Income Tax Appellate Tribunal - Jaipur
Purushottam Das Agarwal, Huf, Jaipur vs Department Of Income Tax on 31 May, 2016
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM
vk;dj vihy la-@ITA No. 225/JP/2015
fu/kZkj.k o"kZ@Assessment Year : 2006-07.
The Income Tax Officer, cuke M/s. Purushottam Das Agarwal HUF,
Ward 3(2), Vs. Through L/h Shri Vinod Agarwal, D-
Jaipur. 18, Shiv Marg, Bani Park, Jaipur.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AADHP 6413 P
vihykFkhZ@Appellant izR;FkhZ@Respondent
jktLo dh vksj ls@ Revenue by : Shri S.K. Jain (JCIT)
fu/kZkfjrh dh vksj ls@ Assessee by : Shri D. Kumar (C.A)
lquokbZ dh rkjh[k@ Date of Hearing : 02.05.2016.
?kks"k.kk dh rkjh[k@ Date of Pronouncement : 31/05/2016.
vkns'k@ ORDER
PER SHRI LALIET KUMAR, J.M.
This is an appeal filed by the revenue against the order of ld. CIT (Appeals)-I, Jaipur dated 19.12.2014 for the A.Y. 2006-07. The grounds raised by the revenue are as under :-
1. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in quashing the reopening of the assessment u/s 147 of the IT Act ignoring the fact that the case was reopened on the basis of information received from Investigation Wing and for reopening a case only prima facie belief is required to be seen and not the sufficiency of information.
2. Whether on the facts and in the circumstances of the case and in law the ld. CIT (A) has erred in deleting the addition of LTCG of Rs. 57,57,165/-
on the ground that the questioned document was manipulated ignoring the fact the in absence of circle rates, AO determined the cost of acquisition on the basis of rates of property sold in the similar locality after conducting independent enquiries.
2ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF
2. Brief facts of the case are that assessment in the case of the assessee HUF has been completed under section 143(3) of the IT Act on 24.12.2008 by making a office note as under :-
" The assessee has sold land and building which is an industrial plot with a shed constructed over it at G.T. Road, Gaziabad. The total sale consideration received as per registered sale deed is rs. 1,15,00,000/-. This property was acquired by the assessee prior to 1981. The valuation of land and building was made by the approved valuer at Rs. 25,16,750/- as on 01.04.1981. The indexed cost as on the date of sale comes to Rs. 1,25,08,247/-. The valuation of the property for the purpose of stamp duty on sale was done by Collector (Finance and Revenue), Gaziabad at a value of Rs. 1,07,63,356/-. Although the approved valuer has mentioned that circle rate as on 01.04.1981 for the area of GT Road was Rs. 500/- per sq. yd. But for the verification of the sale, a letter was written to Sub-Registrar-III, Ghaziabad, UP on 16.12.2008 for obtaining the prevalent circle rates as on 01.04.1981. No reply has been received till date. As the matter is getting barred by limitation, the order is being passed. If any information is received in the nature that the prevalent circle rate as on 01.04.1981 for that area were less than Rs. 500/- then suitable action in this case has to be taken."
Thereafter, on receipt of information from the Investigation Wing of the Department along with the list of circle rate of Industrial Area, Pasonda, GT Road, Ghaziabad that the property sold by the assessee also falls in the said list showing the rate of that area as on 13.08.1980 at Rs. 50/- per sq. yd. only, the AO re-opened the case of the assessee, after recording reasons in writing and obtaining permission from the CIT-I on 21.03.2013. Accordingly, notice u/s 148 was issued to the assessee HUF on 21.03.2013.
3ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF 2.1. In response to the said notice, assessee filed reply on 16.4.2013 stating that the notice u/s 148 was issued after limitation period and, therefore, requested to drop the proceedings. The reply of the assessee HUF is reproduced as under :-
"1. That the return of Purshottam Das Agarwal HUF is filed on 30.11.2006, vide receipt no. 321004823 submitted in the Office of ITO 3(2), Jaipur, a copy of receipt alongwith annexure is enclosed herewith for your kind perusal.
