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TMI Blog2022 (7) TMI 1536X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the record has issued the impugned notice as the petitioner has filed the return of income for the AY 2011-2012 on 17.01.2012 declaring total income of Rs.4,81,499/- which has been processed under section 143(1) of the Act. Thus the entire premise for reopening of the assessment that the petitioner has failed to disclose the long term capital gain by filing return of income is without any basis. Even while disposing the objection of the assessee, the AO failed to consider that the return of income was filed by the assessee on 17.01.2012 declaring long term capital gain with regard to the sale of the land. Moreover, reliance placed by AO on the document seized during the course of search from M/s. K Star Corporation is not at all related to assessee as explained in letter dated 29.11.2018 addressed by the assessee to the AO categorically stating that M/s. K Star Corporation is an unknown entity for the assessee and assessee has not executed any agreement or made any transaction with the said firm and the assessee has executed the sale deed along with other co-owners with Shri Swintobhai Mawani and Ankitbhai Koshiya. Thus the AO has failed to establish any live nexus between t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was received by cheque. Details as to share-holding of all four co-owners of land in question are as follows: Kantibhai Dharamshibhai Narola : 1/6th Vijaybhai Dharamshibhai Narola : 1/6th Jerambhai Bhikhabhai Khokariya : 1/3rd Ambalal Laljibhai Patel (Petitioner) : 1/3rd 5.1) The petitioner filed return of income for the Assessment Year 2011-2012 i.e. the year under consideration on 17.01.2012 declaring total income at Rs.48,14,499/- (excluding agricultural income) which included Long Term Capital Gain of Rs.45,06,219/- arising on account of sale of the land in question. Such return of income was processed under section 143(1) of the Act. 5.2) It is the case of the petitioner that after a period of four years from the end of the relevant assessment year, the respondent issued the impugned notice dated 28.03.2018 under section 148 of the Act seeking to reopen the assessment for the year under consideration. 5.3) In response to such notice, the petitioner filed return of income for the year under consideration on 21.04.2018. It is the case of the petitioner that the petitioner, vide letter dated 24.04.18, intimated such fact to the respondent and further requested the respondent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received long term capital gain of Rs.3,27,20,025/- (Rs.13,08,80,100 x 1/4th share), therefore, an addition of Rs.3,27,20,025/- is required to be made on account of unexplained long term capital gain and added to the total income of the assessee. As such, in view of the above facts and material, I have reason to believe that the income to the tune of Rs.3,27,20,025/- chargeable to tax has escaped assessment within the meaning of Section 147 of the 1.T. Act, 1961 for A.Y. 2011-12. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India:- Not Applicable. 8. Applicability of the provisions of Section 147/151 to the facts of the case:- In this case, no return of income was filed for the year under consideration, accordingly, In this case, no assessment was made and the only requirement to Initiate proceeding u/s.147 of the I.T. Act is reason to believe which has been recorded above (as per paragraph-2 to 6 above). It is pertinent to mention here that in this case the assessee has not filed return of income for the year under consideration although the total income of the assessee had exceeded the maximum amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erroneous since the petitioner had already disclosed the details of agricultural income which included the long term capital gain arising out of the land in question. 6.1) It was submitted that the so called seized material was collected during the course of search action carried out in the case of M/s. K Star Corporation who is a third party and on the basis of such material, the respondent has concluded that the petitioner might have received total sale consideration of Rs. 13,08,80,100/- from the said party as against sale consideration of Rs. 1,46,33,000/-, as mentioned in the sale deed. It was submitted that as a matter of fact, the petitioner has sold the land in question to Ankitbhai Koshiya and Swintubhai Mavani and not to M/s. K Star Corporation and M/s. K Star Corporation is an unknown entity for the petitioner and the petitioner had not at all entered into any transaction with the said entity. It was submitted that upon inquiry, it came to the knowledge of the petitioner that M/s. K Star Corporation was not even in existence at the time of execution of the sale deed with respect to transfer of the land in question. It was therefore, submitted that the petitioner is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that in the said paper, it is not mentioned anywhere that any cash was ever paid to the petitioner and the land cost may be the estimated market value as on the date of preparing such sheet for the purpose of working out the total cost of the project. 