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TMI Blog2019 (7) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... be set aside. Thus in our considered view, the Learned AO has made reopening on the dictates of superior authority and not of his own and without any application of mind; the same was done in tutored manner. AO admittedly failed to comply with the provision of Section 151. It appears from the records that he himself has accepted in assessment year 2010-11 that income was chargeable at the time of execution of sale deed. When in the original assessment the AO accepted the matter, reassessment proceeding cannot be initiated indicating a mere change of opinion. There must be a tenable material on the basis of which an assessment is sought to be reopened even within a period of four years is now well established in view of the judgment passed by the Hon ble Supreme Court in the matter of CIT-vs-Kelvinator of India Ltd [ 2002 (4) TMI 37 - DELHI HIGH COURT] . The reason for reopening also indicates that time limit for issuance of such notice u/s 148 for A.Y. 2007-08 expires on 31.03.2014 which strengthen the case of the assessee showing that in order to reopen the assessment by hook and crook without the approval and/or sanction of the higher authority in terms of the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 25.03.2008 along with computation of income at ₹ 2,65,840/- which was processed u/s 143(1) of the Act. Subsequently, the case was reopened by issuance of the notice dated 27.03.2014 u/s 148 of the Act. The reason recorded by the Income Tax Officer, Ward-10(3), Ahmedabad for such reopening is as follows: The Commissioner of Income Tax Ahmedabad -III, Ahmedabad vide letter No. HQ.Tech.III/263/PK Desai/2013-14 dated 21.03.2014 addressed to the Commissioner of Income Tax Ahmedabad-V, Ahmedabad in which he has passed revisionary proceedings u/s 263 of the I.T.Act,1961 in the case of Shri Prabhat Karsanbhai Dcsai for A.Y. 2009-10 and given various findings after making inquiries and after examining various details furnished by the above named assessee during the said proceedings that pertain to the assessee namely Shri Nishith Prabhatbhai Desai had sold the immovable property i.e. land to Pacifica Developers Pvt Ltd. during the F.Y. 2006-07 and against the said transaction assessee has received amount of ₹ 37,12,500/- on 20/12/2006 accordingly has received total sales j consideration aggregating of ₹ 37,12,500/- which were credits reflecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 expires on 31/03/2014. The assessee further made a request by a letter dated 28.05.2014 to treat the original return dated 25.03.2008 as return filed in response to notice u/s 148 of the Act. Subsequently, in reply to the show-cause dated 12.03.2015, the assessee inter alia submitted as follows: Without prejudice to other rights and entitlements of the assessee, it is to submit that the reassessment proceedings initiated u/s 147 is bad in law as it is solely based upon mere change in opinion and the revenue has not brought on record any material evidences suggesting concealment of any information / income by the assessee. Hence assessment proceedings shall be dropped on such count too. In light of foregoing, your good self is again requested to accept the returned income and conclude the proceedings. The assessee would crave to grant an opportunity of being heard more particularly in case explanations are not found acceptable on face of this submission. However, reassessment proceeding was completed by and under an order dated 30.03.2015 whereby and whereunder long term capital gain of ₹ 34,59 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise taxable in particular year has been escaped from assessment. Now what is reason to believe REASONS TO BELIEVE :- For re-opening of assessment after amendment of Section 147 with effect 01.04.1989. The only condition is required to be fulfilled is as follow :- The Ld Assessing Officer must have reasons to believe that income Profit or Gain chargeable to Income-tax have escaped assessment. In this condition the important words are reason to believe. The Hon'ble Supreme Court as well as various High courts have made afford to interpret the word. Reason to Believe : - The Hon'ble Supreme Court in case of Lakhmani Meval Das interpreted the words Reasons to believe as follow :- The paragraph 11 12 impugned judgment reads as under As stated earlier, the reasons for the formation of the belief must have rational connection with or relevant bearing on the formation of the belief. Rational connection postulated that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of this belief that there has been escapement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r opinion, were not in error in holding that the said material could not led to the formation of the belief that the income of the assessee respondent had escaped assessment because of the failure or omission to disclose fully and truly material fact, We would, therefore uphold the view of the majority and dismiss the appeal