Income Tax Appellate Tribunal - Chandigarh
Arun Kumar Goyal, Chandigarh vs Assessee on 9 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'B' CHANDIGARH
BEFORE SHRI H.L.KARWA, VICE PRESIDENT
AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER
ITA No. 205 & 206/CHD/2009
A.Y: 2000-01 & 2003-04
Shri Arun Kumar Goyal, V ITO, Ward 5(5),
H.No. 2172, Chandigarh.
Sector 22-C,
Chandigarh.
PAN: AAYPG-0284G
&
ITA No. 203 & 204/CHD/2009
A.Y: 2000-01 & 2003-04
Smt. Parveen Goyal, V ITO, Ward 5(5),
H.No. 2172, Chandigarh.
Sector 22-C,
Chandigarh.
PAN: AAYPG-0284G
(Appellant) (Respondent)
Appellant by : Shri Anil Kumar Batra
Respondent by : Smt.Jaishree Sharma
Date of Hearing : 09.11.2011
Date of Pronouncement : 17.11.2011
ORDER
PER MEHAR SINGH, AM
The present appeals filed by different assessees are against the order dated 28.01.2009 passed by the ld. CI T(A) Chandigarh.
2. In these appeals, the assessees have raised the similar Grounds of Appeal. However, the grounds of appeal raised in the case of Shri Arun Kumar Goyal (I TA No. 205/Chd/2009) are reproduced hereunder:
"1. That the ld. CIT(A) has erred in sustaining the assumption of jurisdiction by the ld. ITO 2 against the mandatory requirement u/s 147 r. w.s. 148 of the Income-tax Act,1961. Consequently, the resultant assessment order deserves to be annulled.
2. The ld. CIT(A) as well as the ld. ITO have without properly appreciating the f acts and circumstances of the case and in having given misplaced credence to doubtf ul agreement to sell dated 14.10.1999 and also in ignoring the agreement to sell dated 3.2.2000 erred in making an addition of Rs.2,00,000/- as unexplained investment u/s 169 of the Income-tax Act,1961. The addition be deleted."
3. In the course of appellate proceedings before us, ld. 'AR' contended that the AO failed to apply his mind to the reasons recorded for the purpose of initiating re-assessment proceedings u/s 147 read with Section 148 of the Act. He was of the opinion that the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (2007) 291 ITR 500 (S.C) is not applicable to the facts of the present case. Accordingly, he prayed that the re-opening of the case be declared as bad in law.
3(i). In Ground No.2, ld. 'AR' argued the case on merits. He argued that agreement dated 14.10.1999 is the original agreement and the same has not been acted upon by the assessee appellant. Ld. 'AR' was of the opinion that the agreement dated 03.02.2000 is the agreement which has been acted upon, therefore the addition made u/s 69 is uncalled for. He referred to the statement of Mr.Kulbhushan and J.D.Gupta to support his contentions. 3 The ld. 'AR' also contended that same submissions may be considered in other appeals, being on similar issues.
4. Ld. 'DR' on the other hand, contended that the original agreement dated 14.10.1999 has been duly acted upon by the assessee in view of payment made in pursuance of such agreement. He also referred to the statement of the assessee wherein contents of the impugned agreement have been corroborated in the course of deposition made by the assessee. The ld. 'DR' contended that agreement dated 03.02.2000 is after-thought and self serving agreement entered into for the purpose of tax evasion. The ld. 'DR' placed reliance on the orders of the CI T(A). The ld. 'DR' also stated that such submission is also applicable to other appeals, being on similar issues.
5. We have carefully perused the rival submissions, facts of the case and the relevant material brought on record. We have also perused and considered the case laws relied upon by the assessee. To start with, the Synopsis filed by the assessee is reproduced hereunder:
"Facts First Agreement 14.10.1999 : For Rs.85 lacs with 2/3 r d share in f avour of Shri Arun Goyal and Smt.Parveen Goyal (NB This agreement was not implemented).
Second Agreement 03.02.2000 : For Rs.1600,000/-
with 5/6 th share for Rs.1600000 (19.02.2000).
Sale Deed Dated 13.09.2002 executed through Local Commissioner.
