO report which does not determine fair value as envisaged under the law. Doubting on existence of agreement to sell is also not justified as no addition can be sustained merely on suspicion. The fact that the assessee received advance payment of ₹ 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. Receipt of consideration in cash mode and not through cheque - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 a senior citizen resident, individual aged about 70 years. He is residing at 93, Duleshwar Garden, C-Scheme, Jaipur. According to assessee, as per the residential address of the assessee, the jurisdiction falls upon ITO Ward 2(2), Jaipur. For the year under consideration the assessee filed its return of income u/s 139 of the Income Tax Act ( the Act , in short) on 31.03.2012 in which total income of ₹ 30,88,250/- was declared including capital gain income. Assessee made agreement to transfer two ancestral properties, being land situated at village Kunhadi, Kota (hereinafter referred as immovable properties ) in FY 2004-05 through agreement for sale for total considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout 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 148 of the Act was issued by ITO Ward 2(3) of the Act after recording impugned reasons to believe. The said notice has been issued by authority having no jurisdiction upon the Appellant; therefore, the impugned proceedings u/s 147 of the Income Tax Act, 1961 ( Act in short) are invalid and void ab-initio. 2. The said fact is also supported by the action of transfer of case records by the department during the assessment proceedings itself. 3. The Ld. CIT(A) rejected the contention of the Appellant by taking resort to Section 124(3)(a) of the Act, however, it is humbly submitted that protection u/s 124(3)(a) is not available in case of proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny 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 148 of the Act. Thus, he simply acted upon the borrowed satisfaction of ITO Ward 2(2), Jaipur, who did not have jurisdiction. Reliance is placed on following decisions: (Principal Commissioner of Income-tax-5 vs. Shodiman Investments (P.) Ltd. [2018] 93 taxmann.com 153 (Bombay)) Commissioner of Income-tax, Jalandhar v. Smt. Paramjit Kaur [2008] 168 Taxman 39 (Punjab Haryana) S.N. Bhargava v. Income-tax Officer, 3(4), Mathura 147 ITD 306 (Agra Trib.)] 12. The Ld. PCIT has given mechanical approval in the instance case u/s 151 of the Act which is evident from bare perusal of reasons recorded, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 as formation of belief is missing as same is based on erroneous belief. 5. Reasons shows non-application of mind 6. Approval granted u/s 151 of the Act by Ld. PCIT is mechanical and improper. It does not record satisfaction of Ld. PCIT at all. 7. On the other hand, the ld DR has relied on the orders of the authorities below and also relied on the following judicial pronouncements: (i) CIT Vs British India corporation 337 ITR 64 (All) (ii) Abhishek Jain Vs ITO 405 ITR 1 (Del) (iii) Hanon Automotive Systems India P Ltd. Vs. DCIT 413 ITR 431. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 of assessee in said bank - On basis of said information, Income-tax Officer, Noida issued notice under section 148 against assessee - After three months, assessee raised an objection stating that assessee was regularly filing returns with Income-tax Officer, Delhi and, accordingly, notice under section 148 issued by Income-tax Officer, Noida was illegal and without territorial jurisdiction Whether in terms of section 124(3)(b) assessee could not call in question jurisdiction of an Assessing Officer after expiry of one month from date of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons 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 reason to believe means belief which prompts the Assessing Officer to invoke Section 147 of the Act and the belief should be based on relevant and tangible material and not arbitrary or irrational. The belief must be held in good faith and cannot be merely pretense. The Appellant humbly submits that the reassessment proceedings initiated vide said notice u/s 148 of the Act are illegal and untenable on account of the following reasons: Absence of reasons to believe 2. The foremost condition precedent for a val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dation/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 ₹ 3,59,76,254/- (actual sales consideration is ₹ 2,28,65,500) where stamp value of the property is ₹ 5,56,91,254/-. Merely on the basis of the information of AIR/CIB, the Ld. AO formed an opinion that the Appellant has not computed capital gains as per Section 50C of the Act and therefore, income of the Appellant has escaped assessment. The so called reasons stated by the Ld. AO in the assessment order are at the most in the nature of grounds of suspicion which are not sufficient to invoke jurisdiction u/s 147 of the Act. The suspicion may be sufficient, be starting point to make an enquiry but not sufficient for re-opening of a case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable 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 proceedings. In other words, reassessment proceedings cannot be taken up merely for the purpose of making fishing and roving inquiries. For the said view, the Appellant places reliance on the following judicial pronouncements: Bakulbhai Ramanlal Patel vs. Income Tax officer (2011) 56 DTR (Guj) 212 Entire tenor of reasons recorded indicates on the basis of some unsubstantiated and vague information, the AO has reopened the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 factum per se, of deposits in the bank account of the assessee could not be made the basis for holding the view that income had escaped assessment, over-looking that the sources of the deposits need not necessarily be the income of the assessee; and that as such, the reasons recorded were not sufficient to believe escapement of income; that rather, they were reasons to suspect escapement of income, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 there is no rational nexus of material/information available with formation of belief. Thus, according to us, no valid belief can be formed on the basis of incorrect/non-existing facts U/s 147 of the Act otherwise it would be then difficult to interpret what weighed with the mind of the A.O. while recording reasons as the reasons recorded cannot be modifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced 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 Commissioner of Income-tax, Central Circle- 2, Jaipur IT Appeal No. 470 (JP.) of 2018 as requirement of receipt of advance payment/consideration by cheque would apply prospectively on agreement executed after the amendment brought in Section 50C(1) as at the time of receiving consideration assessee could not foresee the requirement of pay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 properties were sold to Shri Rameshwar Prasad Shrangi residing at 1-B, Kotadi, Gumanpura Road, Near Congress Office, Gumanpura, Kota, Raj through prior agreement dated 18.09.2004 and 19.07.2005 whereby total amount of ₹ 11 Lakh received, which is further supported by agreement to sale agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Thus, same deserves to be quashed. 16. Thus, Ld. CIT(A) was no justified in taking cognizance of DVO report based on invalid reference under the law. 17. Without prejudice to above, DVO report dated 20.04.2018, is cryptic one as the DVO has merely accepted the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 construction. Since, report have not been received from the District Valuation Officer till date, the assessment is finalized accepting the cost of construction. On receipt of the valuation report action will be taken if found necessary . In the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VO 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 ₹ 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 of sale deed. The said DVO report does not determine fair value U/s 50C of the Act. The DVO has merely accepted the stamp value given by the sub-registrar as on the date of sale deed, without considering and disposing the objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the ld. CIT(A) and direct the A.O. to calculate capital gains by adopting the stamp value prevailing in F.Y. 2004-05. 24. The ground No. 6 of the appeal raised by the assessee relate to challenging the order of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X
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