TMI Blog2021 (10) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... no question of any capital gains and consequently, no question of any income escaping assessment. Only material relied upon by the assessing officer, in this case, is the material supplied by the assessees themselves along with their return for the Assessment Year 2015- 16. There is nothing in this material that could constitute a ground for a reason to believe that there was a failure to disclose a material fact and further, that an income had escaped assessment for the Assessment Year 2010-11. The reasons stated by the assessing officer speak about the receipt of ₹ 3 crores by the assessees during the Assessment Year 2010-11. However, based on the very material relied upon by the assessing officer, this contention was virtually given up and a new reason about accrual was sought to be put forward. The decision in Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] assists the case of the petitioners because this decision holds that the assessing officer has the power to reopen the assessment provided there is tangible material to conclude that there is escapement of income from assessment and further, the reasons must have a live link with the formation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e will almost entirely depend upon the fate of the first petitioner's case. Ms. Razaq also fairly pointed out that though there was no stay granted in respect of the notice issued to petitioner no.2, the Department stayed its hands in deference to the interim order made in favor of petitioner no.1. This was because the factual, as well as legal position concerning both the notices, was the same. Having regard to all these factors, no purpose will be served in upholding the objection raised by Ms. Razaq qua the case of the second petitioner. There is no dispute that the procedure prescribed in G.K.N. Driveshaft (India) Limited (supra) was followed insofar as the first petitioner is concerned. 7. A brief reference to some factual aspects is necessary to appreciate the challenges raised in this petition. Admittedly, petitioner no.1 purchased a property bearing Survey No.26/2 at Baiguinim in a public auction held by the Goa State Co-operative Bank for a consideration of ₹ 1.36 crores or thereabouts. This is evidenced by the Sale Certificate dated 17.05.2006 issued by the competent authority. This Sale Certificate has been duly registered before the competent Sub-Registrar. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the said property. 13. For the Assessment Year 2015-2016 therefore, the petitioners filed their return of income disclosing the entire consideration of ₹ 5.36 crores received by them and offered this entire income to tax. The petitioners, in fact, paid the necessary tax against capital gains received by them for the Assessment Year 2015-2016. This return was duly accepted by the Department and at least presently, there is no dispute raised about the same. 14. On 24.03.2017 however, notices were served under Section 148 of the said Act to the petitioners alleging that the income had escaped assessment for the Assessment Year 2010- 2011. On 09.10.2017, petitioner no.1 demanded reasons and then filed objections. On 27.10.2017 objections were rejected. Hence the present petition. 15. Mr. Hanumant Naik submitted that the jurisdictional parameters necessary for invoking powers under Section 147/148 of the said Act do not exist in the present case. He submitted that this was a case of reopening after four years and there was no basis to hold that any material fact had not been disclosed by the assessees in the relevant assessment year. He submitted that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Petition No.1066 of 2019 decided on 17.08.2021, (ii) Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers (P.) Ltd. - (2017) 161 Taxman 316 (SC), (iii) Income-tax Officer v. Lakhmani Mewal Das (1976) 103 ITR 437 (SC), (iv) Chaturbhuj Dwarkadas Kapadia v. Commissioner of Income Tax (2003) 260 ITR 0491, (v) Morvi Industries Ltd. v. Commissioner of Income Tax (1971) 82 ITR 835 (SC), (vi) The Commissioner of Income Tax-111 Pune v. Dr. Arvind S. Phake Income tax Appeal No.139 of 2015 decided on 20.11.2017 and (vii) Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd. - (2010) 187 Taxman 312 (SC) . 