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TMI Blog2025 (1) TMI 1112X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 143(2) of the Act, as per which, where a return of income has been furnished u/s. 139 of the Act, then the A.O, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner shall serve upon him a notice requiring him, on a date to be specified therein, either to attend the office of the A.O or to produce, or cause to be produced before him any evidence on which, he may rely in support of the return. Accordingly, after the return of income was e-verified by the assessee on 24.10.2019, the notice u/s. 143(2) of the Act which was thereafter issued by the A.O could not be held to be invalid. Against assessee. Whether concluded assessment in his case had been reopened based on a mere change of opinion ? - As the concluded assessment of the present assessee that was originally framed by the A.O vide his order passed u/s. 143(3) of the Act, dated 23.08.2016 had been reopened by successor A.O based on the same set of facts as were there before his predecessor and were looked into and deliberated upon by him in the course of the original assessment proceedings, and not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w, reassessment order passed by A.O is illegal, ab initio void as it was passed without issuing notice u/s. 143(2) within the prescribed time. The reassessment order has been passed in violation of mandatory provisions of law and is liable to be quashed as illegal and not sustainable. As the assessee based on the additional ground of appeal has assailed the validity of the jurisdiction that was assumed by the A.O for framing the impugned assessment, the adjudication of which would not require looking any further beyond the facts available on record, therefore, we have no hesitation in admitting the same. Our aforesaid view that where an assessee, had raised, though for the first time, an additional ground of appeal before the Tribunal which involves purely a question of law and requires no further verification of facts, then, the same merits admission finds support from the judgment of the Hon'ble Supreme Court in the case of National Thermal Power Company Ltd. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). 3. Succinctly stated, the assessee had filed his original return of income for the subject year i.e. A.Y.2014-15 on 31.03.2015, declaring an income of Rs. 38,06,600/-. Original assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Rs. 3,70,89,000/-(Rs. 3,75,00,000 4,11,000) in the F.Yr. 2013-14. The assessee has failed to disclose fully and truly all material facts as evident from record. I have, therefore, reason to believe that income of Rs. 3,70,89,000/- for the A. Yr. 2014- 15, has escaped assessment within the meaning of section 147 of the 1. T. Act, 1961. Accordingly, I am of the view that it is fit case to reopen u/s 147 of the I. T. Act, 1961.Notice u/s 148 is required to be issued in this case. (Rituparn Namdeo) Jt. Commissioner of Income tax (OSD) Circle-1(1), Bilaspur (C.G.) 5. During the course of the assessment proceedings, the A.O in the backdrop of the fact that the assessee had purchased the subject property for a consideration of Rs. 4,11,000/-, whereas, the "Fair Market Value" (FMV), i.e. the value adopted by the stamp valuation authority for the same was Rs. 3.75 crore, thus, called upon him to put forth an explanation that as to why the difference of Rs. 3,70,89,000/-[ Rs. 3,75,00,000/-(-) Rs. 4,11,000/-] may not be deemed as his income for the year under consideration u/s. 56(2)(vii)(b) of the Act. In reply, it was the assessee's claim that as the subject property was reflect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his return of income for A.Y.2013-14 was disclosed at Rs. Nil. Also, the A.O taking cognizance of the fact that the assessee had neither shown any current assets in his return of income for the preceding year nor claimed any depreciation on plant and machinery in the said year, thus, held a firm conviction that no real estate business was being carried out by him during the said preceding year. Apart from that, the A.O observed that the assessee had not shown any land development or real estate as his business in the returns of income filed for A.Y.2012-13 to A.Y.2017-18. The A.O based on the aforesaid facts concluded that the assessee had not carried out any real estate business or land development for A.Y.2012-13 to A.Y.2017-18 and, thus, was not holding any property as stock-in-trade. Also, the A.O observed that unlike the preceding and succeeding years the assessee had only in his return of income filed in compliance to notice u/s. 148 of the Act for the year under consideration i.e. A.Y.2014-15 disclosed in the "balance sheet" therein filed "current assets" of Rs. 51,95,700/-. Accordingly, the A.O based on his aforesaid deliberations was of the view that the assessee's cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r grounds as listed above in paragraph of 2.1 of this order. Even though the appellant has taken four ground in appeal, the effective grounds of appeal are two as mentioned below:- (1) Challenge to the validity of assumption of jurisdiction by the A.O under section 147 read with section 148 of the Act. (2) Challenge to the addition of rupees 3,70,89,000/-made by the A.O. under section 56(2(vii)(b) of the Act. 5.2 There are many objections raised by the appellant regarding lack of jurisdiction as well as on the addition mentioned above. Following paragraphs address the issues so raised by the appellant in appropriate place. 6.1. The appellant states that there was failure of the A.O, to provide the reasons recorded for re-opening of the assessment under section 147 of the Act. The appellant has made detailed submissions and relied on the decisions of the Hon'ble Supreme Court and various High Hon'ble High Courts to support his arguments as noted above in this order. It is crucial to examine if the A.O. failed to provide the reasons so recorded for reopening of the assessment under section 147 of the Act. despite the appellant's request. 