Ref erence to the statement and cross examination of Shri Kulbhushan Garg- The SELLER The assessment proceedings f or assessment year 2003-04 and 2001-02 in the case of Shri Arun Goyal 4 and his spouse Smt.Parveen Goyal have been reopened u/s 147 r. w.s. 148 on the basis of inf ormation provided by the DDIT (Inv.)-I Chandigarh being consequent to the complaint f iled by one Shri J.D.Gupta.
As per the complainant who was the property dealer, Shri Arun Goyal and his wif e entered into an agreement with four persons namely Shri Piara Lal S/o late Shri Chanan Ram, Smt. Kail ash Devi w/o Late Madan Lal, Smt.Prem Lata w/o Shri Piara Lal and Shri Kulbhushan Garg s/o Late Madan Lal f or the purchase of 5/6 th share in SCO 60-61 Sector 17D Chandigarh for a consideration of Rs.85 lacs vide agreement to sell dt.14.10.99. Further, as per the state ment of the complainant recorded by the ADI (Inv.) on 09.02.2004 Shri J.D.Gupta was instrumental in negotiating the deal and had signed the agreement as witness No.1.
Shri Arun Goyal though he admits that there was an agreement to sell dated 14.10.99 but this agreement was never acted upon, as the complainant had misquoted the sale consideration at Rs.85 lacs. The complainant had a vested interest and theref ore the agreement was negotiated af resh for 5/6 th share at a consideration of Rs.1600000/- vide agreement to sell dated 3 r d Feb.2000 (03.02.2000). Latter, the sale deed was executed on 13 th Sept.,2002 for 2/3 r d share for consideration of Rs.12,80,000/- through local commission appointed by Civil Judge (Junior Division) Chandigarh.
The drop in the sale consideration was attributed to the following f acts;
i) Because of violation of the Building Law the Estate Off ice UT had resumed the property.
ii) Appeals bef ore the Advisor to the administrator were also unsuccessf ul.
iii) The matter was subjudice as appeal was pending bef ore the Hon'ble Punjab & Haryana High Court.
The appell ant has taken up Ground of Appeal f irst challenging the action of the ITO u/s 47 r. w.s. 148 of the Income-tax Act,1961 and second in sustaining the addition of Rs.19,93,333/- as unexplained investment u/s 69 of the Income-tax Act f or assessment year 2003-04.
On re-opening of assessment A) The ld. CIT(A) has no where in his order, examined the approach of the ITO, in re-opening the assessment. He has merely sustained the re-assessment by relying on the judgment of the Apex Court in re; Rajesh Jhaveri Stock Brokers P.Ltd. 291 ITR 500 (S.C).
1) The ITO is required to verif y the correctness of the inf ormation received by him, but has merely accepted the f ruth of the vague inf ormation in a mechanical manner.
5
2) The ITO has not even recorded his satisf action about the correctness or other wise of the inf ormation or his satisf action that a case has been made out for issuing the notice.
This is established f rom the f act that he received the DDI's dated 11.2.05 Add. Commissioner of IT 23.2.2005 and issued notice u/s 147 dated 9.3.2005.
3) The AO should have applied his own mind to the material bef ore him and f ormed his o wn belief regarding escapement S.K.Gupta v Ito (2000) 246 ITR 560 (All).
Reliance CIT V Atul Jain (2008) 299 ITR 383 (Del) B) The DDI as well as the ITO have placed absolute reliance on the state ment of a 3 r d party viz Mr.JD Gupta, the complainant, who could not establish the f act the consideration of Rs.85 l acs ever exchanged hands. Rather, he has vehemently disassociated himself with f inal execution of the agreement to sell dt. 14.10.99.