2. That the ITO, Ward 3(2) selected the case for scrutiny u/s 143(2) of Income Tax Act. The assessee have furnished all the details, books of account on various dates and after examination the learned ITO Ward 3(2) passed the order u/s 143(3) of Income Tax Act, 1961. A copy of Assessment Order is enclosed herewith.
3. That Dy. Director of Income Tax (Investigation II) Jaipur have also issued notice u/s 131 of Income Tax Act on 28.01.2008 for examining the transaction of the immovable property during the financial year 2005-06 and 2006-07 and the undersigned have submitted all the details as desired by the Hon'ble Dy. Director of Income Tax (Investigation II), Jaipur on the hearing date.
4. that the Assistant Commissioner of Income Tax (Investigation II) Jaipur have also issued notice u/s 131 of Income Tax Act for hearing date 18.3.2009 and the undersigned have further submitted all the details.
5. That the Dy. Director of Income Tax (Investigation I) Jaipur have again issued the notice u/s 131 of IT Act for hearing date 22.11.2012 and the undersigned have the submitted the desired papers on hearing date.
6. That above notice u/s 148 is issued by your honour is after limitation period."
The AO rejected the objections raised by the assessee HUF against reopening of the assessment by passing an order on 19.09.2013. Accordingly, as per the reasons recorded by the AO, he proposed to take the sale consideration of the property at Rs. 1,15,00,000/- and work out the long term capital gain accordingly. The AO asked 4 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF the assessee to submit anything in this regard. A copy of the reasons recorded for reopening the assessment proceedings along with the circle rate as on 13.08.1980 was made available to the assessee HUF on 30.09.2013. In the meantime, on the request of the assessee HUF, case was adjourned a couple of times. Thereafter a show cause letter was issued for compliance on 19.12.2013. In reply to the show cause letter, the legal heir of the assessee HUF vide letter dated 23.12.2013 stated that the Additional District Officer,Ghaziabad for the first time notified the rates w.e.f. 13th August, 1981 to the Tehsildar, Dy. Registrar etc. According to the rate schedule, rate of Rs. 500/- per sq. yd has been notified for lands within the municipal limit of Pasonda (on both sides of GT Road). Assessee HUF claimed that the land under consideration in the municipal limit of Pasonda. In the reply filed on 23.12.2013, the legal heir has further made the following submissions :-
" ........ In the circumstances it will be most appropriate and judicious that your honour may in exercise of powers vested in you under section 131 of Income Tax Act, 1961 call relevant circular and information from the Addl. District Officer/Land Record Officer/Sub- Registrar/Municipal Corporation Ghaziabad."
Thereupon, the AO issued Notice u/s 133(6) to the Sub-Registrar-III, Ghaziabad on 27.12.2013 requesting to provide the fair market value of the lands situated in Municipal No. 194, situated Khasra No. 1771, village Pasonda, Pargana-Loni, Dist. Ghaziabad as on 1.4.1981. A request was also made to the District collector, Ghaziabad endorsing a copy of the notice u/s 133(6) issued to the Sub Registrar-III, Ghaziabad.
5ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF 2.2. The District Magistrate, Ghaziabad vide his office letter No. 2152/ST- ADM(F)/2013014 dated 28.2.2014 informed that circle rate list of the year 1981 is not available in their office. He, however, forwarded the sale deeds of two non- agricultural lands (document No. 1400 & 1403) executed in village Pasonda, Ghaziabad on 30.01.1981.The AO on going through the same, found that the rate per sq.yd for non-agricultural lands in village Pasonda comes to Rs. 50/- per sq. yd. only and the claim of the assessee was found wrong. The AO, therefore, issued final show cause letter on 07/03/2014 which is reproduced at pages 6 & 7 of his order as under :-
" .................... In these circumstances, it is proposed to calculate the Long Term Capital Gain of the property admeasuring 3025 sq yds sold by you to M/s. Shree Nath Processor on 31.3.2006 as under :-
Sale consideration received Rs. 1,15,00,000/-
Less: Indexed cost of acquisition
1155500* 497/100=5742835 Rs. 57,42,835/-
LTCG Rs. 57,57165/-
==========
[The cost of acquisition is taken @ Rs. 50/- per sq. yd on 3025 sq. yds which would come to Rs. 1,51,250/-. Further, the cost of construction incurred by you amounting to Rs. 10,04,250/- is also added to the cost of acquisition and thus the indexed cost of acquisition as on 1.4.1981 is taken 11,55,500/- (Rs.151250 + 1004250)].