6.6) Learned Senior Advocate Mr. Hemani submitted that in any case, notings in such paper appears to be some rough estimate worked out by K. Star Corporation with respect to construction of some project known as 'Silverstone River' on the said land and to the best of the knowledge of the petitioner, the two individuals who purchased the agricultural land in March, 2011 from the petitioner and other there co-owners, subsequently joined the newly formed partnership firm namely M/s. K. Star Corporation as partners and their respective shares in the agricultural land were contributed as share capital. It was further submitted that the seized document i.e. sheet works out estimated receipts from sale of constructed property by assuming certain rates and land cost is estimated at Rs. 13,08,80,100/-. It was submitted that the petitioner, as a co-owner, had sold agricultural land and before any project is developed on ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent has merely relied upon the information received from the office of the DCIT, Central Circle 4, Surat for the purpose of reopening the assessment in the case of the petitioner and the respondent has not at all applied his mind independently so as to reach a conclusion that any income has escaped assessment. In absence of any such exercise at the end of the respondent, reopening is nothing but merely based on borrowed satisfaction as against the statutory requirement of independent satisfaction which is not tenable in the eye of law. 6.10) Reliance was placed on decision of Division Bench of this Court in case of Kantibhai Dharamshibhai Narola v. Assistant Commissioner of Income Tax, Ward 3(2)(4) reported in (2021) 436 ITR 202(Gujarat) to submit that when there was no failure on part of the assessee to disclose fully and truly all material facts necessary for assessment, reopening the assessment beyond a period of four years from the end of relevant assessment year was not justified. 7.On the other hand learned advocate Mr. Nikunt Raval for the respondent submitted that as the petitioner failed to disclose fully and truly all the material facts while filing the return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of exemption under section 54 of the Act, the petitioner has calculated long term capital gain at Rs. 18,56,219/-. It was furher submitted that according to the incriminating documents seized, Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani have purchased land bearing R.S. No.203/2 of Katargam, Surat, admeasuring 7000 Sq. Yards @ Rs.20,000/- per Sq Yard from the assessee and three other comembers. Hence, the total sale consideration as per this seized paper comes to Rs. 13,08,80,100/-. However, the sale document for said land was registered at Rs.1,46,33,000/- on 25.03.2011. It was submitted that from the above data, it is very clear that the actual rate at which land sold is @ Rs.20,000/- per square yard. Thus, total sale consideration is Rs. 13,08,80,100/-. Hence, there was involvement of on money of Rs. 11,62,47,100/- in the said transaction in land. 7.3) Learned advocate Mr. Raval submitted that during the course of search, Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani were confronted with these evidences and recorded statements. In the statement recorded, they have admitted that they are partners in M/s. K. Star Corporation and developed the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome at Rs.21,64,500/- (by way of e-filing) and claimed refund of Rs.5,86,510/- without pointing out any clarification of the difference or cogent evidences and, therefore, action of the respondent of reopening the assessment is valid. 7.7) It was submitted that during the course of search proceedings conducted at M/s. K. Star Corporation, several incriminating documents were seized in which it is clearly mentioned that the petitioner has received Rs. 13,08,80,100/- including cash receipt from the above parties and keeping in view the provisions of Section 132(4A) of the Act, it is presumed that the evidences found from the possession of Shri Ankit Gagjibhai Koshiya and Shri Swintu Arvindbhai Mavani belongs to petitioner and the contents of the evidences are true and correct. It was submitted that it is very clear that the transactions mentioned in the digital data imaging were real rather than a rough estimate. 7.8) Relying upon the decision in case of Raymond Woolen Mills Ltd Vs. ITO reported in 236 ITR 34 (SC) it was submitted that while determining whether commencement of reopening proceedings are valid, it has only to be seen whether there was prima facie some material on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he investigation. The AO must demonstrate some link between tangible material and formation of belief or reason to belief that income has escaped assessment. In the facts of the case merely certain material which is otherwise tangible and enables the AO to form a belief that income chargeable to tax has escaped assessment, which form part of original assessment record per se would not bar the AO from reopening the assessment on the basis of such material. The expression tangible material does not mean material alien to the original record. 11. However, even if the decision to reopen assessment on the basis of report of investigation wing condemned or dubbed as a fishing or roving inquiry, AO has to act as a reasonable and prudent man on the basis of information secured by him that there is a case for reopening so as to form a reason to believe that income has escaped assessment but at the same time, in order to assume the jurisdiction under section 147 of the Act is not the ultimate result of inquiry but the test is whether the AO entertain a bona fide belief upon the definite information presented before him and the jurisdiction to reopen the assessment cannot be exercised on mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 holdings of all the four co-owners of the land in question are as follows : Name Share Kantibhai Dharamshibhai Narola (Petitioner) 1/6th Vijaybhai Dharamshibhai Narola 1/6th Jerambhai Bhikhabhai Khokariya 1/3rd Ambalal Laljibhai Patel 1/3rd 8. The writ-applicant filed his return of income for the Assessment Year 2011- 12 on 29th December 2011 declaring the total income at Rs.6,67,350=00, which included the long-term capital gain of Rs.22,48,496=00 arising on account of sale of the land in question. 