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TMI Blog2020 (2) TMI 122X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose fully and truly all the material facts necessary for the assessment. Such finding of fact could not have been disturbed by the appellate tribunal without any basis for the same. - we hold that the impugned order passed by the appellate tribunal is not sustainable in law. Decided in favour of assessee. - R/TAX APPEAL NO. 1091 of 2008 - - - Dated:- 13-1-2020 - MR. J.B. PARDIWALA AND MR. BHARGAV D. KARIA JJ. Appearance: MRS SWATI SOPARKAR with MR BS SOPARKAR for the Appellant(s) No. 1 MRS MAUNA M BHATT (174) for the Opponent(s) No. 1 ORAL JUDGMENT (PER : MR. J.B.PARDIWALA) This Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act 1961 ) is at the instance of an assessee and is directed against the order dated 9th March 2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench D in the ITA No.1113/Ahd/2001 for the Assessment Year 1991-92. The facts giving rise to this Appeal may be summarised as under : The assessment was completed under Section 143(3) of the Act 1961 on 28th March 1994 on the total income of ₹ 75,404=00, which included the long term capital gains of ₹ 61,812=00. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he A.O. has further submitted that the wealth tax return of the appellant for A.Y. 1990-91 shows that a bungalow mentioned as Avanti has been disclosed in the statement of net wealth and at present also the assessee is staying in that bungalow i.e. Avanti . The A.O. has, therefore, opined that the property declared in the Conveyance Deed as farm house was not the bungalow which was mentioned in the wealth tax return for A.Y. 1990-91. Accordingly, the A.O. was of the view that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The A.O. has further submitted that though in the reasons recorded for the issue of notice u/s.148 specific words regarding failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment have not been mentioned, his action was only as a result of the same. The A.O. has also referred to the judgment of the Hon ble Gujarat High Court in the case of Praful Chunilal Patel and Vasant Chunilal Patel v. M.J.Makwana, ACIT (236 ITR 832) for justifying the reopening of assessment in this case. 4.1 In view of the above report of the A.O., the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessment was reopened because of the belief of the A.O. that certain statutory deductions had been wrongly claimed and allowed. The reasons, however, do not indicate that the assessment was reopened on account of any material fact relating to the claim, which was not before the A.O. at the time of original assessment and which came to the notice of the A.O. subsequently. As far as the submissions made by the present Assessing Officer during the course of hearing of appeal are concerned, it is seen that the inquiry conducted on various points with the appellant shows that what was sold was an agricultural land having a farm house built on it, which was named by the assessee as Avanti . The comparison of the information furnished during the original assessment proceedings with that of the wealth tax records of the assessee (statement of net wealth for A.Y. 1990-91) does not show that the assessee had any other residential house besides this farm house built on agricultural land. Thus, what was required to be considered was, whether the farm house could be treated as bungalow more specifically as a residential house for the purposes of deduction u/s.53(b) and 54(1)(i) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the relevant assessment year has been upheld by the Hon ble Gujarat High Court even in a case where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been passed in the first instance irrespective of whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the re-assessment proceedings. This judgment is not applicable in the case of the appellant as re-assessment proceedings in this case have been initiated beyond four years from the end of the relevant assessment year. 6. Undisputedly the notice u/s.148 has been issued beyond the period of 4 years from the end of the assessment year ended on 31.3.1992 as the notice u/s.148 has been issued on 22.1.98. Also as discussed in the preceding paras, there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The mistake, if any, committed by the Assessing Officer, is on account of improper appreciation of facts before him. Accordingly, the notice issued u/s.148 is not a valid notice and any assessment framed in pursuance thereof is also not a valid assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject to conveyance, including the area on which the residential house stood constructed; c) the manner in which the sale rate of the property stood arrived at, i.e. whether as per the rates applicable to the agricultural land, or as a private land forming part of a residential house, and which stood separately valued (as the entire sale consideration, and thus, capital gains, stood considered as in respect of the residential property only); d) whether, the house, or a part of it was used as a farm house, i.e. for the beneficial user of the said land for agricultural purposes; and e) whether the dominant user of the house property was for residential purpose. Further, he has also not explained the basis on which he considered the capital asset under transfer as a residential house and not an agricultural land, i.e. in whole or in part, in spite of agricultural operations being carried thereon, and further, being so stated in the conveyance deed itself, as well as the permission sought by the assessee from the Appropriate Authority (AA) for selling the same, by treating the said land only as appurtenant to the residential building situate thereon, entitling him, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of those decisions, is that the disclosure of facts as made, besides being inconsistent with the primary record, i.e. the conveyance deed, land revenue record, permission from the AA, was not sufficient or adequate to be able to apply the ratio of those decisions to the same. And which, on merits, rather, appear to be supportive of the Revenue s case, though by stating as much, we may clarify, that this may not be construed as an expression of opinion in the matter. 5.5 The Ld. CIT(A) has directed investigation by the A.O. on the basis of the assertions made by the assessee before him in the appellate proceedings and with reference to the material adduced by him, being the wealth tax return for A.Y. 1990-91, and in relation to the construction of a new residential house, similarly named, on an adjacent piece of land. The same, to our mind, is misdirected, as the said material was not before the A.O. at the time of original assessment, so that, irrespective of the validity of the assessee s claims, what is to be seen is whether he has made at the time of original assessment a full and proper disclosure of all material facts. In fact, the verification as directed, relates to pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Gift-Tax Officer (supra) and CIT vs Zibunnisa Begum (supra). In fact, the said decisions also; the land, or a good part of it, being put to agricultural operations, prima facie support the Revenue s case, and not of the assessee. There is no expression of opinion in the original assessment order in the matter to hold it as a case of change of opinion. 