TMI Blog2020 (1) TMI 1666X X X X Extracts X X X X X X X X Extracts X X X X ..... After getting the information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar, the AO should apply his mind and to examine based on this information that income has escaped assessment. In this case AO has not applied his mind and it is a borrowed satisfaction only. We note that reasons recorded by AO are only on the basis of information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar. Based on this information the AO ought to have conducted further enquiry to examine whether there is tangible material which suggests that income has escaped assessment, which he has not done, therefore based of the borrowed satisfaction he has reopened the assessment. The reasons should be recorded standalone basis and not on the basis of borrowed satisfaction. It is clearly evident from the reasons recorded by the Assessing Officer that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or to conduct further enquiry or to examine certain particulars furnished by the assessee in the return of income. We note that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Per Dr. A.L. Saini: The captioned appeal filed by the assessee, pertaining to assessment year 2011- 12, is directed against the order passed by the Commissioner of Income Tax (Appeals)-2, Jalandhar [in short CIT(A) ], which in turn arises out of an assessment order passed by the Assessing Officer u/s 147/143(3) of the Income Tax Act, 1961 (in short the Act ) dated 27.12.2016. 2. Grounds of appeal raised by the assessee are as follows: 1. That on the facts circumstances of the case, Learned Commissioner of Income Tax (Appeals) [ CIT(A) ], has grossly erred in holding that assessing officer has rightly assumed jurisdiction over the case and proceedings u/s 148 of the Act have been validly initiated by the assessing officer. 2. That on the facts and circumstances of the case, Learned Commissioner of Income Tax (Appeals) has grossly erred in holding that provisions of section 50C of the Act have rightly been invoked since existence of memorandum of understanding prior to 01.10.2009 could not be proved with irrefutable evidence. 3. That both assessing officer and learned CIT(A) have grossly erred in law in failing to appreciate that in light of the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l ground of reopening u/s 147/148 of the Act and held that the AO has discharged his duty before initiating the re-opening proceedings u/s 147 of the Act. However, the ld. CIT(A) also adjudicated the assessee s appeal on merits observing the following: 5.17 I have perused the comments made by the appellant in response to the valuation report of the DVO and find that primary focus is on the circle rate which has been adopted for the purposes of valuation of the property. The appellant has contended that circle rate which is being adopted by the stamp valuation authority has recently been reduced substantially and therefore, it is stated that lower value may be adopted for the purposes of taking deemed sale consideration of the property. 5.18 Having considered the submissions made in this regard, I find that provisions of section 50C (2) of the IT Act do provide for making a reference to the valuation Officer, where it is contended that value adopted by the stamp valuation authority is higher than the fair market value of the property as on the date of transfer, Further, provisions of subsection (3) of section 50C of the IT Act also provide that where the value ascertained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-open the assessment which vitiates the re-opening itself. According to Ld. Counsel, even if the information given by the ITO (hq.) (tech)O/o Pr. Commissioner of Income Tax-1 Jalandhar,is adverse against the assessee, at the most it may trigger reason to suspect ; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. For the said proposition, the Ld. AR drew our attention to following case laws: i).PCIT Vs. Meenakshi Overseas Ltd. 395 ITR 677(Del.) (referred to para 19 till para 37). ii).DCIT Vs. Greal Wall Marketing Pvt. Ltd. ITA No.660/Kol/2011 (referred to page 10 para 11) iii).Shri Raj Kumar Goel Vs. ITO ITA No.1028/Kol/2017 (referred to page 5-8 para 11) (iv).Classic Flour Food Processing Pvt. Ltd. Vs. CIT ITA Nos. 764 to 766/Kol/2014 (page 7 para 12 to 16) v).PCIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) page 4 para 12 to 14) vi).KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 (referred to page 3 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : 10. Besides, the submissions made on behalf of the Revenue that in view of the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), the Assessing Officer is entitled to re-open the Assessment for whatever reasons and the same cannot be subjected to jurisdictional review, is preposterous. First of all, taking out a word or sentence from the entire judgment, divorced from the context and relying upon it, is not permissible (see CIT v. Sun Engg. Works (P) Ltd. [l992] 64 Taxman 442/198 ITR 297 (SC). It may be useful to reproduce the context in which the sentence in Rajesh Jhaveri Stock Brokers (P) Ltd.'s case (supra) being relied upon by the Revenue to support its case, was made. The context, is as under: The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitutions. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed to confer jurisdiction under secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. Therefore, it can only be the basis of forming the belief. However, the belief must be independently formed in the context of the material obtained that there is an escapement of income. Otherwise, no meaning is being given to the words 'to believe' as found in Section 147 of the Act. Therefore, the words 'whatever reasons' in Rajesh Jhaveri Stock Brokers (P) Ltd.'s, case (supra), only means whatever the material, the reasons recorded must indicate the reasons to believe that income has, escaped assessment. This is so as reasons as recorded alone give the Assessing Officer power to re-open an assessment, if it reveals/indicate, reasons to believe that income chargeable to tax has escaped assessment. 