9. The case of the writ-applicant for the year under consideration was selected for scrutiny and various details were called for by the then Assessing Officer and the same were duly furnished by the writ-applicant from time to time. 10. It is the case of the writ-applicant that he had furnished a declaration in writing at the stage of the original assessment, whereby it was pointed out that he himself along with three other co-owners had sold the land in question. The writ-appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 shown his return of income for the A.Y. 2011-12. Information has been analysis and consciously considered. On the perusal of the details received from the DCIT, Central Circle-4, Surat, during the course of survey and search proceedings, it was found that the M/s. K.Star Corporation has made unaccounted investment of Rs.11,62,47,100/- for purchase of the said piece of the land. In this case, the assessee i.e. Shri Kantilal Dharmashibhai Narola has received unaccounted cash of Rs.2,90,61,775/- (25% of Rs.11,62,47,100/-) during the F.Y. 2010-11 relevant to A.Y. 2011-12. On the verification of the return of income filed by the assessee, it is appeared that he has not disclosed the amount of Rs.2,90,61,775/- cash receipts during the year under consideration and same is requires to be taxed as an unaccounted income of the assessee for A.Y. 2011-12. In view of the above facts and circumstances of the case, I have therefore reason to believe that income of Rs.2,90,61,775/- has escaped assessment in this case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 641100 BALANCE 233749589 SHARE-KB 100 233749589 3. From the reasons it is evident that : (a) During the course of search and survey proceedings in the case of K.Star Group it is found that M/s K.Star Corporation has purchase land amounting to Rs.1,46,33,000/- having total area of 5853 Sq. mts equivalent to 7000 Sq. yards. (b) As per working the rate of purchase of land is Rs.20,000/- per sq. yard and total purchase value as per said workings comes to Rs.13,08,80,100/- as against sale deed of Rs.1,46,33,000/-. (c) On the basis of alleged working your Good Self have concluded that Shri Kishorbhai Bhurabhai Koshiya, the sole key person of K.Star Corporation has made unaccounted investment of Rs.11,62,47,100/- for purchase of land. (d) On the basis of said alleged working your Good Self have stated that the assessee being one of co-owner of land and having 25% share received cash of Rs.2,90,61,775/- which was not shown in return of income. 3. The assessee vehemently objects to the alleged receipt of cash from M/s K.Star Corporation or Kishorbhai Bhurabhai Koshiya amounting to Rs.2,90,61,755/- and consequential reopening of his case for A.Y. 2011-12. The sale consideration was received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of execution of sale deed. Therefore reopening made on the basis of the document seized from an unknown entity is not justified and therefore the reopening proceedings should be quashed. 7. Further nowhere in the above sheet it is mentioned that the assessee along with other coowners have received Rs.13,08,80,100/- for sale of land. The assessee has not received any amount over and above the document value i.e. Rs.36,58,250/- (25% of Rs.1,46,33,000/-). The land cost mentioned in the sheet may be the estimated market value of the land as on the date of preparing the sheet. Thus the assessee vehemently objects alleged receipt of unaccounted cash for the sale of land to M/s. K.Star Corporation just on the basis of the estimate sheet. 8. Further, there is no failure on the part of the assessee to disclose the particulars of sale of land in question during the course of original assessment proceedings and accordingly current reassessment proceedings beyond 4 years is bad in law and need to be quashed. In view of what is stated herein above, the assessee vehemently object alleged receipt of unaccounted cash and consequential reopening of its case for A.Y. 2011-12. Therefore the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation of belief by the Assessing Officer is within the realm of subjective satisfaction. 16. Being dissatisfied with the above, the writ-applicant is here before this Court with the present writ-application. SUBMISSIONS : 17. Mr.Tushar Hemani, the learned senior counsel, assisted by Ms.Vaibhavi Parikh, the learned counsel appearing for the writ-applicant, vehemently submitted that the assessment for the year under consideration was framed under Section 143(3) of the Act 1961 and the same is sought to be reopened beyond the period of four years from the end of the relevant Assessment Year on the ground that the Assessing Officer has received information that certain amount was received by the writ-applicant in cash towards his share of the sale consideration. 18. Mr.Hemani would argue that there is nothing on record to even remotely indicate that there was failure on the part of the writ-applicant to make full and true disclosure of the transaction. The capital gains earned on the sale of land was duly disclosed in the return of income. The then Assessing Officer, after minute examination of all the relevant aspects, had consciously chose not to make any addition in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... application and the connected two writapplications have been vehemently opposed by Ms.Kalpana Raval, the learned senior standing counsel appearing for the Revenue. Ms.Raval would submit that the office of the respondent received information from the DCIT, Central Circle-4, Surat, that a search and survey operation was carried out at the residential and business premises of M/s. K.Star Group on 17th August 2016. During the course of the search and survey, it was found that M/s. K.Star Corporation had purchased the land in question situated at Mouje Katargam, Surat. She would submit that the writ- applicant is one of the sellers of the land and at the relevant point of time he had 25% share holding in the land and had received Rs.2,90,61,775=00 towards his share. In such circumstances, the Assessing Officer has formed an opinion that the amount of Rs.2,90,61,775=00 escaped assessment. 