6.2. There is no dispute ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed submission for the first time. 6.5 Moreover, the appellant own admission noted above shows that the A.O. allowed inspection of the record of the assessee for the relevant assessment year. In fact, the authorised representative of the appellant officially inspected the records of the appellant for the relevant assessment year. Not only that, the appellant was also given a certified copy of the reasons recorded by the officer. Considering the above facts, it cannot be concluded that the appellant was denied the chance to file an objection for re-opening of assessment. Even assuming, but not conceding, that the reasons recorded by the A.O. was given to the appellant late on 15/12/2019, the appellant had two weeks to object to re-opening, but he chose not to object. It is not the case of the appellant that recorded reasons were not given to him before completion of reassessment proceedings. If the assessee does not file objections before the A.O., he cannot challenge the same in appellate proceedings. As the appellant failed to raise the question of the validity of the A.O's assumption of jurisdiction under section 147 read with 148 of the Act, he is not entitled to another ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hanically without supporting materials. Therefore, it is concluded that the appellant has not provided any evidence to back up his assertion that approval was granted mechanically by the approving authority and therefore the contention of the appellant is hereby rejected. Hence, appeal fails on this issue. 7.1. The appellant states that the AO, assumed the jurisdiction under section 147 of the Act disregarding the fact that there was no failure on the part of the appellant to disclose the particulars of purchase plots of land in the course original assessment proceedings and accordingly present reassessment was bad in law and need to be quashed. Therefore, the issue to be addressed is whether the first proviso of section 147of the Act, as it existed before its amendment bin 2021 is applicable in the case of the appellant. To address the matter, it would beneficial to reproduce the relevant portion of section 147 of the Act. "Section 147:- If the assessing officer has reason to believe that any income chargeable to tax has escape assessment for any assessment year, he may. subject to provision of section 147 to 153 assess or reassess such income and also any other income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erties and assessee submitted that the said properties which were sold were pieces of agricultural land. Profit on sale of these land have taken in the computation of income as exempt income and. therefore there is no liability for capital gain arises. The justification submitted by assessee was considered after examination of relevant documents. 4. Subject to the above discussion total income of assessee is computed as under. Income as retuned/assessed." 7.4 The order above indicates notice under section 143(2) was issued for the limited purpose of verifying the capital gain on sale of land. It is also evident that A.O'S examination of return of income and books of account for the relevant assessment year was confined to verification of capital as the jurisdiction of A.O. is confined to the issue for which notice is issued. As per instructions issued by CBDT the return selected for CASS/AIR on the basis of information contained therein then verification to be limited to that aspect only. Notice under section 142(1) to ask only for the specific information. The scope of limited scrutiny can be expanded with the approval of PCIT/PDIT. There is no indication in the sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n received ADIT(I &C)., Raipur. Furthermore, it was argued that reason to believe was formed by the A.O. by borrowing satisfaction. 9.2. 'Information', as has been held by the courts, means communication, or reception of knowledge or intelligence. It includes information received from external sources. Thus, A.O. can use such information for formation of belief that income chargeable to tax has escaped assessment as provided under section 147 of the Act. It is crucial to determine if the A.O. applied his mind to the information so received and formed a reasonable belief that income chargeable to tax of the appellant escaped assessment within the meaning of section 147 of the Act. 9.3. The AO's application of mind to the information received is demonstrated by the elaborate reasons recorded. The officer used the information received from the ADIT(I&C), but acted independently after verification of record as is evident from the materials available on record. The reasons recorded by the A.O. clearly shows that tangible material was made the basis for formation of belief that income chargeable to tax had escaped assessment for the relevant assessment year. The A.O. esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wide range of case laws. It is to be noted here that the AO made a convincing case that the subject land was not a stock in trade but capital asset. The view of the AO is supported by the fact that the appellate himself treated two pieces land as capital asset and gain arising out sale of those land was treated as long term capital gain which was claimed exempt as the land was agricultural land. In addition to that the appellant disclosed the plots of land as stock in trade in return of income and trading account and balance sheet that accompanied the return of income filed in response notice under section 148 of the Act. It is important to mention that no opening and closing stock were show in the original return of income filed for the assessment year 2014-15. The appellant's action are merely an attempt to enhance the authencity of his claim that land in question was stock-in-trade, which in reality was capital asset. The case of the appellant cannot be advanced if it is not supported by evidence after presenting a variety of arguments and citing plethora of case laws. 10.4. Frequency of transactions, volume of transactions, entries, and treatment of books of account, inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been pressed into service by the Ld. AR to drive home his contentions. 