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TMI Blog2023 (7) TMI 1093X X X X Extracts X X X X X X X X Extracts X X X X ..... that even the authority granting approval has not applied its mind as to whether the AO had sufficient material available with him to form a belief that income which was otherwise chargeable to tax had escaped assessment. 6. The record shows that the petitioner had filed his Return of Income (ROI) for the aforementioned AY i.e., AY 2011-12 on 29.06.2012. 6.1 The ROI was processed under Section 143(1) of the Income Tax Act, 1961 [in short, "the Act"]. 7. The petitioner was served a notice dated 24.01.2014 under Section 133(6) of the Act. To this notice, the petitioner filed his response on 05.02.2014. 8. Thereafter, the petitioner was issued a non-statutory letter dated 10.06.2018 by the Assistant Commissioner of Income Tax (ACIT) seeking details of lands sold. The petitioner was also directed to furnish the documents with regard to the sale. 8.1 This notice was replied to by the petitioner via communication dated 23.06.2014. 9. The afore-mentioned correspondence led to the ACIT serving the notice dated 29.03.2018 under Section 148 of the Act on the petitioner. 10. The petitioner filed a reply on 11.04.2018 to the notice issued under Section 148 of the Act. 11. Thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested that the necessary action as per the provision of Sec. 50C of the Act may be taken in hands of the assessee. On making enquiry by the ACIT, Cir. 31(1), New Delhi [prerestructuring] for A.Y. 2011-12, the assessee had submitted that following explanation with respect to the above stated transaction: "....the circle rate is higher than market rate because the land is uneven as this is a hilly land so very small portion of the land is usable....". Further, the assessee has enclosed a list containing details of lands sold during the financial year 2010-11, which is hereunder: S.No. Name of Party Area (Sq.Mtr.) Registry S.No. Amount actually received. Amount as per Circle Rate 1 M/s Krit Yug Infrabuild Pvt. Ltd. 44530 1284 I-10 92,00,000 3,42,89,000 2 Sh. Kamal Kant Malik 36432 10-I-10 65,00,000 2,80,52,640 3 M/s Nyas Infrabuild Pvt. Ltd. 36432 1127-I-10 75,00,0000 2,80,52,640 4 M/s Shree vaas Infrastructure Pvt. Ltd. 48600 204-I-11 1,00,00,000 3,74,22,000 5 M/s Saundriya Construction Pvt. Ltd. 48600 351-I-1 1,00,00,000 3,74,22,000 6 M/s Karamshil Construction Pvt. Ltd. 48600 352-I-1 1,00,00,000 3,74,22,000 Total 2631 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sq. mtrs. * The A.O. is required to further work out the value of capital gain tax liability after taking into consideration the material found during the course of search and collected during the course of post search enquiries. In view of the above facts and documents found and seized during the course of search and perusal of ITR for A.Y. 2011-12, it is evident that the cost of acquisition claimed is much higher. In light of the facts it is therefore, requested to examine the same facts and take appropriate action in the light of provision of section 50C of Income Tax Act, 1961, by invoking the provision of section 153C/148 as deemed fit at your end.....". 3. On perusal of all details contained in the above referred letter/information, it is observed that the assessee had sold the above stated lands below the circle rate as prescribed by the stamp valuation authority. Hence, the provision of Sec.50C is clearly attracted in this case. Further, the cost of acquisition of the lands had been taken at higher rate. The provision of Sec. 50C is stated as under: Special provision for full value of consideration in certain cases 50C.(1) Where the consideration received or accruing as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (27 of 1957). Explanation 2.