5.7 In view of the foregoing, we are of the unequivocal view that there has not been a full and true disclosure of all material facts necessary for his assessment for the current assessment year by the assessee, so that the initiation of reassessment proceedings, the law in the matter being patently clear, by the issue of notice u/s.148 of the Act, is not bad in law, as held by the first appellate authority. 5.8 The Ld. CIT(A) has not decided the issue on merits as he had annulled the reassessment as made. Under the circumstances, having upheld the validity of the reassessment proceeding, the matter would necessarily have to go back to his file for adjudication on merits, which also stand agitated before him as per the grounds of appeal as enumerated at page-2 of his order. We decide accordingly. Being dissatisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a reference of bungalow situated on the land bearing Block No.518. It is not in dispute that the assessee had filled in Form No.37-I as provided in Rule 48 of the Income Tax Rules. In the said form, there is a specific reference of a farmhouse along with water tank, servant quarter, etc. Form 37-I reads thus : FORM NO.37-I (See rule 48L) Statement of transfer of immovable property to be furnished to the appropriate authority under section 269UC I/We, ______________________ intend to transfer the immovable property located at _________________ to ______________________. The total apparent consideration for the transfer of the above property is ____________________. The particulars of the agreement for transfer of the said property are furnished in the annexure to the statement. Verification In my/our opinion and to the best of my/our knowledge and information, the particulars furnished above and in the annexure hereto are true and correct. Transferor(s) Transferee(s) 1.____________ 1.____________ 2.____________ 2.____________ 3.____________ 3.____________ *Note : Any change in the address of the transferor(s) or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rning re-assessment may be summarised thus : (i) The Court should be guided by the reasons recorded for the reassessment and not by the reasons or explanation given by the Assessing Officer at a later stage in respect of the notice of reassessment. To put it in other words, having regard to the entire scheme and the purpose of the Act, the validity of the assumption of jurisdiction under Section 147 can be tested only by reference to the reasons recorded under Section 148(2) of the Act and the Assessing Officer is not authorized to refer to any other reason even if it can be otherwise inferred or gathered from the records. The Assessing Officer is confined to the recorded reasons to support the assumption of jurisdiction. He cannot record only some of the reasons and keep the others upto his sleeves to be disclosed before the Court if his action is ever challenged in a court of law. (ii) At the time of the commencement of the reassessment proceedings, the Assessing Officer has to see whether there is prima facie material, on the basis of which, the department would be justified in reopening the case. The sufficiency or correctness of the material is not a thing to be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts necessary for his assessment for that purpose. (x) The Assessing Officer, being a quasi judicial authority, is expected to arrive at a subjective satisfaction independently on an objective criteria. (xi) While the report of the Investigation Wing might constitute the material, on the basis of which, the Assessing Officer forms the reasons to believe, the process of arriving at such satisfaction should not be a mere repetition of the report of the investigation. The reasons to believe must demonstrate some link between the tangible material and the formation of the belief or the reason to believe that the income has escaped assessment. (xii) Merely because certain materials which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax has escaped assessment, formed part of the original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression tangible material does not mean the material alien to the original record. (xiii) The order, disposing of objections or any counter affidavit filed during the writ proceedings before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowledge derived from the external source concerning the facts or particulars or as to the law relating to a matter bearing on the assessment. An information anonymous is information from unknown authorship but nonetheless in a given case, it may constitute information and not less an information though anonymous. This is now a recognized and accepted source for detection of large scale tax evasion. The non-disclosure of the source of the information, by itself, may not reduce the credibility of the information. There may be good and substantial reasons for such anonymous disclosure, but the real thing to be looked into is the nature of the information disclosed, whether it is a mere gossip, suspicion or rumour. If it is none of these, but a discovery of fresh facts or of new and important matters not present at the time of the assessment, which appears to be credible to an honest and rational mind leading to a scrutiny of facts indicating incorrect allowance of the expense, such disclosure would constitute information as contemplated in clause (b) of Section 147. (xx) The reasons recorded or the material available on record must have nexus to the subjective opinion formed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6.2.1 After enactment of Direct Tax Laws (Amendment) Act, 1987, i.e., prior to 1st April, 1989, Section 147 of the Act, reads as under: 147. Income escaping assessment.-- If the Assessing Officer, for reasons to be recorded by him in writing, is of the opinion that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year). 6.2.3 After the Amending Act, 1989, Section 147 reads as under: 147. Income escaping assessment.-- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words reason to believe , Parliament re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe in Section 147. A number of representations were received against the omission of the words reason to believe from Section 147 and their substitution by the opinion of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred to above speaks for itself. It is not in dispute that the notice under Section 148 of the Act came to be issued beyond the period of four years. The CIT(A) recorded a finding of fact that there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. Such finding of fact could not have been disturbed by the appellate tribunal without any basis for the same. The Supreme Court in the case of Omar Salay Mohamed Sait v. CIT, reported in 1959(37) ITR 151 (SC), succinctly expressed the expectation from a tribunal while deciding the appeals. The following observations are important : We are aware that the Income Tax Appellate-Tribunal is a fact finding Tribunal and if it arrives at its own conclusion of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and contra in regard to each one of them ..... X X X X Extracts X X X X X X X X Extracts X X X X
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