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TMI Blog2022 (3) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer (AO) that the assessee along with his brothers Sh. Kanwar Lal, Sh. Manphool, Sh. Ram Avtar and several others (in total 21 persons called 'Owners' hereafter) had entered into a collaboration agreement on 14.12.2006 with "Bestech India Pvt. Ltd., Gurugram" (hereinafter called as 'Developer') for the acquisition of 253 kanals, 01 marla of land in the revenue village Nakhrola, Gurugram. That collaboration agreement, though not registered, stated that all the 21 Owners were not fully equipped to execute and complete the proposed work of group housing complex and so they had entered into the agreement with the Developer after due consideration of its reputation / experience / expertise and capability to obtain permission for the change of land use (CLU) and a license from the government for the development / construction of the housing complex. As per the collaboration agreement, it was agreed between the Developer and Owners as under:- (i) The developer will construct / develop the said project over the said piece of land at his own cost. (ii) The owner shall be entitled to 35% of the total saleable area along with proportionate right in land, open areas, parking, te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain sanction and permission for construction / development of the housing project on the said land for building and carrying out construction as per the other legal requirements. 4. The Owners through the Developer made an application on 04/01/2007 to the Government of Haryana to grant permission to construct a residential Project over the said land. The Government of Haryana through the Director, Town & Country Planning, had issued LOI and subsequently the license on 31/5/2008 to construct the Group complex on the said land. The license was granted in the names of the Owners who were in collaboration with the Developer subject to the condition that the licensee would not give any advertisement for the sale of space before the approval of layout/building plan. 5. On going through the copy of account of the assessee with the Developer the Assessing Officer noticed that the assessee has received a total payment of Rs. 2,41,70,000/-. Subsequently the assessee along with his brothers Sh. Kanwar Lal, Sh. Manphool & Sh. Ram Avtar had executed / registered sale deed in respect of 3 Acre 2 Kanals, 17 Marlas (out of the above land) on 18.11.2009 in favour of M/s Bestech India Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfers as also the alteration in the initial agreement to receive 35% of the built-up area and the ratio of the cases in Alapati Venkataramaiah v. CIT (1965) 57 ITR 185 (SC), CIT v. Podar Cements Pvt. Ltd. (1997) 226 ITR 625 (SC) and CIT v. Vishnu Trading & Investment Co (2003) 259 ITR 724 (Raj.), CIT vs. Geetadevi Pasari (2009) 17 DTC 2001(Bom). He thereupon concluded that the provisions of Section 45(2) were applicable to the sale of lands by the assessee and computed the total income inclusive of the capital gains and business profits thereon with the following observations:- "4. In view of these facts the assessee was asked to explain vide order sheet entry dated 12.10.2015 as to why income accrued/earned on this transaction should not be assessed as income under the head business/profession. In response to the same, there AR of the assessee has filed written submissions vide his letter dated 27.10.2015 as discussed above. In view of the detailed facts and reason as above, it is clear that the land owners including the assessee converted their land holding collectively with the help of developer to develop the same as constructed space (Units/Apartments) where the cost/marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be treated as business income and taxed under the head 'profit and gain' of business and profession." Therefore, on the composite analysis of the facts it is clear that the assessee has entered into the transaction of converting his individual land parcel along with other owners collectibly into stock in trade to be developed/constructed as residential housing project to be sold in different units (as stock in trade) which is an adventure in the nature of trade. Therefore, income of the assessee on the transaction as accrued is assessed as income under the head income from capital gain and under the head income from business/profession. It is also worthwhile mentioning here that as per the report of SubRegistrar, Manesar, the said land is situated at a distance of mere 3 km from the notified distance from the MC limits of Gurgaon." In view of the above the income from capital gain and income from business / profession is calculated as under:- Area of Land of the assessee = 134.25 Marlas i.e. 1/4th share of the assessee (Total area of land is 26 Kanals and 17 Marlas i.e. total 537 Marlas) (1 Kanal = 20 Marlas) Sales consideration u/s 50C as on 31.05.2008 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome u/s 143(30 of the Act at Rs. 2,42,39,410/- against the returned income of Rs. 1,91,500/-; 5. in computing Long Term Capital Gain on transfer of agricultural land done in an earlier year but charged during the year by assuming the cost of acquisition and indexation cost without any material before him; 6. confirming the computation of Long Term Capital gain and additions made to the returned income to the extent of Rs. 2,40,47,914/-; 7. not allowing claim for deduction u/s 54B and 54F of the I.T. Act, 1961; 8. charging interest u/s 234A and 234B of the Income-tax Act, 1961. All the above actions being arbitrary, erroneous and unlawful must be quashed with directions for appropriate relief." 