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TMI Blog2021 (3) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... odi pointed out that in all these four appeals the legal issue as raised by the assessee has been allowed by the Ld. CIT(A) on the ground that since four years have elapsed from the end of the relevant assessment year, no notice u/s. 148 of the Income-tax Act, 1961 (hereinafter referred to as the "Act") should have been issued in the relevant assessment year as prescribed in section 149 of the Act without the AO indicating in the reasons recorded that Rupees one lakh or more income, chargeable to tax has escaped assessment for that year. The Ld. AR drew our attention to the reasons recorded in respect of ITA No. 140/Gau/2020 (Shri Ankit Agarwalla) as the test case (it is noted that in other cases also it is identically or similarly worded without mentioning anything about the escapement of income of more than one lakh rupees) which will be the lead case (Shri Ankit Agarwalla) and the decision of which will be followed in all the other three appeals. The reasons recorded by the AO which has been given to the assessee has been filed before us at paper book page 2 which is as under: "As per information provided by the Pr. Director of Income Tax (Inv.), NER, Guwahati vide letter in F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is above Rs. 1 lakh as is mandated by section 149(l)(b) of the Act. Hence the action of issue of notice itself is bad in law. 2. The Ld. CIT(A) had not asked for a remand report before deciding the case. Had he asked for one then the AO would have been able to explain the system of ITBA. Nowadays all notices u/s 148 are issued online through ITBA and this one was no exception. In ITBA no notice u/s 148 can be generated or even sent by the AO to PCIT for sanction (where 4 years has expired from the relevant assessment year) unless the income chargeable to tax which has escaped assessment amounts to or likely to amount to one lakh rupees or more for that year. 3. From the attached screenshot of the relevant screen of ITBA it can be seen that proposal of AO that is to be sent to the PCIT has the following segments in ITBA: a. Menu: Selection of case u/s 147 is clearly mentioned b. Proposal for Scrutiny a. Basic Details: PAN, Name, A Y etc. are mentioned b. Basis of selection: the AO had marked Yes in the radio button beside Income Escaped Amount> = 1lakh. c. Selection Details: Approving authority is marked PCIT/CIT d. Reasons for Selection: The AO has mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntended that if four (4) years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b), no notice u/s. 148 of the Act could have been issued by the AO without recording his satisfaction in the 'reasons recorded' that the income chargeable to tax which has escaped assessment would be more than Rs. 1 lakh; and, according to him, it is also well settled law that reasons recorded for reopening has to be seen on a stand-alone basis as held by the Hon'ble Bombay High court in the case of Hindustan Lever Ltd. Vs. ACIT 268 ITR 332 (Bom); and since on a bare perusal of the reasons recorded by the AO in respect of all the appeals are conspicuously silent about the escapement of income of more than Rs. 1 lakh,; and according to Ld AR, the additional requirement as provided in section 151 of the Act is that after four years have elapsed/expired from the end of the relevant assessment, the sanction of PCIT/Commissioner on the reasons recorded by AO (to reopen) that it is a fit case for issue of notice u/s. 148 of the Act. According to ld. AR, without satisfying both the requirements as stipulated u/s 149 and section 151 of the Act, the jurisdictional co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e aforesaid provision shows that AO could not have issued notice u/s. 148 of the Act, after four (4) years have elapsed from the end of the relevant assessment year, unless the income chargeable to tax which has escaped assessment amounts to one lakh rupees or more for that year. It is an admitted fact in respect of all the four (4) appeals (supra), that four (4) years have elapsed from the end of the relevant assessment year i.e. (AY 2011-12) for which notice u/s. 148 of the Act was issued by the AO upon the assessee. In such a scenario, provision of section 149(1) and clause (b) is applicable. Therefore, the AO should not have issued notice without satisfying the condition precedent as laid down in clause (b) of section 149(1) of the Act. And the Ld. PCIT/CIT should not have given sanction to reopen on the basis of the reasons recorded by AO without satisfying the condition precedent as prescribed in section 149 of the Act. Failure to do so, makes the sanction of the authority u/s. 151 of the Act fragile for nonapplication of mind. Therefore, I am of the opinion that without satisfying both the legal requirements as stipulated u/s 149 and section 151 of the Act, the jurisdictiona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be invalid. The reasons recorded by the Assessing Officer is, that the assessee had sold the property within three years after converting lease hold land to free hold resulting into short term capital gains in view of the judgment in Dr. V.V. Mody (supra). The aforesaid reasons, makes it clear that the assessee was required to pay short term capital gains tax instead of long term capital gains tax and, therefore, the Assessing Officer had reasons to believe that the income had escaped assessment. In the instant case, admittedly, the notice was issued after four years but before six years. In our opinion, the reasons so recorded by the Assessing Officer was not sufficient to intiate proceedings under Section 148 of the Act. We find from the reasons recorded by the Assessing Officer that no such reasons has been recorded to the effect that the escaped income is likely to be Rs. 1 lac or more except for the assessment year 2001-02. In Mahesh Kumar Gupta and others Vs. Commissioner of Income Tax and another, 363 ITR 300 a coordinate Bench of this Court held that it is imperative for the Assessing Officer to record in his reasons that the escaped income is likely to be Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd "long term capital asset" is the period over which the property has been held by the assessee. It has nothing to do with the nature of the title over the property. The petitioner already had rights as owner of the property subject to the covenant of the lease for all purposes such as transfer of the lease hold rights of the property with the previous consent of the lessor. The petitioner's father was the lessee since 1958. The conversion of the rights of the lessee in the property from lease hold to free hold was only an improvement of the rights over the property, which the petitioner enjoyed and this would not have any effect on the taxability of capital gains from such property. Since the property was held by the petitioner for more than three years, short term capital gains would not be applicable. The conversion from lease hold to a free hold being an improvement of the title, does not have any effect on the taxability of profits as short term capital gains. Reliance by the Assessing Officer in his reasons to believe on a decision of Karnataka High Court in Dr. V.V. Mody (supra) case is misplaced. In that case, the assessee was allotted a site by the Banglore Develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, about the escapement of income of one (1) lakh rupees or more which was a condition precedent for reopening as prescribed u/s. 149(1)(a) and (b) of the Act. It is well settled that reasons as recorded for reopening the assessment are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor any thing can be deleted from the reasons so recorded. The Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. (supra) had only observed that "...... It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded by him. He has to speak through the reasons." Their Lordship added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reason. Reasons provide link between conclusion and the evidence.....". Therefore, reasons are to be examined only on the reasons as recorded. Here, in this case, as noted by me (supra) the condition precedent as required u/s. 149(1)(a) and (b) having not been satisfied and since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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