TMI Blog2022 (3) TMI 1541X X X X Extracts X X X X X X X X Extracts X X X X ..... ned or if the income for the relevant assessment 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 r.w.s. 148 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. 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. Status of Appellant selling the agricultural lands - whether the property is an HUF property or individual? - HELD THAT:- There is nothing on record brought before us, whether, the above named assessees (4 brothers) have applied for any PAN for HUF or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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, terrace, roof and other undivided areas. The developer shall be entitled balance 65% of the total saleable area. (Clause 1 of the collaboration agreement) (iii) The developer will pay the interest free refundable security deposit of Rs. 8 lacs per acre and non-refundable security of Rs. 27 lacs per acre to the owners. (Clause 2 of the collaboration agreement) (iv) If Letter of Intent (LOI) for the above land is not obtained from the Government of Haryana within six months, developer will pay compensation of Rs. 6 lacs per month for the delayed period. If LOI is not obtained in 12 months the owners at their discretion can increase the time period to obtain LOI or if they don t want to continue with the agreement they can terminate the agreement and forfeit the security amount at the rate Rs. 20 lacs per acre. (Clause 3 of the collaboration agreement) (v) The owners will m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticed 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. Ltd. for a total consideration of Rs. 9,66,80,000/- (out of which the assessee has got one fourth share). The said sale deed of 18.11.2009, refers to the collaboration agreement dated 14 Dec. 2006 vide which the owners were having share of 35% out of the saleable area. The Sale Deed also mentions that the Owners were not interested in obtaining duly constructed space of 35% and wanted the Developer to purchase the above land along with all rights (accrued to them by virtue of above collaboration). As per the above sale deed, the sale amount has been paid to this assessee through different cheques as per the following details:- Vendor Ch. No. Dated Amount Bank Name Ram Kishan 351179 28.12.2006 35,00,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/market of each unit depends on various parameters as discussed above. The land owners were facing the risk and rewards involved w.r.t. the market condition in respect of potential sale consideration of the units (reward in case of appreciation and risk if there is depression in the rates of apartments depending upon market conditions). The owners including the assessee have taken a series o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 = Rs. 50,34,375/- (Sales conversion @ Rs. 60,00,000/- per acre in view of the verbal Field enquiries) Less:- Indexed cost of acquisition @ Rs. 25,000/- Per acre = Rs. 20,977/- X 582/100 = Rs. 1,22,086/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the proceedings u/s 147/148 of the Act in the subject year; 3. in completing the assessment on the basis of such wrong action u/s 143(3) of the Act; 4. in computing the income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted for adjudication and orders. 12. Per contra the Ld. Sr. DR vehemently objected to the entertainment of the additional grounds filed at this late stage by the Appellant. According to her these grounds were not taken 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The decisions in CIT vs. B.Ranga Reddy (1929) 118 ITR 897(AP), CIT vs. Ram Das Deoki Nandan Prasad (2005) 277 ITR 197(All) were cited in this context. 14.2 It was further submitted that the relevant assessment year for consideration 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s individual capacity. That was however subject to correction. Ld. Sr. DR cited the provisions of Section 124 of the Act in this regard governing transfer of cases from one AO to another. she submitted that after having participated in the 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 fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, the notice u/s 148 of the Income Tax Act, 1961 dated 30.03.2015 was issued by the then AO well within his jurisdiction as he had the complete authority of law to assume charge over the case. It is also pertinent to mention that the assessee participated in the assessment 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 consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is accepting notices on jurisdictional address of Gurgaon, he is filing his ROI due in that year from Gurgaon address he is not objection to the jurisdiction during assessment clearly shows that he is residing in the area of jurisdiction of Assessing Officer and thus AO has rightly assumed the jurisdiction. 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 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without PAN. c) Further, in that case, the assessee raised objections to notice u/s 148 and claimed that the AO had examined the ITR while disposing off the objections and thus had knowledge of lack of jurisdiction. In present case, no such objections were ever raised at any stage and thus the present case is not covered by the judgment of Hon ble bench. 