10.2 During the hearing of the appeal the Appellant has moved application for admission of additional grounds of appeal as under:- "Permission is respectfully sought for raising the following grounds as additional grounds of appeal: 1. in assuming jurisdiction over the case without any authority of law and in derogation of the jurisdiction as originally vested with the Assessing Officer, Salary Circle, Jaipur; 2. in the proceedings u/s 147/148 being endorsed and approved ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in appeal before the Ld. CIT (A) and so since they would involve fresh investigation into facts they should ought not be entertained at this late stage. 13. We have considered the rival contentions and have also gone through the material on record. As urged on behalf of the Appellant we find that the additional grounds as taken and canvassed for admission have been generally stated vide Ground Nos. 1 and 2 of the grounds of appeal as originally taken in the appeal. We also find that the issues regarding jurisdiction and the approval of the satisfaction note by the prescribed authority are dealt with by the Ld. CIT(A) in the Appellate order. Being so and as the additional grounds go to the root of the controversy we admit the same. 14. Since the question of jurisdiction has been raised through the additional ground No. 1, therefore, same is considered first. It has been brought on record that the Appellant was at the relevant time a salaried employee with the Army with address 423, Field Ambulance, C/o 56 APO and with PAN AQAPK7840G in the jurisdiction of the salary AO In-charge of Pay & Accounts Office (OR), Army Medical Core as per material placed on record as Form 26AS for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration of transfer could not be AY 2010-11. The transfer was occasioned due to the handing over of the possession of the agricultural lands on receipt of the partial sale consideration qua the Collaboration Agreement dated December 2006 to the Developer. With the registration of the sale deed for that act and deed which was carried out in November 2009, the transaction related back to AY 2007-08 as per Section 47 of the Registration Act, 1908 and so the reassessment as carried out for AY 2010-11 was per se erroneous and untenable. 14.3 Lastly, it was submitted that the agricultural lands as transferred were not capital assets because post 06.01.1994 no notification for urbanisation of those areas had been issued till November 2009. The lands were beyond 8 kms from Gurugram, and being agricultural lands did not fall in the lap of sub-section (14) of Section 2 of the Act. 14.4 Arguing additional ground No. 2, Ld. Counsel for the Appellant submitted that the notice issued to the assessee u/s 148 of the Act after recording the satisfaction 9as appearing on pages 57 & 57A of the paper book) was improper and invalid. The satisfaction as recorded was based on scanty and insufficient ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment proceedings, the appellant could not now assail the assumption of jurisdiction by the ITO, Ward-3(5), Gurgaon. On the point of the reassessment having been completed for an incorrect assessment year, the Ld. Sr. DR urged that in view of the apex Court decision in Balbir Singh HUF (2017) 398 ITR 531(SC) it was the registration of the transfer documents that was material and with registration done in the subject year so AY 2010-11 that was the correct year for reassessment. As to the argument of the assessee of the agricultural land being located 8 km away from the nearest municipality Ld. Sr. DR stated that was not factually correct for as per the Registrar's finding that it was within 3 km of the municipal limits. She urged that the authorities had issued the reassessment notice after the due deliberation and proper verification which was valid in law. On the assessee's basic argument on the point of jurisdiction the Ld. Sr. DR also filed the following written submissions: "Appeal in the cases of I. Ram Kishan, Gurgaon in ITA No. 3025/Del/17, for the A.Y. 2010- 11 (PAN: AQAPK7840G) II. Kanwar Lal, Gurgaon in ITA No. 3026/Del/17, for the A.Y. 2010- 11 (PAN: AEC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings till its completion but never challenged the jurisdiction for issuance of notice u/s 148 under consideration. B. Ram Kishan Assessment proceedings in the case were initiated u/s 147/148 on 30/03/2015 as a Non PAN case by the then AO i.e. Income Tax Officer, Ward-3(5), Gurgaon (now merged into Ward-3(1), Gurgaon) on the basis of certain information in his possession at that time of initiation of proceedings under consideration which did not contain the