Your assessment is proposed to be completed on above lines. If you wish to submit anything in the matter, the same may please be filed by 12/03/2014 along with documentary evidence in support of your submissions. Please note that no cognizance will be given to any submissions to be made which are not accompanied by proper supporting documents."
2.3. In reply to the above show cause letter, the legal heir of the assessee HUF filed a written reply on 18.03.2014 as under :-
6ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF "1. With reference to letter of assessee dated 12.3.2014, you have provided copy of letter No. 2152/ST-ADM(F)013-14 dated 28.2.2014 of the District Magistrate, Ghaziabad along with the letter of Assistant Commissioner, Stamps, Ghaziabad.
2. That from the perusal of letter of District Magistrate it is clear that rate list of the year 1981 is not available.
3. In the reasons recorded for reopening assessment u/s 148 of the IT Act, 1961 it has been mentioned "As per the DLC rate of Industrial Area Pasonda, GT Road, Ghaziabad applicable w.e.f. 13.8.1980 obtained by the ADIT (Inv.), the DLC rate of this property was at Rs. 50/- per sq. yd only". The assessee obtained copies of the DLC rate under RTI Act from Addl. District Officer, Ghaziabad vide their letter dated 29.1.2014 and from the information provided it is apparent that DLC rate were for the first time notified in August, 1981.
Therefore, it is clear that the basis for the reasons of reopening i.e. DLC rate of 1981 as obtained by ADIT (Inv.) is incorrect and cannot form a legal reason to reopen the assessment. A non existing fact when relied on for reopening assessment cannot form a ground to reopen the assessment. Therefore, the reopening of the assessment is illegal and without jurisdiction.
4. that for considering the validity of reasons for reopening assessment the facts available on record on the date of reopening and which have been considered are only relevant and subsequent information gathered or evidence obtained cannot form ground/basis for reopening assessment.
5. That you have relied on two sale deeds copy of which have been provided along with letter of District Magistrate, Ghaziabad. These sale deed are not relevant for more than one reason :-
i) The situation of properties are not similar the situation of the property under consideration.
ii) That two plots referred to in the sale deeds are agricultural land acquired by the society and resold. It is, settled law that valuation of property being agricultural land has to be considered on the basis of how the property is recorded in the land records and not on the basis of future use. The property under consideration is not agricultural land in the revenue record.
iii) That property under consideration is within the municipal area of Pasonda on main GT Road and was fully developed. On the other hand the two plots are outside the municipal area. In the DLC rate issued on 13.8.1982 the land situated in municipal area of Pasonda (on both side of GT Road) i.e. property sold by assessee under 7 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF consideration the rate prescribed is Rs. 500/- per sq. yd. On the other hand for the land in "Loni Abadi Gramin" (where the two properties relied upon by you are situated) are outside municipal area, and DLC rate is Rs. 15/- per sq. yd. Thus it is apparent that two properties are not comparable.
iv) That authorities of UP Government were conscious of the fact that situation and rate are different for various area within the municipal limit and out side municipal limit and have notified different rates for the areas within municipal limit and outside municipal limit.
They have notified rate of the property situated in Pasonda municipality and Loni Gram outside municipal area. The rate are thus not comparable.
v) That property sold by assessee was fully developed with all the facilities of road, water supply, electricity etc. On the other hand the two sale deeds of the land relied upon by you provides that the purchaser shall have to bear the charges/expenses for the facilities road, water supply, electricity etc. Therefore, also these are not comparable cases".