Ref er Examination in Chief of JD Gupta Q.No.4 page 34 of Paper Book And Cross Examination ? Q.No. 9 page 53-54. Reliance Hindustan Dorr Oliver Ltd.v P.K.Kedia Dy.CIT (2008) 305 ITR 282 (Bombay) Suspicion Mere existence f or reason of suspicion would not tentamount to evidence
i) CIT v Smt.Paramjit Kaur (2009) 311 ITR 38 (P&H)
ii) ITO v Lakhmani Meval Dass (1976) 103 ITR 437 (S.C)
iii) Shri Krishna Pvt.Ltd. v ITO (1996) 221 ITR 538 (S.C)
iv) Raymond Woollen Mill Ltd. v ITO (1999) a236 ITR 34 (S.C)
v) Cit V Ved Parkash Choudhry (2008) 305 ITR 245 (Del) NB Splleave by Deptt. Dismmes (SLP) (C) No.17329 of 2008 Unexplained investment Rebuttable presumption 9.1.2009 - Their Lordships S.B.Sinha and Dr.Muklndak M.Sharma JJ dsmissed the department's special leave petition against the judgment dated Feb 19,2008 of the Delhi High Court ITA No.903 of 2007 reported in 305 ITR 245 whereby the High Court dismissed the department's appeal on the ground that the respondent having denied the transf er of money between him and the respective vendor and the 6 vendors having denied the receipt of money f rom the respondent there ought to have been corroborative evidence to sho w that there was inf act such a transf er of money : CIT V Ved Parkash choudhary SLP (C) No.17329 of 2008 reported in vol. 309 ITR (Statutes) 19. On merits
1. Apparent is real : The onus is on the department to prove that the sale deed dt.13.9.2002 through Court is a sho wn document. This has not been done. No mention of this document in the entire assessment order. Onus not discharged.
2. Total reliance has been placed upon the statement of the complainant Shri J.D.Gupta also himself could not prove the transf er of the sale consideration of Rs.85 l acs.
3. The statement of Shri Kulbhushan Garg the seller has been totally ignored.
Statement of seller
1. The seller straight away states that the sale consideration is Rs.1920000/-. There were two registers
i) For Rs.12,80,000/- f or 2/3 r d share in f avour of the appell ant.
ii) No question of Rs.85 lacs has been posed to him
iii) Denies the authenticity of the agreement to sell dated 14.20.99.
Ref erence Q.No. 18,19,20,21 page 38,39,40 of Examination in Chief by DI And Cross Examination Q.No. 3,7,11.
iv) No commission paid to Shri J.D.Gupta : No such question posed to him in examination in chief . Ho wever, there is a denial of the commission having been paid to him in cross examination Q.No. 10 PB page 61.
a) In his Examination in Chief : he has on by/admitted the simil arity of the signatures of himself and the f amily members, but not the veracity of the document-as it was only a Photostat.
b) No question of the amount of sale consideration was ever put to him. He has
admitted the sale consideration of Rs.19,20,000/- in his ex-in-chief as well as cross examination. 7
c) He has denied the payment of commission Rs.1,70,000/- to Shri JD Gupta in the cross examination Q.NO. 10 page 61.
d) He has produced the books of account as well as the f iling of ITR ref lecting the share of each co- o wner at Rs.4,80,000/-. No parallel action has been initiated in their cases (Q No. 3 & 11 page 58-61).
4. Shri P.C.Singla the Notary has only admitted to the simil arity of his signatures and not to the authenticity of the document- since it was only a Photostat (JD Gupta is not aware of the notarization page 49)
5. i) The ld. AO has made only a passing ref erence in para 3.2 of the assessment order.
That the source of investment could have been through property deal ing- No instance has been illustrated-only inferences-no nexus establ ished.
ii) No such ref erence has been made in the case of Smt.Prem Lata, the wif e.
iii) No def ects in the bank statements has been pointed out. No cash entries have been demonstrated.
iv) In para 3.1 of the assessment order, AO has said that f igure of Rs.60 lacs appears twice. The f igure of Rs.16 lacs also appears twice. Ref er to ans wer to Q.No. 4 & 5 of the purchaser at page 31,32. Theref ore the aff idavit was filed. Contradiction with respect to signatures on agreement dt.14.10.1999
i) As per the statement of Shri J.D.Gupta, the buyers i.e. Shri Arun and Smt.Parveen Goyal accompanied him to Rampuraphool, where the seller and buyers together signed the statement. Q.No. 4 of Examination in chief and cross examination, where as per :
a) The Sellter :
i) Mr.JD Gupta, alone come to Rampuraphool
ii) There were no signatures of buyers
iii) They had never met the buyers
iv) Mp copy of the agreement was given to the
seller, theref ore he denied kno wledge of the attestation by the notary, signatures of the buyers etc.
v) The amount mentioned f or consideration was Rs.1920000/-.
b) The purchaser : He signed on perf orma agreement to sell, which was signed by him and his wif e at Chandigarh 8 Statements of the other purchaser viz Sanjeev Chadha and Smt.Vinod Kumari, Prop.
