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TMI Blog2021 (2) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148 of the Income Tax Act, 1961 (for short, 'the Act 1961') seeking to reopen the writ-applicant's income tax assessment for the Assessment Year 2011-12 on the ground of being illegal, contrary to law and without jurisdiction. 4. The facts giving rise to this writ-application may be summarised as under : 5. The writ-applicant derived income from a partnership firm, salary, capital gains and income from other sources during the Assessment Year 2011-12, i.e. the year under consideration. 6. It appears from the materials on record that the writ-applicant along with three other co-owners (writ-applicants of the connected writ-applications) sold a parcel of agriculture land bearing Revenue Survey No.203/2, Khata No.2367, old tenure land admeasuring 7000 sq.yards of Draft Town Planning Scheme No.50, Final Plot No.68, situated at village Katargam, Surat, to two individuals, namely, Ankitkumar Gagjibhai Koshiya and Swintubhai Arvindbhai Mavani, vide the sale-deed dated 29th March 2011 for the total sale consideration of Rs. 1,46,33,000=00. 7. It is the case of the writ-applicant that the sale consideration was received by cheque. The details as to the share holding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration upon the said piece of land. The rate of purchase of the above piece of land is Rs. 20,000/- per Sq. yard and the purchase value of the piece of land mentioned in the said working is Rs. 13,08,80,100/- (may be after some deductions) but the sale deed is made for Rs. 1,46,33,000/- only. This proved that the M/s. K.Star Corporation has made unaccounted cash investment of Rs. 11,62,47,100/- (Rs. 13,08,80,100/- less Rs. 1,46,33,000/-) for purchase of the said land piece of land. The actual and sole developers of the project is Kishorbhai Bhurabhai Koshiya. As such, Shri Kishorbhai Bhurabhai Koshiya made unaccounted cash investment of Rs. 11,62,47,100/-, for purchase of the aforesaid land, upon which, the project "Silverstone River' was developed by the assessee group. Similarly, the above unaccounted cash payments and by the assessee also constitute unaccounted income of the seller of the land. The assessee i.e. Shri Kantilal Dharmashibhai Narola was one partner of seller of the land. As per the information, the assessee Shri Kantilal Dharmashibhai Narola has received unaccounted cash receipts of Rs. 2,90,61,775/- (as per the assessee share 25% of Rs. 11,62,47,100/-) and not sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of income. The assessee vehemently objected the alleged receipt of unaccounted cash for the sale of land to M/s K.Star Corporation. However to file detailed objection against your good selves belief of escapement of income i.e. Rs. 2,90,61,775/-, the assessee requested Your Good Self to forward the copy of alleged "seized incriminating document" relied upon to work out the rate of purchase of land. 2. With reference to captioned subject the assessee is in receipt of aforesaid letter wherein your Good Self have forwarded the seized incriminating information received from ADIT (Inv) on the basis of which reopening of the assessee's case for A.Y. 2011-12 was made. The said information/excel sheet is reproduced herein below for ready reference purpose : 2 S.N.203/2, FP-68, TP-50 (KATARGAM), LAXMIVADI, SURAT SILVERSTONE RIVER SQ.FT. AVERAGE TOTAL SOLD 122475 3434 420635489 UNSOLD 33699 4800 185755200 TOTAL 161174 3762 606390689 LAND COST 7000 * 20000 130880100 AVERAGE CONSTR. COST PER SQ.FT. 161174 1500 241761000 TOTAL COST 372641100 BALANCE 233749589 SHARE - KB 100 233749589 3. From the reasons it is evident that : (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, Average cost of construction per Square Foot and total estimated cost of construction. Working of total estimated cost, total estimated collection and estimated balance amount. Thus as seen above all the figures mentioned in the above reproduced sheet are on estimated basis and therefore the land cost of Rs. 13,08,80,100/- cannot be considered as actual consideration received by the assessee along with his co-owners. 6. Further it is submitted that the assessee had not made any transaction with K.Star Corporation. As informed by Your Good Self in the aforesaid letter the said incriminating document on which Your Good Self is relying upon was seized from the back office of M/s. K.Star Corporation. The assessee had sold the land under reference to Shri Swintubhai Mavani and Shri Ankitbhai Koshiya. In this regard copy of sale deed is enclosed herewith. M/s. K.Star Corporation is an unknown entity for the assessee and the assessee had not executed any agreement or made any transactions with the said firm. It also came to the knowledge of the assessee that M/s. K.Star Corporation was not into existence at the time of execution of sale deed. Therefore reopening made on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-open a case is "Reason to believe" but not to establish facts of escapement of income. The sufficiency or correctness of the material is not to be considered because it is open to the assessee to prove that the facts assumed by the Assessing Officer in the notice were erroneous (Raymond Woolen Mills vs. ITO [(1999) 236 ITR 34 (SC)]. (i) In this case, notice u/s.148 of the I.T. Act is issued after recording reason applicable to the relevant A.Y. As observed by the Hon'ble Supreme Court in the case of "Centre Provinces Manganese Ore Co. Ltd. vs. ITO (1991) 191 ITR 662, for initiation of action u/s.147(a) (as the provision stood at the relevant time) fulfillment of the two condition is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, what is required is "Reason to believe" but not to establish fact of escapement of income. At the stage of issue of notice the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the material would conclusively prove the escapement is not the concern at this stage. This is so because the formation of belief by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the sale-deed. 22. Mr.Hemani submitted that the department, on its own, has prepared a rough estimate as regards the cost of the project put up by M/s. K.Star Corporation. While working out the cost of project, the department has come out with the figure of Rs. 13,08,80,100=00 towards the value of the land. 23. Mr.Hemani pointed out that the two individuals named above who purchased the agriculture land in March 2011 from the writ-applicant along with the three co-owners later joined the newly formed partnership firm, namely, M/s. K.Star Corporation, as partners and their respective share in the agriculture land were contributed as share capital. 