The AO considered the submission made by the assessee HUF, but he could not find the same acceptable. He held that the assessee has overlooked the facts emerged during the course of assessment proceedings which clearly indicates that the rate of non agricultural lands at the same village where assessee had sold property was Rs. 50/- per sq. yd. in January, 1981. Further, when no DLC rate is available, the normal method is to apply the fair market value of the property sold in question. It is, therefore, totally unfair on the part of the assessee to argue that the rate of Rs. 50/- per sq. yd is a non-existing fact. The fact is that fair market value of the properties in village Pasonda where the assessee had sold land was Rs. 50/- per sq. yd. on which no capital gain tax was paid by the assessee in January 1981. Therefore, the AO held that the proceedings have been initiated on valid reasons. Regarding reopening of the assessment, the AO held that whatever evidences 8 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF gathered during assessment proceedings have been gathered after reopening of the case and how the evidences gathered after issue of notice u/s 148 be formed basis for reopening of the case. Regarding valuation of property sold by assessee, department conducted enquiries on the request of the assessee. Accordingly details, including two sale deeds of agricultural lands, were obtained from the concerned State Government authorities at Ghaziabad to find out the correct cost of acquisition of the land sold by the assessee. On the basis of the details obtained, the AO taking the cost of acquisition of land as on 1.4.1981 at Rs. 50/- per sq. yd calculated the Long Term Capital Gain at Rs. 57,57,165/- and added the same to the total income of the assessee.
3. Being aggrieved by the order of AO, the assessee preferred appeal before ld. CIT (A), who has discussed the matter at great length at page 3 to 13 of his order. The ld. CIT (A) allowed the ground of the assessee by holding that reopening of the case u/s 147 was bad in law and same cannot be sustained. The relevant observations of the ld. CIT (A) are as under :-
" I have also carefully gone through the contents of the questioned documents and clarification given by the Asst. Commissioner stamp Ghaziabad (Reference : para 2.2). It is pertinent to note that report from Asst. Commissioner Stamps Ghaziabad supports assessee's contention. On the facts gathered in this regard, it is concluded that questioned document on which AO relied upon is a manipulated document whose authenticity is even doubted by the notifying authorities and this makes whole process of reopening as ab initio void. Assessee also contends that complete details in this regard have been provided to the AO, however the same were considered. Even during the appellate proceeding, a copy of assessee's submission has also been forwarded and remanded to the AO u/s 46A of the Act for his comments and rebuttal but same facts as appearing in the assessment order have been reiterated again.9 ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF Reopening of the case u/s 147 on the basis of manipulated document is not only illegal but also bad in law and same cannot be sustained. Accordingly, issuance of notice u/s 148 is ab initio void, accordingly, reopening proceeding is hereby quashed. However, issues pertaining to quantum additions as raised by the assessee in grounds of appeal supra are being decided on merits in para below.
Assessee's appeal succeeds."
Regarding deletion of Long Term Capital Gain of Rs. 57,57,165/-, the ld. CIT (A) observed that the AO has not considered the certified copy of notification issued by Asst. Commissioner Stamps, Ghaziabad for the Loni Industrial Area and also copies of written submissions made before him. The ld. CIT (A) seeking comments of the AO, remanded the matter to him on 09.10.2014 under section 46A and specifically asked to produce any evidence in rebuttal of the document/evidences submitted by the assessee. However, AO riterated the same facts as mentioned in the assessment order and no specific comments were offered with regard to DLC rate @ Rs. 500/- per sq. yd w.e.f. 1.4.1981 as evident from the certified copy of the notification issued by the Asstt. Commissioner of Stamps, Ghaziabd. Assessee has also offered its comments vide letter dt. 2.12.2014 on the remand report submitted by the AO. The ld. CIT (A) mentioned that in the remand report submitted, the AO has reiterated the same facts as mentioned in the assessment order without offering any rebuttal/comments on the documentary evidences submitted by the assessee. The ld. CIT (A) has narrated the brief facts as emerged from the submissions made by the assessee as under :-
• Assessee's premise is located at village Pasonda situated on the National Highway the GT Road side.10 ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF • Questioned document is regarding the DLC Rate w.e.f. 13.8.1980 for Loni Industrial Area. However, assessee's certified copy suggests that the said letter/question document was issued by the Tehsildar Ghaziabad on 11.8.1982 for the Loni Industrial Area.
• Pg. 82 of the said notification (questioned document, a part of the said notification) suggests DLC rate @ 500/- for Pasonda, GT Road whereas the AO took DLC rate @ Rs. 50 per sq. yd for industrial area.