PAN of the assessee anywhere. Hence, the first notice u/s 148 was issued to the assessee as per his address available in the information i.e. "Sh. Ram Kishan S/o Sh. Late Sh. Ram Singh, VPO Nakhrola, Tehsil & Distt. Gurgaon, Haryana" and the said address was lying under the territorial jurisdiction of erstwhile Income Tax Officer, Ward-3(5), Gurgaon. PAN of the assessee was identified only during the assessment proceedings under consideration. At the time of assessment proceedings, the assessee was residing at the above mentioned address and this gets established by the fact that notice was issued to the assessee on 30/03/2015 and served at his Gurgaon address. Also, as per ITR's filed by the assessee for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. Further, as per 124(3)(a), the assessee can object with respect to jurisdiction of Assessing officer within one month of receipt of notice u/s 142(1) or 143(2) or before completion of assessment whichever is earlier. In the present case, the assessee never objected to jurisdiction during assessment nor at the first appellate stage. So, he is barred from taking this objection at this stage as per Sec 124(3) of the IT Act 1961. The appellant raised this objection for the first time before the Hon'ble bench after five and half years. 2. With respect to Ram Kishan's case: a. The case was reopened u/s 148 on the basis of concrete information in possession of AO at that time which didn't contain PAN. So the case was reopened without PAN on the address of Gurgaon which comes in jurisdiction of the AO passing the Assessment order. b. Notice u/s 148 was duly served on the assessee at Gurgaon address. In fact in the present case assessee's PAN residence address is same on which notice u/s 148 was issued (copy of PAN jurisdiction is enclosed as Annexure C). c. Further, in the present case as per ROI for AY 2010-11 (year in consideration) to AY 2012-13, the address was o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. 2. In the proceedings u/s 147/148 being endorsed and approved by the prescribed authorities without application of mind and in contravention as applicable thereto: The reasons in the case under consideration were recorded in detail by the AO after analyzing all the information / facts available with him at time of considering the case for initiation of proceedings u/s 147/148 of the Act and the facts had been mentioned in the reasons itself. Therefore, assessee's plea regarding "application of mind" is not acceptable at all. In this regard, I place my reliance on Ld. CIT(A)'s order. 3. Without prejudice in computing the long term capital gain as per circle rate prevailing during subject year instead of the actual sale consideration as received in terms of the collaboration agreement of a preceding year with the vendees: In this regard, it is submitted that the sale consideration mentioned in the sale deed no. 1005 dated 18/11/2009 was paid to the assessee and the other owners, against the land and their right as mentioned in the collaboration agreement dated 14/12/2006 by the vendee and no bifurcation in respect of consideration paid for the land and the consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidual where it says that after naming the individual as son of Late Sh. Ram Singh that "the income in respect of which you are assessable / chargeable to tax". This, therefore, is a clear case of wrongful imputation of income and also wrongful assumption of jurisdiction by the AO in Gurgaon on an assessee who was otherwise being assessed in a different state by another AO as a salaried employee. There is no provision in law which would permit or give leave to an AOs to issue notice for reassessment at his ipse dixit wherever he found that a particular assessee does not possess a PAN. The need for an enquiry, examination and verification before issuing such notice for reassessment is insisted and provided for only for this reason that the notices ought to be served for a definite cause on an appropriate person. Thus the assertion of the Ld. Sr. DR that the notice was served in the manner in which it was done due to the absence of PAN is basically erroneous and totally untenable and which could not give rise to any valid reassessment action. That apart the Ld. Sr. DR has conceded that the factum of the assessee holding a PAN was identified only during the assessment proceedings clea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue notice u/s 148 of the Act. In that circumstance, whatever is submitted above with regard to Manphool Ram Singh applies equally to Ram Kishan as well. 4. It is noteworthy that the objections as taken to the assumption of jurisdiction by the Gurgaon AO in the case of Kanwar Lal and Ram Avtar remain un-rebutted. So the delay in these two cases, on the basis of the fact situation that the Gurgaon AO had unauthorisedly assumed jurisdiction over the case. The cited decision in the case of Attar Singh & Ors. applies so as to invalidate the notices issued by the respective AOs. The Ld. Sr. DR, in the note dated 12.10.021, has raised almost common arguments with regard to facts of the cases of Manphool Ram Singh and Ram Kishan. Reply to those arguments are