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2013 (8) TMI 742 - AT - Income TaxNotice u/s 148 - Reasons to be recorded borrowed satisfaction - Held that - ITO, Agra was not having jurisdiction over the assessee, therefore, should not have recorded the reasons for reopening of assessment and further, he was having no reasons to believe that income chargeable to tax has escaped assessment because the order of ADM, Agra has not reached finality on admission of writ petition by the Hon ble High Court. The reasons which are not in accordance with law have been recorded at Agra by the ITO, who was not authorized to do so, as was having no jurisdiction over the assessee and the Assessing Officer having jurisdiction over the assessee at Aligarh did not do anything with regard to the initiation of re-assessment proceedings and has not recorded any reasons for re-assessment proceedings and merely acted on the borrowed satisfaction. Reliance has been placed upon the judgments in the case of Signature Hotels P. Ltd. vs. ITO, 2011 (7) TMI 361 - Delhi High Court ; Hon ble Rajasthan High Court in the case of CIT vs. Shree Rajasthan Syntex Ltd., 2008 (5) TMI 276 - RAJASTHAN HIGH COURT .
Issues Involved:
1. Initiation of re-assessment proceedings under Section 147 of the IT Act. 2. Confirmation of addition of Rs. 2,31,60,000/-. Issue-wise Detailed Analysis: 1. Initiation of Re-assessment Proceedings under Section 147 of the IT Act: The primary contention of the assessee was the legality of the re-assessment proceedings initiated under Section 147 of the IT Act. The assessee argued that the re-assessment order was passed by the ITO, Ward 1(2), Aligarh, whereas the reasons for reopening the assessment were recorded by the ITO 4(2), Agra, who did not have jurisdiction over the assessee. The assessee contended that the ITO at Agra merely followed the borrowed satisfaction from the office of DCIT-2, Agra, making the re-assessment bad in law. The Tribunal examined the provisions of Section 147, which allows the Assessing Officer to reassess income if there is reason to believe that income chargeable to tax has escaped assessment. It was noted that the ITO 4(2), Agra recorded the reasons for reopening the assessment based on the order of the ADM, Agra, which determined a higher valuation for stamp duty purposes. However, this valuation was under dispute before the Hon'ble Allahabad High Court, making it non-final. The Tribunal referred to the case of Late Shri S.N. Bhargava vs. ITO, where similar facts were present. In that case, the Tribunal held that the initiation of re-assessment proceedings was invalid because the reasons for reopening were recorded by an officer who did not have jurisdiction over the assessee, and the officer with jurisdiction did not record fresh reasons. The Tribunal applied the same reasoning to the present case, concluding that the ITO at Agra, who recorded the reasons, did not have jurisdiction over the assessee, and the ITO at Aligarh, who passed the re-assessment order, did not record any reasons at his own. The Tribunal highlighted that the re-assessment proceedings were initiated based on borrowed satisfaction, which is not permissible under the law. The Tribunal also noted that the ADM's order was not final as it was subject to the outcome of the writ petition before the Hon'ble Allahabad High Court. Therefore, the Tribunal held that the initiation of re-assessment proceedings was bad in law and quashed the re-assessment proceedings under Section 147 of the IT Act. 2. Confirmation of Addition of Rs. 2,31,60,000/-: The second issue involved the confirmation of the addition of Rs. 2,31,60,000/- to the assessee's income. The assessee argued that the valuation determined by the ADM, Agra, was in dispute and could not be the basis for the addition. The assessee contended that the valuation determined by the ADM was applicable to the buyers and not to the assessee. The Tribunal noted that the ADM, Agra, had valued the property at Rs. 8,51,10,000/- for stamp duty purposes, and the AO applied the provisions of Section 50C of the IT Act to take the full value of consideration as per the ADM's order. However, the Tribunal emphasized that the ADM's order was under challenge before the Hon'ble Allahabad High Court, and the valuation was not final. The Tribunal reiterated that the ADM's order could not be the basis for the addition as it was subjudice. Given that the re-assessment proceedings were quashed, the Tribunal found it unnecessary to decide on the merits of the addition. The Tribunal concluded that all additions would stand deleted as the re-assessment proceedings were invalid. Conclusion: The Tribunal allowed the appeal of the assessee, quashing the re-assessment proceedings under Section 147 of the IT Act and deleting all additions. The Tribunal emphasized that the initiation of re-assessment proceedings based on borrowed satisfaction and non-final valuation orders was against the provisions of law.
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