• Assessee on the basis of certified copy of notification issued by Tehsildar Ghaziabad submits that as on 01.04.1981 there was no DLC Rate for this property and the date 13.08.1980 has been manipulated on the copy supplied which formed the reason to belief for issuance of notice u/s 148. The rate in the said question document was notified for Loni Industrial Area are Rs. 50/- per yds was actually notified w.e.f. 13.8.1982 (reference PB 67 & 68). Property in dispute is in village Pasonda on the side of GT Road for which rates of Rs. 500 per yds has been notified (PB 82).
• Assessee's valuer (Atual & Assoiciates) took this DLC rate and valued the said property at Rs. 25,16,750/-, however, AO did not object this. AO has not taken into cognizance of this valuation report, accordingly no reference in the assessment order or any comments offered. Valuer has taken into account all constructed area plus free hold area located at Plot No. 194 GT Rd Sahibabad admeasuring 3025 sq. yds and applied circle rate @ Rs. 500/- as a fair market rate as on 1.4.1981 for the GT road area.
• For comparison of properties located in the close vicinity, AO took into consideration of DLC Rate @ Rs. 50 per sq. yds for industrial area and Shalimar Extension Colony near Industrial 11 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF area but completely ignored the land rates for Pasonda village within/outside Municipal limits.
In view of the above facts, the ld. CIT (A) held that the AO's action was based on manipulated document wherein DLC rate was mentioned as effective from 13.8.1980 whereas certified copy of the said notification mentions effective date from 1.4.1981. He further held that AO has not disclosed the source of the said questioned document. Therefore, additions made on the basis of manipulated documents cannot be sustained, hence he deleted the addition.
4. Now the revenue is in appeal before us.
4.1. The ld. D/R supported the order of the AO and requested to set aside the order of ld. CIT (A).
4.2. On the other hand, the ld. A/R for the assessee submitted that the proceedings under section 147 has been started after expiry of period of four years after the end of the assessment year 2006-07. For acquiring jurisdiction after expiry of four years from the end of the relevant assessment year, two conditions are required to be fulfilled i.e. (i) there is escapement of income from assessment and
(ii) failure on the part of the assessee to make a return under section 139 or in response to notice under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.
12ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF 4.3. In the reasons to belief recorded by the AO, he has neither alleged nor has mentioned in the reasons for reopening that there was failure on the part of the assessee to make a return u/s 139 or in response to notice under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for making assessment. The ld. A/R submitted that in absence of such allegation, reopening of assessment after four year is bad in law and without jurisdiction. In support, he relied on the judgments in the case of German Remedies Ltd. Vs. DCIT, 287 ITR 494 (Bom.), Panchratna Cooperative Housing Society Ltd. Vs. AO, 376 Taxman 404 (Bom.), Duli Chand Singhania vs. ACIT, 269 ITR 192, CIT vs. Jubilant Organosys Ltd. 94 CCH 21 (All.).
4.4. The ld. A/R submitted that the assessment was reopened on the basis of manipulated and irrelevant document which is illegal. He submitted that the assessee obtained copies of the DLC rate under RTI Act from Additional District Officer, Ghaziabad vide their letter dated 29th January, 2014 and from the information provided it is apparent that DLC rate were for the first time notified in August, 1982. Therefore, it is clear that the basis for the reasons of reopening i.e. DLC rate of 1981 as obtained by ADIT (Inv.) is incorrect and cannot form a legal reason to reopen the assessment. A non existing fact when relied on for reopening assessment cannot form a ground to reopen the assessment. Therefore, reopening of the assessment is illegal and without jurisdiction. 4.5. The notice u/s 148 was issued on 21.03.2013 for the A.Y. 2006-07 is barred by limitation. The assessee has fully disclosed all the material facts which were considered in the course of assessment proceedings and after due verification and 13 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF scrutiny assessment u/s 143(3) was passed. The initiation of the proceedings is, therefore, illegal and without jurisdiction.
