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TMI Blog2019 (5) TMI 1702X X X X Extracts X X X X X X X X Extracts X X X X ..... ner of the same property Shri Iqbal has accepted the long term capital gains in a sum of 1,47,975/- on the same set of facts. It would show that A.O. did not verify the information as to how much capital gains has escaped assessment. A.O, therefore, 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 A.O. had to act on the basis of the reasons to believe and not on reasons to suspect. The issue is, therefore, covered in favour of the assessee by the Order of ITAT, Agra Bench in the case of Rameshwar, Jhansi vs. ITO 6(2), Jhansi [ 2014 (10) TMI 332 - ITAT AGRA] . - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. Dated 01.02.2016 Sd/-Anil Kumar Sharma, Income Tax Officer, Ward-2(1), Ghaziabad". 3.1. He has referred to sale deed which is executed by the assessee and the co-owner Mr. Iqbal. He has submitted that in case of co-owner Mr. Iqbal, the A.O. passed the assessment order under section 147/143(3) Dated 06.12.2016 and returned income have been accepted at ₹ 1,99,980/-. Copy of the computation of income is also filed in which long term capital gains on the same property have been computed at ₹ 1,47,975/- and after adding the interest income, total income was declared in a sum of ₹ 1,99,980/- which is accepted by the A.O. Learned Counsel for the Assessee, therefore, submitted that A.O. has not verified any information and did not apply the mind to the facts of the case. The entire amount of sale consideration could not be disclosing capital gains, therefore, there were no reason to believe to the A.O. to have reopened the assessment. He has submitted that the issue is covered by the Order of ITAT, Agra Bench in the case of Rameshwar vs. ITO 6(2), Jhansi in ITA.No.20/Agra/2014, Dated 28.02.2014. Copy of the Order is placed on record and provided to the Ld. D.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital loss on sale of above land at ₹ 8,79,701/-. While computing the long term capital loss on sale of land, sale consideration was shown at ₹ 36,75,000/- and cost of land was computed @ ₹ 40/- per sq. meter as on 01.04.1981 (2.128 hectare =21280 sq. meter) and also showing the indexed cost of improvement at ₹ 3,24,237/-. On finding that there is difference in sale consideration as per the information received by the AO than what was declared by the assessee [ as per the information, the sale consideration should be ₹ 85,50,000/2 = ₹ 42,75,000/- but sale consideration declared was ₹ 36,75,000/- and hence, the difference was of ₹ 6,00,000/-], the AO required the assessee to explain the reasons for difference in the sale consideration and the basis on which, the cost of acquisition was taken along with cost of improvement. The assessee vide his reply dated 28.11.2011 stated that the difference of ₹ 6,00,000/- in the amount of sale consideration was paid to intermediaries 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 assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has not replied. The land situates at Aaraji Mauja, Jhansi Khas, Tehsil & District, Jhansi, its Khata No. 374 & 373, the land is within the 8 km. from the Jhansi Municipality Limit, assessee was liable for payment of capital gain tax on the above transaction of land as per Income Tax Act, 1961. Sale Value of land at Jhansi Khas, Tehsil Jhansi =₹ 85,50,000/- The assessee share is half i.e. Assessee received =₹ 42,75,000/- Sold area of total land =4,256 hectare Assessees share sold area =2,128 hectare =21,280 sw. Meter Value of land as on 01.04.81 @ ₹ 10 per sq. meter = ₹ 2,12,800/- Index cost of acquisition = 2,12,800/- 497 100 =₹ 10,57,616/- Long Term Capital Gain =42,75,000/- 10,57,616/- =₹ 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,19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required in the notice to confirm land transaction and also to intimate as to how the capital gain arise out of land transaction has been reflected in his/her return of income. Since land situates within the 8 km. from the Jhansi Municipality Limit, assessee was 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 anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment value. The AO has not verified the information issued notice u/s. 133(6) to the assessee and required to confirm the transaction as to how the capital gains arise out of the transaction. It would mean that there was no definite information received 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as satisfied that income had escaped assessment, he wrote yes. Thereafter, the Assessing Officer reassessed the income and charged interest and levied penalty. The Commissioner (appeals) allowed relief partly but the Tribunal concluded 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 recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other grounds have only academic interest and as such, we do not find it necessary to decide the issue on merits. 5. In the result, the appeal of the assessee is allowed." 7. In view of the above, the orders of the authorities below are quashed and the addition made stands deleted. Appeal allowed. Order pronounced in the open Court. Sd/-PRAMOD KUMAR Sd/-BHAVNESH SAINI ACCOUNTANT MEMBER JUDICIAL MEMBER" 4.1. It is well settled Law that validity of reopening of the assessment shall have to be judged with reference to the reasons recorded for reopening of the assessment. In the present case, the A.O. has mentioned in the reasons that assessee sold the property and his share comes to ₹ 43,04,000/-. Since, no compliance was made by the assessee, the A.O, therefore, presumed that there is an escapement of income on account of long term capital gains. The A.O, therefore, recorded reasons to believe that capital gains on sale consideration of ₹ 43,04,000/- chargeable to tax has escaped assessment. The A.O. did not verify the information and even did not compute as to how much capital gain have been escaped assessment in the facts of the case. The reasons are t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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