- For the purposes of this section, the expression "assessable" means the price which the stamp valuation authority would have, notwithstanding anything to the contrary contained in any other law for the time being in force, adopted or assessed, if it were referred to such authority for the purposes of the payment of stamp duty. (3) Subject to the provisions contained in sub-section (2), where the value ascertained under sub-section (2) exceeds the value adopted or assessed or assessable by the stamp valuation authority referred to in sub-section (), the value so adopted or assessed or assessable by such authority shall be taken as the full value of the consideration received or accruing as a result of the transfer. Following section 50CA shall be inserted after section 50C by the Finance Act, 2017, w.e.f. 1-4-2018: 4. On perusal of ITR and computation of income filed by the assessee for the year under consideration, it reveals that the assessee has declared 'Long Term Capital Gain' amounting to Rs. 1,4760,893/- as per the calculation below: Full value of consideration Less: : Rs. 20,26,60,280/- Cost of acquisition : Rs. 17,77,74,387/- L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Revenue to assume valid jurisdiction u/s 148 is the existence of cogent material that would lead a person of normal prudence, acting reasonably, to an honest belief as to the escapement of income from assessment." 8. To conclude, I have independently examined the entire gamut of facts and circumstances surrounding the case as also the material available on record and after due application of mind on the same as brought out above, I, therefore, have, reasons to believe that an income of Rs. 18,56,68,835/- in the case of the assesseee that was chargeable to tax under the provisions of Income Tax Act, 1961 has escaped assessment during the A.Y. 2011-12 by reason of the failure on the part of the assesse to disclosure fully and truly all material facts necessary for its assessment. Hence, it is a fit case for initiation of proceedings in terms of Explanation 2(b) read with 2(ca) to Sec. 147 of I.T. Act 1961; so as to bring to tax the income escaping assessment to the tune of Rs. 18,56,68,835/- or any other income which comes to my notice subsequently during the course of assessment proceedings. In this case, more than four years have lapsed from the end of the assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no dispute whatsoever that capital gains were calculated by the petitioner by taking the circle rate into account; the cumulative value of which, as noticed above, was Rs. 20,26,60,280/-. Therefore, clearly, the provisions of Section 50C were not applicable, as the computation of capital gains was based on the circle rate. 28. A careful perusal of paragraphs four (4) and five (5) of the reasons recorded by the AO would show that the real difference in the long-term capital gain upon the sale of subject lands, as calculated by the respondent/revenue, and that which the AO has arrived at, was on account of the cost of acquisition. 29. The cost of acquisition that the petitioner had arrived at, as noted in paragraph four (4) of the reasons recorded, was Rs. 17,77,74,387/-. 29.1 Thus, having taken into account the full value of the consideration, which was the circle rate i.e., Rs. 20,26,60,280/- after adjusting the transfer expenses of Rs. 1,25,000/-, the long-term capital gain on the subject lands which the petitioner arrived at was Rs. 2,47,60,893/-. 29.2 The petitioner also sought a deduction against the said figure under Section 54EC of the Act, which was pegged at Rs. 1 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken as the rate, as against Rs. 10 per square metre, while ascertaining the cost of acquisition. 34. Mr Gupta also says that the AO did not have the relevant material in his possession. This aspect has been emphasized by Dr Gupta by referring to assertions made in paragraphs 11 and 24 of the writ petition, wherein it is averred that the AO did not have relevant material in his possession before triggering the reassessment proceedings. 34.1 This plea is supported by Dr Gupta by referring to the counter-affidavit, where there is no denial qua the assertion made in the writ petition. 35. What makes matters worse is that the Principal Commissioner of Income Tax [in short, "PCIT"], while granting approval, has adopted an almost nonchalant approach. This is evident from a perusal of the following extract: "I have gone through the entire material on record, in the case of SH.MANUJENDRA SINGH (ABMPS6821N) for A.Y. 2011-12. The AO, i.e. CIRCLE-52(1), New Delhi has sufficient information in her possession which leads to reasons to believe that the Assessee would have Income exceeding maximum amount not chargeable to Tax and Has Income which has escaped assessment which exceeds Rs.1 L ..... X X X X Extracts X X X X X X X X Extracts X X X X
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