4.6. It is important to mention that in the reasons recorded the reopening has been based on DLC rate as on 13.08.1980 while the fact as has been revealed by the Ghaziabad Authorities that as on 1.4.1981 there were no DLC rate notified. The date 13.8.1980 has been manipulated on the copy supplied. Thus reopening has been based on manipulated evidence and therefore not valid. 4.7. Regarding determining the value of the property, the AO has discarded the valuation report without giving any good reason. The valuer has adopted and applied the rate of DLSC as notified by the authorities of Ghaziabad. The AO has wrongly applied the rates for Loni which are not at all applicable particularly when rates are available for Pasonda Municipal Area on both sides of GT Road, where the property of the assessee is situated. DLC rate as prescribed are Rs. 500/- per sq. yd which have been applied by registered valuer. Therefore, the AO was not justified in applying rate of Rs. 50/- per sq. yd. The AO has grossly erred in considering the rate of land at Rs. 50/- per sq. yd which is for industrial area having distance of more than 5-6 km and undeveloped residential land for which information is gathered later on u/s 133(6) in Shalimar Extension Colony near by Industrial Area but have not considered the land rates notification for village Pasonda within Municipal Limits and outside municipal limits. The circle rates were furnished to the AO during the course of assessment showing Rs. 500/- per sq. yd. The AO has also disregarded the valuation report of Chartered Engineer as on 01.04.1981 of the property. The property was situated on National Highway GT Road, Ghaziabad which 14 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF is developed area and have more realizable value and the respondent has taken the value of land @ Rs. 500/- per sq. yard as per valuation report and circular issued by local authority on 11.08.1982. Thus the AO has taken the lower rate of Rs. 50/- just to create the demand of capital gain tax against the facts of the case. 4.8. The ld. A/R therefore, prayed that the deletion of long term capital gain made by the ld. CIT (A) be confirmed.
4.9. We have heard the rival contentions and perused the material available on record. The assessee had filed the return of income and in the return of income the assessee has mentioned the income from LTCG in respect of sale of land and building situated on Plot No. 194, GT Road, Ghaziabad at Rs. 1,15,00,000/-. This has been done on the basis of valuation report of Chartered Engineer. The Chartered Engineer in his Valuation Report dated 20.11.2005 has mentioned against in column no. 39 as under :-
" CIRCLE RATE AS ON 01.04.1981 WAS Rs. 500/- SQ. YARD FOR THE AREA OF G.T. ROAD, THEREFORE A RATE OF Rs.
500.00 PER SQ. YARD FOR TOTAL PLOT IS CONSIDERED AS FAIR MARKET RATE/VALUE."
The return of income and the Valuation Report clearly suggest that the address of the property is 194 G.T. Road, Ghaziabad and not village Pasonda situated on National Highway, GT Road side.
4.10. As per the approved valuer, the Circle Rate of Rs. 500/- as on 1.4.1981 was there in respect of the property. In our view, the conclusion therefore, which can be drawn is that the property is situated on G.T. Road, Ghaziabad and there was 15 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF applicable Circle Rate available to the property. In the light of above, if we look into the assessment order passed by the AO on 24.12.2008, in our view there is not even a whisper what to talk of raising any question by the AO at the time of conducting assessment in pursuant to the notice dated 7.8.2008. No document has been brought to our notice pursuant to the notice dated 19.10.2007 or 7.8.2008 issued by the AO to the appellant here which shows the conduct of enquiry/application of mind during the course of original assessment proceedings. On the other hand, a notice for reassessment was issued on 21.3.2013 and thereafter the reasons were supplied to the assessee. The assessee has filed the reply to the notice under section 148 and the AO vide a detailed order dated 19.9.2013 has disposed off the objections for reopening of the matter. The reasons given by the AO while disposing off the objections are as under :-
" The objection raised in point No. 2 of the letter that the case was completed u/s 143(3) by ITO Ward 3(2), Jaipur after examination of the details does not debar the Assessing Officer to reopen the assessment proceedings. Section 148 empowers the Assessing Officer to reopen the assessment proceedings if he has reasons to belief that income has escaped assessment. Therefore, this point of contention has no merits to be entertained.