11. Shri R.B Doshi, Ld. Authorized Representative (for short 'AR') for the assessee, submitted that as the A.O had failed to issue a valid notice u/s. 143(2) of the Act within the prescribed time period, therefore, the assessment framed by him vide his order u/s. 143(3) r.w.s. 147 of the Act, dated 30.12.2019 cannot be sustained and is liable to be struck down on the said count itself. Elaborating on his contention, the Ld. AR submitted that the assessee had filed his return of income in compliance to notice u/s. 148 of the Act on 11.06.2018, Page 29 of APB. The Ld. AR submitted that as the return of income filed by the assessee was not e-verified within the stipulated time period, therefore, the same was held as invalid. Elaborating further on his contention, the Ld. AR submitted that though the assessee had as on 24.10.2019 e-verified the return of income that was filed by him on 11.06.2018, but the same was still treated as "invalid" as the e-verification was done beyond the time period of 120 days. The Ld. AR submitted that the assessee had filed a request for condonation which had remained undisposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of India Ltd. (2010) 320 ITR 561 (SC) cannot be sustained and is liable to be struck down on the said count itself. The Ld. AR in support of his aforesaid contention had drawn our attention to the "reasons to believe", Page 46 of APB. The Ld. AR submitted that as no new material had come to the notice of the A.O after framing of the original assessment vide his order u/s. 143(3) of the Act, dated 23.08.2016, therefore, reopening of the concluded assessment based on the same set of facts as were available before his predecessor in the course of original assessment proceedings, being based on a mere "change of opinion" of the successor A.O was not justified and liable to be struck down for want of valid assumption of jurisdiction. Elaborating further on his contention, the Ld. AR submitted that the fact that the subject land i.e. land situated at Talapara, Bilaspur was purchased by the assessee for a consideration of Rs. 4,11,000/- i.e. for a consideration lower than the FMV, for the reason that it was a disputed land, for which, a criminal case was filed against the assessee, was duly looked into by the A.O in the course of original assessment proceedings. The Ld. AR to fortify hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er passed u/s. 143(3) of the Act, dated 23.08.2016? 17. Apropos the claim of the assessee that the assessment in his case had been framed by the A.O vide his order passed u/s. 143(3) r.w.s. 147 of the Act, dated 30.12.2019 in absence of any valid notice u/s. 143(2) of the Act having been issued, the same does not find favour with us. Admittedly, it is a matter of fact borne from record that the A.O had issued notice u/s. 143(2) of the Act, dated 05.11.2019. Although, it is the Ld. AR's claim that the return of income filed by the assessee in compliance to notice u/s. 148 of the Act on 11.06.2018 had remained unverified and, thus, was an invalid return of income, based on which, no notice u/s. 143(2) of the Act could have been issued, but we are unable to concur with the same. As is discernible from the "Screen shot" of the e-portal account of the assessee, Page 84 of APB, the return of income filed by the assessee on 11.06.2018 (supra) had thereafter been e-verified though after the due date i.e. on 24.10.2019. Accordingly, as the assessee had filed the return of income in compliance to notice u/s. 148 of the Act (wherein the provisions of the Act shall so far as may be apply acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Smt.Rudrani Bajpai for a consideration of Rs. 4,11,000/- was at a value lower than the FMV, for the reason that the said land was a disputed one and a criminal case regarding the same was filed against him. Also, a perusal of the reply, revealed that the assessee had produced the criminal case records for verification before the A.O, Page 37 of APB. Based on the aforesaid facts, we concur with the Ld. AR that the A.O in the course of the original assessment proceedings had not only queried the assessee that as to why the subject property i.e. land situated at Telepara, Bilaspur was purchased by him at a value lower than the FMV, Page 35 & 36 of APB, but also the said issue was duly replied to his satisfaction by the assessee in the course of the original assessment proceedings, Page 37 of APB. For the sake of clarity, query raised by the A.O is culled out as under: (relevant extract) "QUESTIONNAIRE SHRI RAHUL BAJPAI Annexure With regard to assessment proceedings in your case for the A.Yr.2014-15 you are required to furnish the replies to the following queries: 1. Sale consideration of the property in ITR is less than sale consideration of property reported in AIR 2. Furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch reveals that the reopening of the concluded assessment of the assessee was based on a mere re-appreciation of the facts available on record by the successor A.O. The Ld. Departmental Representative ("D.R", for short) on being confronted with the aforesaid facts could not rebut the same. 22. Considering the fact that the case of the assessee had been reopened with the purpose to re-appreciate the facts which were already available on record, and not on the basis of any fresh material/document coming into the possession of the A.O after culmination of the original assessment by his predecessor vide his order passed u/s. 143(3) dated 23.08.2016, which would reveal that any income of the assessee chargeable to tax had escaped assessment, we find substance in the Ld. AR's claim that the A.O. had clearly traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee company under Sec. 147 of the Act. In fact, we are unable to comprehend what new "material" or "information" had come up before the A.O which justified the reopening of the concluded assessment of the assessee company. We are afraid that re-appreciation of the facts alread ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record, but he failed to apply his mind to that material in making the assessment order. The question is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 and the Full Bench has observed thus (page 19) : "The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or subsection (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al that was available on record while framing the original assessment cannot justify the reopening of its concluded assessment, as the same would amount to opening of the assessment on the basis of a "change of opinion", which is not allowed as per the mandate of law, had thereafter been approved by the Hon'ble Apex Court in CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). The observations of the "Full bench" of the Hon'ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), which thereafter had been approved by the Hon'ble Apex Court in (2010) 320 ITR 561, are culled out as under (relevant extract): "10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO ..... X X X X Extracts X X X X X X X X Extracts X X X X
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