27. Ms.Raval invited the attention of this Court to the averments made in paragraphs 5, 6 and 7 of the affidavitin- reply, which read thus : 5. With reference to para no. 3.2, I state that this office has received information from the DCIT, Central Circle-4, Surat wherein it was communicated that a sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter forming the belief and obtaining necessary approvals and as per the procedure laid down in the Act, the case was reopened u/s. 147 of the Act. There is no estimation of the figures but the working was made after deducing the figures on the documentary evidences collected during the course of search. In view of the above discussion and on the ratio laid down by the Hon ble High Court there is no borrowed satisfaction and all the reasons recorded for reopening are valid and this office duly followed the complete procedure as per the provisions of the Act. There is no deviation from the procedure. The contention that the impugned notice is bad, illegal, contrary to law and is required to be appropriately quashed and set aside is totally ruled as this office based on the information available and after examining the same, reopened the assessment of the assessee. 7. In view of the above stated facts, there is no illegality in the issue of the notice u/s 148 dated 28.03.2018 and the prayers sought in the present petition are required to be rejected and petition is required to be dismissed with costs. 28. In such circumstances referred to above, Ms.Raval prays that there being no meri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, the impugned notice deserves to be quashed. ANALYSIS : 30. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice should be quashed. 31. On 14th December 2018, a Coordinate Bench of this Court, while issuing the notice, passed the following order : 1. Mr. Tushar Hemani, learned advocate for the petitioner has invited the attention of the court to the reasons recorded for reopening the assessment, to submit that the Assessing Officer seeks to reopen the assessment on the ground that the assessee has received unaccounted cash in respect of the sale of the property described therein. It was pointed out that in this case, scrutiny assessment had been carried out for the assessment year under consideration, during the course of which, details had been called for by the Assessing Officer, which had been duly furnished. Reference was made to Annexure-B to the petition to point out that the details with regard to the sale transaction had been duly submitted to the Assessing Officer. The attention of the court was further invited to the communication ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t stage. (iii) The validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded for reopening of the assessment. (iv) The basic requirement of law for reopening and assessment is application of mind by the Assessing Officer, to the materials produced prior to the reopening of the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied-a postmortem exercise of analysing the materials produced subsequent to the reopening will not make an inherently defective reassessment order valid. (v) The crucial link between the information made available to the Assessing Officer and the formation of the belief should be present. The reasons must be self evident, they must speak for themselves. (vi) The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. To put it in other words, something therein, which is critical to the formation of the belief must be referred to. Otherwise, the link would go missing. (vii) The reopening of assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open the assessment on the basis of the report of the Investigation Wing cannot always be condemned or dubbed as a fishing or roving inquiry. The expression reason to believe appearing in Section 147 suggests that if the Income Tax Officer acts as a reasonable and prudent man on the basis of the information secured by him that there is a case for reopening, then Section 147 can well be pressed into service and the assessments be reopened. As a consequence of such reopening, certain other facts may come to light. There is no ban or any legal embargo under Section 147 for the Assessing Officer to take into consideration such facts which come to light either by discovery or by a fuller probe into the matter and reassess the assessee in detail if circumstances require. (xv) The test of jurisdiction under Section 143 of the Act is not the ultimate result of the inquiry but the test is whether the income tax officer entertained a bona fide belief upon the definite information presented before him. Power under this section cannot be exercised on mere rumours or suspicions. (xvi) The concept of change of opinion has been treated as a built in test to check abuse. If there is tangible mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to finally ascertain the factum of escapement of the tax and it is sufficient that the A.O had cause or justification to know or suppose that the income had escaped assessment [vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is also well settled that the sufficiency and adequacy of the reasons which have led to the formation of a belief by the Assessing Officer that the income has escaped the assessment cannot be examined by the court. 13. It appears from the material on record as well as on perusal of the reasons recorded for reopening the assessment that on the basis of search and seizure under section 132 of the Act in case of M/s K Star Corporation carried out by the investigation wing of Surat, certain incriminating documentary evidence was found and based upon one such document seized during course of search, assessment is sought to be reopened on the ground that the petitioner along with others sold the property for a consideration of Rs. 1,30,80,100/- whereas amount shown in the sale deed is only 1,46,33,000/-. It is also the case of the AO that no return of income was filed by the petitioner at the relevant time and the assessed income to the ..... 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