Issues raised in point Nos. 3 to 5 that the DDIT (Inv.)-I & II have examined the transactions from time to time and you have provided them all the necessary details sought by them are also not valid reasons for not reopening of the assessment proceedings. The Investigation Wing have done the necessary inquiries on the basis of information available with them and the results of the inquiries have led to forming of an opinion by the Assessing Officer that income has escaped assessment. Therefore, the AO after recording the reasons in writing to his belief that income has escaped assessment, issued notice u/s 148 of the Act for the A.Y. 2005-06. Therefore, the issued raised vide point nos. 3 to 5 do not constitute any reason as to why the case should not be reopened.16 ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF The last contention that the notice u/s 148 is issued after limitation period has been raised without properly understanding the provisions of section 148 of the IT Act. The notice u/s 148 was issued well within the permissible period as provided under the Act.
Since, all the issues raised by you have no merits and the same are being re butted as above, you are requested to provide all the necessary details required for completion of the reassessment proceedings. A copy of reasons recorded for reopening of the case is being enclosed herewith.
As has been mentioned in the reasons recorded, it is proposed to take the sale consideration of the property at Rs. 1,15,00,000/- and work out the long term capital gain accordingly."
However, the ld. CIT (A) has allowed the appeal of the assessee with the following reasons:-
" 3.1.2. I have duly considered the submissions made by the assessee and contention of the AO and also ratio of judgments relied on by the assessee. I have also gone through the assessment order. I have also carefully gone through the contents of the scanned documents as reproduced in para 2.2 above.
I have also carefully gone through the contents of the questioned documents and clarification given by the Asst. Commissioner stamp Ghaziabad (Reference : para 2.2). It is pertinent to note that report from Asst. Commissioner Stamps Ghaziabad supports assessee's contention. On the facts gathered in this regard, it is concluded that questioned document on which AO relied upon is a manipulated document whose authenticity is even doubted by the notifying authorities and this makes whole process of reopening as ab initio void. Assessee also contends that complete details in this regard have been provided to the AO, however the same were considered. Even during the appellate proceeding, a copy of assessee's submission has also been forwarded and remanded to the AO u/s 46A of the Act for his comments and rebuttal but same facts as appearing in the assessment order have been reiterated again.
Reopening of the case u/s 147 on the basis of manipulated document is not only illegal but also bad in law and same cannot be sustained. Accordingly, issuance of notice u/s 148 is ab initio void, accordingly, reopening proceeding is hereby quashed. However, issues pertaining to quantum additions as raised by the assessee in grounds of appeal supra are being decided on merits in para below.17 ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF Assessee's appeal succeeds."
4.11. In our view, the AO while doing the original assessment has not applied his mind to the facts and circumstances of the case with a view to calculate the Long Term Capital Gain which can be discernable from the assessment order. However, in the note filed, it is mentioned as under :-
" The assessee has sold land and building which is an industrial plot with a shed constructed over it at G.T. Road, Ghaziabad. The total sale consideration received as per registered sale deed is Rs. 1,15,00,000/-. This property was acquired by the assessee prior to 1981. The valuation of land and building was made by the approved valuer at Rs. 25,16,750/- as on 01.04.1981. The indexed cost as on the date of sale comes to Rs. 1,25,08,247/-. The valuation of the property for the purpose of stamp duty on sale was done by Collector (Finance and Revenue), Gaziabad at a value of Rs. 1,07,63,356/-. Although the approved valuer has mentioned that circle rate as on 01.04.1981 for the area of GT Road was Rs. 500/- per sq. yd. but for the verification of the sale, a letter was written to Sub Registrar-III, Ghaziabad, UP on 16.12.2008 for obtaining the prevalent circle rates as on 01.04.1981. No reply has been received till date. As the matter is getting barred by limitation, the order is being passed. If any information is received in the nature that the prevalent circle rate as on 01.04.1981 for that area were less than Rs. 500/- then suitable action in this case has to be taken."
