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TMI Blog2014 (10) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... investigated by the court - the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount - The information did not indicate the source of the capital gains which in this case were shares - There was no information which shares had been transferred and with whom the transaction had taken place - The AO did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner - The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148 - the AO has not satisfied the ingredients of section 147 of the Act in the reasons recorded for reopening of assessment - the AO has not correctly assumed jurisdiction u/s 147 / 148 of the IT Act – the order of the CIT(A) is set aside – Decided in favour of assessee. - ITA No. 20/Agra/ 2014 - - - Dated:- 28-2-2014 - SHRI BHAVNESH SAINI AND SHRI PRAMOD KUMAR, JJ. Appellant by Shri Manoj Badal, C.A. Respondent by Shri Anirudh Kumar, Jr.D.R. ORDER PER BHAVNESH SAINI, JUDICIAL MEMMBER: 1. This appeal by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ediaries and the cost of acquisition was taken on the basis of the valuation report of the Government Approved Valuer. After examining the details furnished by the assessee with respect to sale of land in the return of income and further filed during the course of assessment proceeding as called for by the AO and taking into account the information available with him and also collected during the course of assessment proceeding, the AO computed the long term capital gain earned by the assessee on sale of land by taking the sale consideration at ₹ 42,75,000/- and cost of acquisition as the value of land as on 01.04.1981 computed @ ₹ 800/- per acre on the basis of information collected from Tehsildar u/s 133(6) of the Act as mentioned in the assessment order. The AO did not accept valuation report submitted by the assessee for the purpose of determining the cost of acquisition because as per the AO, in the report, location of land is not correctly mentioned. Computation of capital gain as made by him in the assessment order is as under:- Total area sold 4.256 Hectare Assessee s share in sales 2,128 Hectare Assessee s Share in sales (1 Hect. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Meter Value of land as on 01.04.81 @ ₹ 10 per sq. meter =Rs.2,12,800/- Index cost of acquisition =2,12,800/- 497 100 =Rs.10,57,616/- Long Term Capital Gain =42,75,000/- 10,57,616/- =Rs.32,17,384/- However, assessee has failed to submit reply in this regard. As per this office record, no return of income for A.Y. 2006-07 was filed. As per these facts go to show that assessee has failed to disclose his taxable income and I have therefore, reason to believe that income chargeable to tax arising out of capital gain ₹ 32,17,384/- has escaped assessment within the meaning of section 147 of the Income Tax Act,1961. 4. Ld. CIT(A) considering the submission of the assessee and material on record, confirmed the reopening of the assessment and dismissed the appeal of the assessee on that ground. On quantum, the assessee filed revised computation to show that long term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s liable for payment of capital gain tax on the above transaction of land as per Income Tax Act, 1961. However, assessee has failed to submit reply in this regard. It goes to show that income chargeable to tax arising out of capital gain has escaped assessment within the meaning of sec. 147 of the IT Act, 1961. Accordingly, proceedings u/s. 147 is initiated and issued notice u/s. 148 of the IT Act, 1961. 2.1 The assessee challenged the reassessment proceedings and addition on merits before the ld. CIT(A) and submissions of the assessee have been incorporated in the impugned order. It was explained that the value of land as on 01.04.1981 was higher than the consideration amount. Therefore, no return of income was filed being the income not liable for income-tax. It was explained that the reasons recorded for reopening of assessment are without date. The reasons were recorded on the basis of information received from another officer and the AO has not applied his mind to satisfy himself through his own enquiry. There s no mention that the AO was having reason to believe that the assessee has concealed the particulars of income. The sale consideration cannot be treated as income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved from ITO 6(3), Jhansi that the assessee earned any capital gains out of the sale transaction of land in question. There was no material with the AO to prima facie prove that the assessee earned capital gain because he wanted the assessee to intimate as to how capital gain arises out of the transaction. Since no reply was submitted in this regard before the AO, therefore, the AO presumed that the income chargeable to tax has escaped assessment and he initiated proceedings u/s. 147 of the IT Act. The reasons recorded by the AO, therefore, do not satisfy the requirement of section 147 of the IT Act. The AO had not examined the information received from the ITO 6(3), Jhansi before recording the reasons for reopening of assessment. The AO had acted only on the basis of suspicion and it could not be said that it was based on belief that income chargeable to tax had escaped assessment. The Assessing Officer had to act on the basis of reason to believe and not on reason to suspect . The information received from ITO 6(3) did not indicate as to how capital gains arise in the case of assessee and the AO merely accepted truth in vague information in a mechanical manner and put the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the issue in favour of the assessees. On appeal: Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice under section 148. What had been recorded by the Assessing Officer as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The Assessing Officer had clearly substituted form for substance and therefore the action of the Assessing Officer was not sustainable. 4.2 Hon ble Punjab Haryana High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X
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