rendered point-wise as under: (a) The Gurgaon AO had reopened the case casually and mechanically without abiding by the set norms on the subject. The information as used by him was apparently unvouched and unverified. The basic step of verifying the information for its authenticity and correctness was not taken. It is because of this omission that the Gurgaon AO wrongly superimposed his jurisdiction and authority over the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is fact was known to the ITO at Gurgaon, therefore, in absence of any transfer of jurisdiction u/s 127, we hold that the ITO, Gurgaon has no jurisdiction over the assessee. Therefore, respectfully following the decision of the Hon'ble Punjab & Haryana High Court, which is the jurisdictional High Court in view of the assessment order being passed by the ITO at Gurgaon, we hold that the Assessing Officer, Gurgaon had no jurisdiction over the assessee to issue notice u/s 148 and consequently pass the order u/s 147/143(3). Therefore, the notice issued u/s 148 is quashed. Since the reopening is quashed the subsequent orders passed on account of such reopening are also quashed". This ruling applies with equal force to the facts of the cases of these four Appellants. More particularly the differences on facts as cited in the note are point wise rebutted as under: a. Jurisdiction need not always be challenged at the beginning for the jurisdiction is fundamental and can be challenged at any stage of the proceedings b. Had only the Gurgaon AO made the requisite enquiries he would learnt about the four Appellants being under the charge of other ITOs in different salary jurisdictions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fication of the details of the case and the facts pertaining to the transaction was ever attempted before issuing the impugned notices. The impugned notices were issued mechanically and casually without adherence to the statutory norms and applicable standard verification procedures. The prescribed authority seemingly granted the Section 151 sanction just as mechanically and casually as the Gurgaon AO had initiated. Further, the factum of escapement of any income out of the sale transactions by the Appellants assessable in which entity's hand was not examined. Also the basic fact that the properties which were the subject matter of transactions were not capital assets at the time of their transfer so as to result in any capital gain exigible to tax was not gone into at all. Further the need for an assessment in the year of the agreement i.e. 2006 was not even visualised as a possibility. 11. The Appellants had relied upon the Coordinate Bench decision in the case of Attar Singh & Ors. in ITA Nos. 2682, 2913, 2683, 3112, 2684, 2700/Del/2018 other assessees similarly placed had been quashed where notices u/s 148 to the Delhi Tribunal on the ground that the AO issuing those notices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year is to be reassessed, it is the Income-tax Officer who could assess the same in the first instance who has jurisdiction to proceed in the matter u/s 147 read with Section 148 of the Act, unless of course the case had been transferred by a competent authority to another AO u/s 127 of the Act. No such transfer order u/s 127 of the Act has been produced before us to validate the jurisdiction as assumed by the ITO, Ward 3(5), Gurugram. It is thus clear that the assumption of jurisdiction to reassess the Appellant by the Gurugram AO is irregular and fallacious. In a similar situation the Delhi Bench of the Income-tax Appellate Tribunal in the case of Attar Singh & Ors. ITA No. 2682/Del/2018 dated 08.08.2019 has held that the assumption of jurisdiction by a different AO at Gurugram who was other than the AO holding jurisdiction over the assessee for the relevant year was invalid. Respectfully following that order and with facts being similar we hold that the assumption of jurisdiction by the ITO, Ward 3(5), Gurugram in the case of the Appellant is erroneous, illegal and void. 18. On the question of the status of Appellant selling the agricultural lands, it has been vehemently urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether any account was opened in the name of HUF or earlier there was any existing PAN. Neither there is any mentioned in the deed that all the individuals had entered into the agreement as HUF or jointly representing HUF. At the time of issuance of notice, the AO could not have created HUF by allotting separate PAN or create any entity without any information provided by the assessees. Even the sale consideration was received individually. The action of the assessee also does not indicate that the transaction was entered in the capacity of HUF, albeit it was entered in the individual capacity collectively. In these circumstances, it is difficult to uphold the contention of the assessee and accordingly we reject the same. 20. As to the proceedings pertaining to AY 2010-11, it has been contended on behalf of Appellant that the registration of the sale deed on 17.11.2009 restored the incident of transfer to the date of the collaboration agreement of 14.12.2006. Our attention was drawn to section 47 of the Registration