with costs. The copy of impugned judgment is attached herewith as (Annexure 3). The Hon'ble Gujarat High Court in case of Sheth Brothers v/s Joint Commissioner of Income-Tax ( 251 ITR 270) has very well tried to interpret. The words reasons to believe in the fallowings words Para 11 of the impugned judgment reads as under :- Thus, The settled legal position can be summarized, that: - a) There must be material for belief: b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. c) Reason t to believe must be honest and not based on suspicious, gossip, rumors or conjuncture. d) Reasons referred must disclose the process of reasoning by which he holds Reason to believe and change of opinion does not confer jurisdiction to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cifica Developer Pvt. Ltd. Though sale of Immovable Property is not defined in Income-tax Act, but sale is defined in the Transfer of Property Act, 1882. The Section 54 of the said Act reads as under: Section 54 of Transfer of Property Act: - Sale is a transfer of ownership in exchange for a price paid or Promised or Part Paid Part Promised. Sale How Made: - Such transfer in the case of Tangible Immovable Property of the value of one hundred rupees and upwards and in the case of a reversal or other Intangible thing can be made only by registered instrument. From the above definition of sale, it is evident that transfer of Immovable property cannot he made unless registered instrument is executed While Basic requirement of Sale of land namely registered instrument was not available at all, how the Ld. Assessing Officer-believed that sale of land in favour of Pacifica has taken place in the F.Y. 2006-07. In case of Sheth Brothers (Supra), it is held that reason to believe must be honest and not based on suspicion, gossip, rumor or conjuncture. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Transfer of Property Act to Pacifica Developers Pvt. Ltd. and possession of the land was also given to impugned party and as per section 2(47) of Income-tax Act Transfer of Property Act. The Assesses must be offered income arised on sale consideration received in the FY 2006-07. The reasons recorded, itself was contradictory. On the one land. The Ld. Assessing Officer believed that sale of land has taken place in FY. 2006-07, on the other land, he believed that transfer of land has taken place within the meaning of section 53A of Transfer of Property Act. However in both cases there was no iota of evidences or information for forming the belief that income has escaped assessment. The Ld Assessing Officer believed that possession of land was given to purchasing party M/s Pacifica Developers Pvt. Ltd. This belief also created many doubts such as follows. ( 1) No description of land, which land transferred. ( 2) Transaction placed as per section 53A of Transfer of Property Act by which document as No banakhat, No chithhi, No any other writing was brought on record by Ld. Assessing Officer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Ld. Assessing Officer has not applied his mind. What the Ld. Commissioner of Income-tax, 3 Ahmedabad communicated his suspicion that land has been sold by the assessee to Pacifica Developers Pvt. Ltd. without passing any proof or even iota of evidence for such belief to Assessing Officer. Without obtaining any further information, evidence or proof. He simply took superiors authority as god's version as truth. The belief of Assessing Officer is suspicious. On the one hand he believed that land was sold and on other hand he believe that section 53A of Transfer of Property Act was applicable to cover , transaction of 2(47)(v) of Income Tax Act. A single transaction cannot be covered under both sections i.e. 2(47)(i) as well as 2(47)(v) of Income-tax Act., The Section 2(47)(i) referred to sale, exchange or relinquishment of the Assets. Where as 2(47)(v) referred of transaction cover under section 53A of Transfer of Property Act, 1882. In the first Para of reason recorded, he believed that sale has taken place. Where as section 2(47)(v) referred following :- Any transaction involving the all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dal were not available. No registered sale deed, No Banakhat, Chitthi, or any other writing which suggest transaction. Even description of Land, Measurement, Price etc. Not available even date or year of transaction not available. No iota of evidence regarding hand over of possession, then how it can be called dish for dinner. It was not a dish at all. Over and above various judgment cited above the following judgments would be helpful to decide that there was no reason to believe that any income has escaped assessment. Chhugamal Rajpal v/s S. P. Chaliha Other (79 ITR 603 ( Supreme) (Annexure : 7 ) Bombay Pharma Products v/s Income-tax Officer (237 ITR 614 ) (Annexure 8) In nutshell, The notice issued u/s 148 is illegal, ultravires and without any base further these was no iota of information on the basis of which, The Ld. Assessing Officer formed the belief that in this case a legitimate capital gain otherwise