24. Mr.Hemani would submit that there is absolutely no basis whatsoever or any evidence for the unfounded assumption that the agriculture land was sold for Rs. 13,08,80,100=00. He submits that there is no tangible material so as to reopen the case of the writ-applicant. 25. In such circumstances referred to above, Mr.Hemani, the learned senior counsel, prays that there being merit in his writ-application, the same may be allowed and the impugned notice be quashed and set-aside. 26. On the other hand, this writ-application and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- for purchase of the aforesaid land, upon which, the project "Silverstone River" was developed by the assessee group. The assessee is one of the sellers of the land and was 25% share holder in the land and received Rs. 2,90,61,775/- (25% of Rs. 11,62,47,100/-) and the same is not shown in his return of income for the AY 2011-12. After recording the above reasons and forming satisfaction that the amount of Rs. 2,90,61,775/- escaped assessment, the case was reopened u/s. 147 of the Act. Further, notice u/s. 148 of the Act was issued after following the procedure prescribed as per the Act and obtaining approval from the Competent Authority which was duly served upon the assessee. 6. With reference to para no. 3.3 to 7, this office is in possession of specific information received from the DCIT, Central Circle which is further based on Investigation Wing and these are the internal limbs of the Department and the decision of the Hon'ble High Court in the case of Aradhana Estate P. Ltd. Vs. DCIT is applicable in this case. It is once again reiterated that there is no change of opinion. Further, impounded material was also received wherein the above facts could clearly be examined. So ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than 1,22,000 sq. ft. and remaining area is unsold. It suggests that this is fully developed land and this sheet has been prepared after full development in the year 2014-15. Also the Petitioner has not entered into any transaction with M/s. K.Star Corporation. It is also nowhere stated in the so called seized material that the Petitioner or any of the other co-owners was given any cash towards sale consideration over and above the amount mentioned in the conveyance deed. It has been baselessly stated that the sole developer of the project was Kishore Bhurabhai Koshiya and it has been further baselessly assumed that the said person has made unaccounted cash payment of Rs. 11,62,47,100/-. In any case, this reopening beyond a period of four years and there is no failure on the part of the Petitioner as to full and true disclosure. Also the issue on hand was threadbare examined at the original assessment stage. Validity of reopening is to be tested strictly on the basis of reasons recorded prior to reopening. Also reopening is based on borrowed satisfaction. Also the share of the Petitioner has been erroneously presumed to be 25%. All these fallacies clearly show that no case is mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening of the assessment under Section 147 of the Act 1961 is well-settled. (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 mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 Court cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 the A.O. regarding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cannot be any reassessment proceedings. However, upon receipt of the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee by applying his mind and thereafter is required to form an independent opinion on the basis of the material on record that the information has bearing on the income of the assessee and such income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her independent mind to record his/her satisfaction and further mandatory condition is that the satisfaction recorded should be 'independent' and not 'borrowed' or 'dictated' satisfaction. Law in this regard is now well-settled. 36. The Supreme Court in the case of Anirudh Sinhji Karan Sinhji Jadeja vs. State of Gujarat reported in [1995] 5 SCC 302 as well has held that if a statutory autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... teway Leasing (P.) Ltd vs. ACIT reported in 117 taxmann.com 442 where it was held as under: "35. Having discussed the above, we may once again revert back to the reasons furnished by Respondent No. 2 for re-opening of assessment under Section 147 of the Act. After referring to the information received following search and seizure action carried out in the premises of Shri Naresh Jain, it was stated that information showed that Petitioner had traded in the shares of M/s. Scan Steels Ltd., and was in receipt of Rs. 23,98,014.00 and therefore, Respondent No. 2 concluded that he had reasons to believe that this amount had escaped assessment within the meaning of Section 147 of the Act. 36. First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under Section 143 (3) of the Act. Thus it would appear that P ..... X X X X Extracts X X X X X X X X Extracts X X X X
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