19. She submitted that in this case, the assessees failed to disclose the sale deed dated 02.02.2010 and the income of ₹ 1 crore admittedly received by them in the relevant assessment year. She submits that this was more than a sufficient reason to reopen the assessment. She submits that sufficiency of reasons cannot be gone into at this stage. She submits that the issue as to whether the capital gains were indeed payable or not in the Assessment Year 2010-2011 is quite irrelevant at this stage. She sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- Purchase (2006) 1,36,52,400/- Indexed Cost (1,36,52,400 * 632/ 519) ₹ 1,66,75,113 Capital Gain 1,33,75,113/- In view of the above facts, it is abundantly clear that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for her assessments for the AY 2010-11. Therefore, I have a reason to believe that income chargeable to tax amounting to ₹ 1,33,75,113/- has escaped the assessment, within meaning of provision of section 147 of the Income Tax Act, 1961. Accordingly, assessment for A.Y. 2010-11 is proposed to be reopened by issuing notice u/s 148 of the I.T. Act, 1961. 23. This Court, in a catena of decisions beginning from Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. Cit (No. 2) 268 ITR 332 has held that the notice for reopening of assessment would stand or fall based on the reasons recorded at the time of issuing notice for reopening of assessment. This Court has held that the reasons are required to be read as recorded by the assessing officer and the same cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d earlier, the reasons proceeded on the basis that an amount of ₹ 3 crores was in fact received by the petitioners during the Assessment Year 2010-11. The submission now made before the Court is not based on any factum of receipt but rather, based on accrual . This was not at all the reason that prompted the assessing officer to reopen the assessment. A fresh reason or a new reason, cannot be advanced either orally or by filing an affidavit to add to or supplement to the reasons already recorded. This is impermissible in terms of the law laid down in Hindustan Lever Ltd. (supra). This decision was reiterated in GKN Sinter Metals Ltd. (supra). Applying this principle, therefore, the impugned notices are required to be quashed and set aside. 27. Apart from the aforesaid, we find that there was no omission on the part of the assessees to disclose fully or truly all the material facts necessary for the assessment Year 2010-11. There is no dispute that the assessees had purchased the property in question for ₹ 1.36 crores or thereabouts in the year 2006. Even in terms of the reasons furnished by the assessing officer the indexed cost for the Assessment Year 2010-11 came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental Insurance Co. v. Commissioner of Income-tax 378 ITR 421 (Delhi), it was held that powers under Section 147 of the said Act can be invoked only in cases where the assessing officer has reason to believe that income chargeable to tax has escaped assessment. The reason to believe must be based on tangible material and cogent facts. The powers cannot be exercised merely on suspicion or apprehension. A bonafide reason to believe is a necessary pre-condition that clothes the assessing officer with the power to reopen the assessment that has otherwise attained finality. The reason to believe must have a direct nexus and a live link with the formation of the opinion that taxable income has escaped assessment. Therefore, where notice of reopening was based on an erroneous assumption of fact, such notice was quashed. 31. In Dr. Ajit Gupta v. Assistant Commissioner of Income Tax 383 ITR 361 (Delhi), the reason for reopening the assessment was a mistaken factual premise that the assessee had changed the system of accounting from the mercantile to cash system. Since this factual premise was found to be erroneous, the reopening of the assessment was held unsustainable. 32. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... need not be considered in detail. In Smt. Raj Rani Devi Ramna (supra) the Division Bench of Patna High Court, relying on the decision of the Division Bench of Calcutta High Court in Nita Chandra Naskar v. Smt. Champahlnta Debi (1919) 29 CLJ 250 has held that the true test of determining whether there is a transfer of ownership or not is the intention of the parties to the transaction. If the intention is that the title should pass immediately, even though the consideration has not been paid, the title passes, i.e., failure to pay the consideration for a conveyance does not defeat the conveyance except where there is an agreement that it should take effect only if the consideration is first paid. This decision is considered in several other decisions which take the view that title does not pass on mere execution of a document but what is important is the intention of the parties which is to be gathered from the document itself. Based upon such principles, the Division Bench held that the parties before it had clearly intended that despite the execution and registration of the sale deeds, transfer was to be effective only on payment of the entire consideration amount and since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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