liable to tax has been escaped from assessment.. Even in reassessment. The Ld. Assessment Officer failed to prove sale of land in AY. 2007-08 as no registered stamped document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material of sale or any other cogent document when not available with the Assessing Officer he could not have firm belief regarding such sale of immovable property; this belief does not empower the Assessing Officer to reopen the assessment made u/s 143(1) of the Income Tax Act. Further that since the reopening was made without approval of ACIT/JCIT the provision of section 151 of the Act has not been complied with. Hence, the reopening is bad and liable to be set aside as also submitted by the Learned AR. On the other hand, Learned DR relied upon the order passed by the authorities below. 5. Heard the respective parties, perused the relevant materials available on record. The moot point involved in this particular matter as to whether the Learned AO has invoked jurisdiction u/s 147 in due process of law i.e. with the approval of the higher authority and consequently whether the reason was recorded independently upon application of mind by the Learned AO or is a product of borrowed satisfaction. We would like to address the first point regarding the approval for initiating proceeding u/s 148 of the Act. Sanction of issuance of notice is the first and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and foremost condition to be fulfilled. The relevant documents being the reason recorded by the Assessing Officer dated 24.03.2017 appearing at page 3 of paper book, or the issuance of notice u/s 148 of the Act dated 27.03.2014 appearing at page 1 of the paper book does not give any indication of obtaining sanction from the ACIT/JCIT by the Assessing Officer for reopening the assessment of the assessee u/s 148 of the Act though in terms of the provision of section 151 it is the pre-condition for initiating proceeding u/s 148 of the Act. Non-compliance of the same remains a defect which is admittedly not curable. We find that the Learned DR failed to controvert this particular aspect of the matter at the time of argument advanced before us during hearing. In that view of the matter in the absence of the very basis or foundation of the reopening being the sanction of the higher authority renders the entire proceeding void in law and thus liable to be set aside. The second issue relating to the reasons to belief is also required to be addressed . It is a well settled principle of law that the reasons for the confirmation of the belief must have rati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t on record by the Assessing Officer to frame the belief that sale of land has taken place in the A.Y. 2007-08 and capital gain was escaped in the said assessment year. Before the appellate authority the assessee submitted the following in respect of said ground: The Second Para of reason recorded was in connection with return filed and 143(1) Assessment was made. It has nothing to do with reason to believe. The Third Para some incorrect and false information has been mentioned which was contrary to the contention given in Para above. In the Para 2 only income shown was ₹ 70 only from other sources where as in third Para. It was mentioned that capital gain in respect of residential units sold was show in return of income for AY 2007-08. In fact No Capital gain was show in AY. 2007-08 and in immediate succeeding year for sale of residential units because no capital gain whatsoever arouse in AY. 2007-08. Further in this Para the Ld. Assessing Officer mentioned that land was transferred within the meaning of section 53 A of Transfer of Property Act to Pacifica Developers Pvt. Ltd. and possession of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthority and not of his own and without any application of mind; the same was done in tutored manner. Further that the Learned AO admittedly failed to comply with the provision of Section 151 of the Act. Further that it appears from the records that he himself has accepted in assessment year 2010-11 that income was chargeable at the time of execution of sale deed. When in the original assessment the Learned AO accepted the matter, reassessment proceeding cannot be initiated indicating a mere change of opinion. There must be a tenable material on the basis of which an assessment is sought to be reopened even within a period of four years is now well established in view of the judgment passed by the Hon ble Supreme Court in the matter of CIT-vs-Kelvinator of India Ltd reported in 256 ITR 1 (Del) (FB). The reason for reopening as it appears at Page 3 of the Paper Book also indicates that time limit for issuance of such notice u/s 148 for A.Y. 2007-08 expires on 31.03.2014 which strengthen the case of the assessee showing that in order to reopen the assessment by hook and crook without the approval and/or sanction of the higher authority in terms of the provision of Section 151 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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