Act, 1908, which reads as under: "47. Time from which registered document operates. - A registered document shall operate from the time it would have commenced to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the possession of the agricultural lands to the Developer soon after receipt of the partial sale consideration as defined in the Collaboration Agreement. Such a transfer got legally ratified on the registration of the sale deed in November 2009. The facts in the subject case are, therefore, quite unlike the facts of Balbir Singh Maini. In the said case the transaction of transfer did not take place due to joint development agreement getting aborted in between. Ld. Counsel further stated that the agreement of Collaboration and the Sale Deed had to be read together and not to the exclusion of one another. The two agreements together ratified the transfer of the land to the year 2006, i.e., the year of execution of collaboration agreement. 22. On a careful consideration of the facts of the case and the argument of the Ld. Counsel, prima facie we are in tandem with the contention of the Ld. Counsel that after the implementation of the collaboration agreement dated 14.12.2006 and its subsequent registration through a regular sale deed dated on 17.11.2009, the transfer, if any, should have been relatable to the AY 2007-08. However, we are not going into this aspect and whether the j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and his brothers. For the reason that the records of the office of ITO, Ward 2(4), Gurugram did not show that the Appellant was filing any incometax return in his Ward at Gurugram. Income-tax Officer has simply opined that the amount of Rs. 2,41,69,500/- received by the Appellant constituted his business income which he had not been returned for assessment by the Appellant and so the notice for reassessment was issued. Pursuant to the above notice the Income-tax Officer, Ward 2(2), Gurugram completed the assessment of the Appellant u/s 147/143(3) of the Act on 21.11.2015 determining the taxable income at Rs. 3,23,77,807/-. Like in the case of Ram Kishan the assessment order contains an endorsement to the effect that the agricultural land as sold vested in the Appellant due to inheritance. 26. Aggrieved by this assessment order the Appellant had filed an appeal before the CIT(A)-1, Gurugram who vide the common order in the case of four brothers of 30.03.2017 held that the income as assessed as of business by the ITO was actually from capital gains and not business. The other observations as made by the ITO in assessment were confirmed by the Ld. CIT(A). 27. Against the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the copy of the reasons for reopening of the case u/s 147 of the I.T. Act as recorded by the ITO. That stands in the name of the individual and refers to the Collaboration Agreement with Bestech India Private Ltd. and to the Sale Deed of 18.11.2009 and of the assessee earning business income as provided under Section 45(2) of the Act. For the fact that the assessee had allegedly failed to file true particulars of his income the reasons u/s 147 were recorded culminating in a notice u/s 148 of the Act. 30. Pursuant to the above notice ITO, Ward 3(4), Gurugram completed the assessment at an income of Rs.2,44,07,850/- in the case of Sri Ram Kishan and Sri Kanwar Lal the assessment order contains an endorsement of the fact that the agricultural land as sold vested in the Appellant due to inheritance. 31. Aggrieved by this assessment order the Appellant had filed an appeal before the CIT(A)-1, Gurugram who vide the common order in the case of four brothers of 30.03.2017 ruled that the income as assessed as of business by the ITO was actually from capital gains and not business. The other observations as made by the ITO in assessment were confirmed by the Ld. CIT(A). 32. At the time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book. The notice is issued to the individual assessee it refers to the Collaboration Agreement of December 2006 with Bestech India Private Ltd. to which the Appellant was a party. The note also refers to the Sale Deed dated 17.11.2009. For the reason that as per the records of the Office of the ITO, Ward 2(5), Gurugram, there was no return of income of the assessee. The AO concluded that as provided u/s 45(2) of the Act a sum of Rs. 2,41,69,500/- had to be brought to tax which had escaped assessment due to the alleged failure of the assessee to declare the true particulars of income. Pursuant to the aforesaid notice the ITO, Ward 2(4), Gurugram completed the assessment at an income of Rs. 2,47,31,297/-. 35. In the first appeal before the CIT(A)-1, vide common order in the case of four brothers of 30.03.2017 ruled that the income as assessed as of business by the ITO was actually from capital gains and not business. The other observations as made by the ITO in assessment were confirmed by the Ld. CIT(A). 36. The grounds as taken originally and the additional grounds as taken later are identical to those as are there in the case of Ram Kishan case. 37. We have carefully con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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