12. The re-opening of an Assessment is an exercise of extra-ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening. Assessment and its reasons which would evidence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law. Thus, not entertained. 9. Having taken into consideration the aforesaid judicial precedents and other case laws cited before us by both the parties, in order to appreciate the legal ground raised before us, we need to look into the reasons recorded by the AO before proposing to reopen the assessment, which is reproduced as under. In this case an information was received from the ITO (Hq.)(Tech.) O/o Pr. Commissioner of Income Tax-I, Jalandhar. This case was selected under code 007. As per information received the sale deed is Rs. 1,21,00,000/- whereas stamp duty had been paid on Rs.3,46,00,000/- and paid additional stamp duty of Rs. 18,36,000/-. To circumvent the law assessee had filed an unregister copy of agreements dated 04.09.2009 and 02.04.2010 as per these agreements the land was transferred to Sirjan Construction Pvt. Ltd. for sum of Rs.1,21,00,000/-. It appears that these agreements are an afterthought and moreover have no legal sanctions. In this case escapement of an amount of Rs.2,25,00,000/-, as per section 48 read with section 50C of the income tax Act, 1961. The section 50C has been amended by the Finance Act 2009 with effect from 01.10.2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO to reopen the assessment it can be said that AO on the basis of whatever material before it, had reasons which he had indicated in his reasons recorded which warrant holding a belief that income chargeable to tax has escaped assessment. The reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed while adjudicating the legal issue of AO s usurpation of jurisdiction u/s. 147 of the Act. From the reasons already set out above and from the gist of the reasons recorded by the AO, we understand that the AO received information from ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar. After getting the information from the ITO(hq.) (tech) O/o Pr. Commissioner of Income Tax-1 Jalandhar, the AO should apply his mind and to examine based on this information that income has escaped assessment. In this case AO has not applied his mind and it is a borrowed satisfaction only. The relevant para of the reasons recorded is reproduced below for ready reference: In this case an information was receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the most it may trigger reason to suspect ; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. The reasons recorded by AO to reopen has to be evaluated on a stand-alone basis and no addition/extrapolation can be made or assumed while adjudicating the legal issue of AO s usurpation of jurisdiction u/s. 147 of the Act. 12. We note that the information given by the ITO(hq.) (tech) O/o Pr. Commissioner, can only be a basis to ignite/trigger reason to suspect for which reopening cannot be made for further examination to be carried out by him in order to strengthen the suspicion to an extent which can form the belief in his mind that income chargeable to tax has escaped assessment. No quantification of income escaping assessment has been spelt out by the AO in the reasons recorded for justifying reopening u/s. 147 of the Act. It has to be kept in mind that merely on an allegations leveled by the ITO(hq.) (tech) O/o Pr. Commissioner, can only raise suspicion in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comments made by the appellant in response to the valuation report of the DVO and find that primary focus is on the circle rate which has been adopted for the purposes of valuation of the property. The appellant has contended that circle rate which is being adopted by the stamp valuation authority has recently been reduced substantially and therefore, it is stated that lower value may be adopted for the purposes of taking deemed sale consideration of the property. 5.18 Having considered the submissions made in this regard, I find that provisions of section 50C (2) of the IT Act do provide for making a reference to the valuation Officer, where it is contended that value adopted by the stamp valuation authority is higher than the fair market value of the property as on the date of transfer, Further, provisions of subsection (3) of section 50C of the IT Act also provide that where the value ascertained under subsection(2) exceeds life value adopted by the stamp valuation authority, then the value so adopted by such authority shall be taken as the full value of consideration received as a result of transfer. In this case, the stamp valuation authority had adopted the value of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Sec. 147 has this effect that the AO has to assess or reassess the income ( such income ) which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings. However, if after issuing a notice under s. 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under s. 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. The reasons recorded by AO does not stand the test as laid by plethora of judicial precedence as discussed above which is necessary to assume jurisdiction u/s 147 of the Act, therefore, in the light of the aforesaid facts and circumstances of the case as discussed, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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