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TMI Blog2014 (12) TMI 465X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings has been reopened u/s. 147 of the IT Act by the AO after noticing that the assessee had sold agricultural land bearing Arazi No. 373 & 374 situated at Mauza Jhansi Khas admeasuring 4.256 hectare for Rs. 88,50,000/- on 30.05.2005 jointly with his brother Shri Rameshwar and also finding from the office record that the assessee had not filed any return of income for the assessment year under consideration and further finding that land which was sold by the assessee was situated within 8 kilometers of Municipal Limits of Jhansi, hence, being a capital asset within the meaning of section 2(14) of the IT Act and gain arisen on sale of such land will be chargeable to capital gain tax and therefore, after recording the reasons to believe that capital gains chargeable to tax arising out of sale of land, has escaped assessment, the AO issued notice u/s. 148 on 22.03.2011. The AO proposed as to why long-term capital gain of Rs. 32,17,384 may not be assessed as income. The AO ultimately assessed the income at the same amount. The assessee challenged the reopening of assessment and addition on merits before the ld. CIT(A). The ld. CIT(A) considering the reasons recorded for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed the reopening of the assessment vide order dated 22.06.2012. Copy of the order is placed on record. Learned D.R. accepted that issue is covered in favour of the assessee on identical facts. 6. On consideration of the facts of the case, in the light of the reason for reopening of the assessment recorded, we find that issue is covered in favour of the assessee by order of ITAT, Agra Bench in the case of Shri Badam Singh Rajpali Vs. ITO (Supra) in which the facts and finding are reproduced as under :- "2. Briefly, the facts of the case are that the assessee had sold certain agriculture land on 05.08.2003 for a sum of Rs. 19,50,000/-. As per the AO, the assessee had not filed any income tax return showing capital gain arising out of sale of agriculture land. Information was received by the AO from ITO 6(3), Jhansi that during the year assessee had sold the land to M/s. Sahara City Homes (P) Ltd. for a consideration of Rs. 19,50,000/- whereas the land value as per govt. rate was Rs. 11,40,000/-. On receipt of this information, the AO had issue notice u/s. 133(6) was not replied. The reasons as recorded by the AO for issuance of notice u/s. 148 are reproduced as under : "Reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of assessment, noted in para 2.2 of the appellate order that at the stage of initiation of reassessment proceedings u/. 148 of the IT Act, it is a trite law that the AO should have reason to believe that income assessable to tax has escaped assessment. It need not to prove conclusively and accordingly, upheld the reassessment proceedings u/s. 148 of the IT Act and dismissed the appeal of the assessee on this reason. 3. The ld. counsel for the assessee reiterated the submissions made before the ld. CIT(A) and submitted that ingredients of section 147 of the Act have not been satisfied in this case. Therefore, reopening of assessment is bad in law. On the other hand, the ld. DR relied upon the orders of the authorities below. 4. We have considered the rival submissions and the material on record. The reasons for reopening of assessment have been incorporated in the impugned order, which is also reproduced above. Copy of same is also filed at page 11 of the paper book. According to section 147 of the IT Act, the essential ingredient of this section has been that "if the Assessing Officer has reason to belief that any income chargeable to tax has escaped assessment in any assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ust be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." 4.1 Hon'ble Delhi High Curt in the case of CIT vs. Atul Jain & Smt. Vinita Jain, 299 ITR 383 held - "There must be "reason to believe" warranting the issuance of a notice of reassessment by the Assessing Officer. If there are no reasons, then the entire foundation for initiating the proceedings is bad and the notice initiating proceedings must be quashed. Mere satisfaction of the Assessing Officer for the issuance of a notice is not enough, there must be reasons on record which led him to believe that a notice should be issued. After a foundation based on information is set up, there must still be some reasons which warrant the holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellate authority upheld the validity of the notice under section 148 of the Income-tax Act, 1961, but set aside the assessment on the addition made by the Assessing Officer and remitted the matter to him to frame a fresh assessment. On second appeal, the Tribunal held that since the Assessing Officer failed to incorporate the material and its satisfaction for reopening the assessment, the same was invalid. On a reference : Held, that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid." 4.3 Considering the reasons for reopenin ..... 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