In our view, when the Hon'ble Supreme Court in the case of Calcutta Discount Co. vs. ITO (1961) 41 ITR 191 has held " That the words "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year," used in section 34 postulated a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts were material and necessary for assessment different from case to case." , the assessee had failed to produce the primary fact necessary for assess the income of the assessee. The assessee has categorically mentioned that prevalent circle rates are applicable to the property in 18 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF question. However, the assessee during the reopening proceedings has changed its stand and has submitted that the property is situated at village Pasonda, GT Road, Ghaziabad and there are no circle rates available with the AO at the time of reopening of the assessment proceedings. The assessee and the ld. CIT (A) has gone to the extent of saying that the letter on which the reliance was placed by the AO at pages 67 & 68 of the paper book are forged and manipulated one. The document is dated 11.8.1982 whereas the circle rate applied was for the year 1981. Since the assessee himself in the return of income along with the valuation report has wrongly mentioned the circle rate as Rs. 500/- per sq. yard, therefore, the assessee has failed to disclose fully and truly material facts during assessment proceedings in the original assessment. Therefore, in our view, re-assessment proceedings initiated by the AO were within the four corners of law. Accordingly, the Ground No. 1 of the revenue's appeal is allowed. Further, we may like to add that the judgment referred by the assessee in the matter of German Remedies Ltd. Vs. DCIT, Panchratna Co-operative Housing Society Ltd. Vs. AO and Others, Duli Chand Singhania vs. ACIT and CIT vs. Jubilant Organosys Ltd. are not applicable to the facts and circumstances of the case. There is a failure and omission on the part of the assessee to disclose fully and truly all material facts at the time of assessment proceedings. In fact, the assessee has wrongly mentioned the circle rate of Rs. 500/- per sq. yard, whereas the circle rate as found by the AO in the reopening proceedings was Rs. 50/- per sq. yard. In view thereof, we have no hesitation to allow the Ground No. 1 of the revenue's appeal.
19ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF
5. Second ground is with respect to the deletion of addition of Long Term Capital Gain of Rs. 57,57,165/- on the ground of in absence of circle rate as mentioned by the CIT (A).
5.1 In our view, the whole case of the assessee is built up on the premises that the letter dated 11.08.1982, on the basis of which the reopening was made, was a manipulated document and there was no circle rate available for the year 1981-82. In our view, this argument of the assessee is not available to the assessee as the assessee in the return of income and in the valuation report has mentioned as under
:-
" The land is situated in a developed & approved industrially use area, having all amenities. The land adjoins to and lies in front of main G.T. road. The fair market land rate as on 01.04.1981 has been derived based on market survey, after considering and analising the available circle rates for 1981, for surrounding industrial/commercial areas, as also the market values, after making suitable enquiries. The rate of Rs. 500/- per sq. yard is considered as fair market rate of industrial land for that period. The Construction value for different work sheds/structures etc. have been considered as per the construction quality & specifications, as on the date of valuation."
From the perusal of the above, it is clear that there are circle rates available for this property surrounding and commercial area and the same are required to be applied. The AO, in our view, has rightly applied the rates of the adjoining property which are @ 50/- per sq. yard. The assessee has failed to point out as to how the sale deeds are not comparable with the land in question. In view thereof, we deem it appropriate to uphold the order passed by the AO and set aside the order passed by the ld. CIT (A). Accordingly the appeal of the revenue is allowed. 20 ITA No. 225/JP/2015
ITO vs. Purushottam Dass Agarwal HUF 5.2. We may also like to add that the observation of the ld. CIT (A) that the findings of the AO were based on manipulated document, in our view, was unwarranted. When the assessee himself in the return of income and in valuation report has submitted that there is circle rate available as on 1.4.1981, then there is no question of manipulating any record as alleged by the ld. CIT (A). In view thereof, the said observation of the ld. CIT (A) is directed to be removed.
6. In the result, appeal of the revenue is allowed.
Order pronounced in the open court on 31/05/2016.
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(T.R. Meena) (Laliet Kumar)
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Tk;iqj@Jaipur
fnukad@Dated:- 31/05/2016
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vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- The ITO Ward 3(2), Jaipur.
2. izR;FkhZ@ The Respondent- M/s. Purshottam Dass Agarwal (HUF), Jaipur.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 225/JP/2015) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 21 ITA No. 225/JP/2015 ITO vs. Purushottam Dass Agarwal HUF