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TMI Blog2018 (8) TMI 650X X X X Extracts X X X X X X X X Extracts X X X X ..... , has grossly erred both in law and on facts in enhancing the income of the appellant to Rs. 3,50,000/- and bringing to tax the aforesaid sum u/s 25AA and 25B of the Act failing to appreciate that since computation of income under the head income from house property was not the issue before the learned AO as such, same being new source of income was beyond the subject matter of appeal and hence enhancement of income by the aforesaid sum is outside the scope of section 251 of the Act and as such, without jurisdiction. 4. That the learned Commissioner of Income Tax (Appeals), has grossly erred both in law and on facts in enhancing the income of the appellant without issuing a specific show cause notice to the appellant and hence enhancement made was without jurisdiction. 5. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that sum of Rs. 5,00,000/- relates to mainly rent which could not be collected because the owners were residing outside Dhaulpur and this rent was neither unrealized rent nor arrear of rent. 6. That the learned Commissioner of Income Tax (Appeals) has failed to notice that that income from house property as aforesaid of each ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) held the balance consideration of Rs. 25,00,000/- towards unrealized rent including use of furniture and fixtures, and the appropriate share of the assessee arising therefrom amounting to Rs. 5,00,000/- was brought to tax U/s 25AA r.w.s. 25B of the Act after allowing deduction of 30% under the head "income from his property". 4. Being aggrieved, the assessee is now in appeal before us. It was submitted by the ld. AR that the reasons recorded by the Assessing Officer that Rs. 8,00,000/- has escaped assessment is wholly misconceived as property sold was a capital asset as such, whole of the sale consideration cannot be adopted as income of the assessee and if at all, any income would be chargeable, it is only the capital gain after allowing deduction for cost of acquisition which at best can be held to have escaped assessment. It was submitted that if the government approved rate is applied for determining the cost of acquisition, there would be actual capital loss instead of capital gain and as such foundation for the assumption of jurisdiction is bad in law. It was submitted that it is settled law U/s 147 of the Act that burden is on the Revenue to establish that income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome chargeable to tax amounting to Rs. 8,00,000/- has escaped assessment in terms of Explanation- 2(a) of Section 147 of the Act. In our view, the Assessing Officer is duly ceased of the information in the form of the sale deed registered with the Sub-registrar, Dholpur, Rajasthan and the assessee's share in the sale deed is also determined to the extent of 1/5 share. There is, therefore, a definitive and a live link between the information in possession of the Assessing Officer and formation of believe that the income in the form of capital gain on the sale of the property has escaped assessment. As far as the assessee's contention that whole of the amount of Rs. 8,00,000/- is not the income in the hands of the assessee and where the cost of acquisition is taking into consideration, it will result in long term capital loss as against long term capital gain. In our view, at the time of issuance of notice U/s 148 of the Act, what is required is formation of a prima facie belief that certain income has escaped assessment and as far as determination of the actual income and allowing necessary allowances/deductions are concerned, the same is a matter of verification and quantificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In case of GKN Driveshafts (India) Ltd. vs. ITO & Ors. (supra), the Hon'ble Supreme Court held as under:- "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under s. 148 of the IT Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The AO is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the AO is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the AO has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. 6. Insofar as the appeals filed against the order of assessment before the CIT(A), we direct the appellate authority to dispose of the same, expeditiously. With the above observations, the civil appeals are dismissed." 11. The above judgment of the Hon'ble Supreme Court has been followed by various Hon'ble High Courts while dealing wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rted in 308 ITR 38, the Hon'ble Delhi High Court has held as under: "23. Secondly, let us assume for the sake of argument that the 'actual' reasons were those as noted in the said form. Then why did the Assessing Officer communicate a different set of reasons to the petitioner ? Did he think that the supplying of reasons and the inviting of objections were mere charades? Did he think that it was a mere pretence or a formality which had to be gotten over with? At this point, it would be well to remember that the Supreme Court in GKN Driveshafts (India) Ltd.'s case (supra) had specifically directed that when a notice under section 148 of the said Act is issued and the noticee files a return and seeks reasons for the issuance of the notice, the Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of the reasons, the noticee is entitled to file objections to the issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. These are specific directions given by the Supreme Court in all cases where notices under section 148 of the said Act are issued. Surely, the Assessing Officer could not have cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, for this reason also, the notice under section 148 as well as all proceedings subsequent thereto as also the order dated 2-3-2005 are liable to be quashed." 15. In the matter of Trend Electronics reported in 379 ITR 456, the Hon'ble Bombay High Court has held as under: "8. We find that the impugned order merely applies the decision of the Apex Court in GNK Driveshafts (India) Ltd. (supra). Further it also follows the decision of this Court in Videsh Sanchanr Nigam Ltd. (supra) in holding that an order passed in reassessment proceedings are bad in law in the absence of reasons recorded for issuing a reopening notice under Section 148 of the Act being furnished to the assessee when sought for. It is axiomatic that power to reopen a completed assessment under the Act is an exceptional power and whenever revenue seeks to exercise such power, they must strictly comply with the prerequisite conditions viz. Reopening of reasons to indicate that the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment which would warrant the reopening of an assessment. These recorded reasons as laid down by the Apex Court must be furnished to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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