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 wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission under reply it is conceded that the reassessment proceedings which were initiated on 30.03.2015 by the ITO, Ward 2(5) Gurugram was as a non-PAN case on the basis of information in his possession. The notice is dated 30.03.2015 which is for the subject AY 2010-11. The notice does not define the status of the assessee as that of a family. It imputes escapement of income to the assessee individual 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owledgement of the return for AY 2011-12 filed on 31.07.2012 by Sh. Ram Kishan with the AO designated as Ward Circle R2-W4-Ranchi-W2(4). This acknowledgement is dated 31.07.2012 whereas the notice u/s 148 is issued on 30.03.2015. This clearly shows that despite being aware of the fact that Ram Kishan was being assessed by the AO at Ranchi, the Gurgaon AO arbitrarily assumed jurisdiction in the case to issue 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case and the law bearing on the subject and the case laws as applicable had quashed the notices under section 148 and the consequents 147/143(3) re-assessments with the following observations. 32. In view of the above discussion and considering the fact that the assessee was employed with Delhi Police and was regularly filing his return of income at Delhi under ITO, Ward 64(3) {earlier ITO, Ward 40(3) and since this 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 Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the information or even applying his mind to the facts of the case as to its authenticity and applicability to the Appellants as was conveyed to him by the stated source. The notices were issued to the above Appellants who were definitely not within his jurisdiction even as individuals. Besides the notices were issued in respect of transactions and the resultant incomes which did not belong to these individuals at all. No appropriate verification 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 exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income of the Appellant. The ITO Ward 3(5) Gurugram does not seem to have made any inquiry on the relevant issues before issuing a notice u/s 148 of the Act to the Appellant. No material in this behalf has been brought before us by the Department. The High Court of Punjab Haryana in Lt. Col. Paramjeet Singh vs. CIT (1996) 220 ITR 446 has ruled that if the assessment proceedings of an assessee is to be reopened or if the income for the relevant assessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and the income sought to be reassessed was that of the Hindu undivided family of which the assessee was the karts. The notice to reassess the income of the Hindu undivided family was invalid . 19. On a perusal of the facts and the aforesaid judicial pronouncement, though we may agree with the aforesaid argument of the Ld. Counsel, however, there is nothing on record brought before us, whether, the above named assessees (4 brothers) have applied for any PAN for HUF or 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 rejec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject case, the Developer has initially been vested with the irrevocable possession of agricultural land on payment of significant refundable and non-refundable security deposits plus 35% share in the projected multi-story complex. By so doing, and acting on it, the conditions of part performance of a contract u/s 53A of the Transfer of Property Act as envisaged u/s 2(47)(v) of the Act stood fulfilled, causing a valid transfer. The Sale Deed confirms the factum of the Appellant giving 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 148 of the Act dated 30.03.2015 by the ITO, Ward 2(5), Gurugram. The copy of the notice as issued by the said ITO is placed at page 59 of the paper book filed in his case. That marks the status of the Appellant as individual. The satisfaction note of the AO is annexed at pages 60 to 62. Therein too, the AO refers to the collaboration agreement of December 2006 with Bestech India Private Ltd. for the development and construction of multi-storied complexes on the agricultural land of the Appellant 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per book shows his PAN as APLPR4350L. He was subjected to deduction of TDS on salary u/s 192 of the Act. Accordingly he was under the jurisdiction of Salary Circle ITO In-charge of the Panchayati Raj Department, Gurugram of the Government of Haryana. He too like his brothers Ram Kishan, Kanwar Lal and Manphool Ram Singh was issued a notice issued u/s 148 of the Act 30.03.2015 by the ITO, Ward 3(5), Gurugram. That is placed at page 6 of the paper book filed in his case. Placed on pages 61 and 62 of the paper book is 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar with address: INS Shivaji, Lonavala, Pune. This return was filed on 13.03.2012 with ITO, Ward 26(1)-4 (NAVY). With this material on record his assessment with the ITO, Salary Circle, Navy is established. The Appellant, like his brothers Sri Ram Kishan, Sri Kanwar Lal and Sri Ram Avtar was visited with a notice u/s 148 dated 30.03.2015 issued by the Incometax Officer, Ward 2(5), Gurugram a copy of which is placed at page 62 of the paper book. The reasons for initiating the proceedings u/s 147 are filed at pages 63 and 64 of the 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 compl ..... 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