Shivalik Book Depot, not examined."
6. The brief facts necessary for the disposal of the present appeal are that the assessee filed his return of income declaring estimated business income at Rs.69500/- and income from house property at Rs.35,000/-. The return was filed by the assessee on 31.3.2004 which was processed on 15.6.2004 at the returned income u/s 143(1) of the Act. Subsequently, it was noticed by the AO that certain income escaped assessment and consequently a notice u/s 148 was issued on 9.3.2005. The reasons recorded u/s 148 of the Act by the AO are reproduced hereunder :
"As per inf ormation received from DDIT (Inv)-I Chandigarh vide his letter No. DDIT-I/Inv /2004- 05/2342 dated 11.02.2005 received through Addl.CIT, Range-III Chandigarh vide letter No.7695 dated 23.02.2005, Shri Arun Kumar Goyal and his wife Smt.Parveen Goyal residents of House No.2172 Sector 22-C Chandigarh (2/3 r d share),Smt.Vinod Virmani, resident of H.No. 1033, Section 15B Chandigarh (1/6 th share) and Smt. Anju Chadha, resident of House No.3002 Sector 40B Chandigarh (1/6 t h share) have purchased SCO NO. 60-61 sector 17D Chandigarh f or a consideration of Rs.85 l acs as per Agreement to sell dated 14.10.1999 (placed as annexure-1). The sale Deed of this property was registered at Rs.19.20 l acs in the year 2002-03 (assessment year 2003-04) Thus, these persons had made undisclosed payment of Rs.63.80 lacs to the sellers Shri Piara Lal & others.
The assessee and his wif e's share in the property is 2/3 r d . Thus Shri Arun Kumar Goyal and Smt.Parveen Goyal have invested Rs.43.87 lacs out of their undisclosed income. Shri Arun Kumar's 50% share 9 comes to Rs.21.94 lacs. I have theref ore, reasons to believe that investment to the extent of Rs.21.94 lacs remained unexplained in the hands of Shri Arun Kumar Goyal. Hence, a notice u/s 148 of IT Act,1961 is being issued f or the assessment year 2003-04."
7. The CI T(A) dismissed the ground of the assessee regarding re-opening of the case after passing a detailed order and following the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (2007) 291 I TR 500 (S.C). It would be pertinent to reproduce the relevant and operative part of the decision as recorded by the CIT(A), in para 4 and 5 of the impugned appellate order, for the purpose of proper appreciation of the factual and legal position of the issue involved in the first Ground of Appeal:
4. "The only requirement f or re-opening the assessment is that there should be some material with the AO that gives him reasons to believe that the income has escaped assessment. In my opinion, the AO had suff icient material to reopen the assessment of the assessee. The law is settled by the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. 291 ITR 500 (S.C) that suff iciency of the reasons is not justif iable.
The relevant part of the decision is as under :
"Section 147 authorizes and permits the AO to assess or reassess income chargeable to tax if he has reason to bel ieve that income f or any assessment year has escaped assessment.
The word "reason" in the phrase "reason to bel ieve"
would mean cause or justif ication. If the AO has cause or justif ication to kno w or suppose that income 10 had escaped assessment, it can be said to have reason to believe that an income had escaped assessment.
The expression cannot be read to mean that the AO should have f inally ascertained the f act by legal evidence or conclusion. The f unction of the AO is to administer the statute with solicitude f or the public exchequer with an inbuil t idea of f airness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v ITO (1991) 191 ITR 662 f or initiation of action u/s 147(a) (as the provision stood at the relevant time) fulf ill ment of the two requisite conditions in that regard is essential.
At that stage, the f inal outcome of the proceeding is not relevant. In other words at the initiation stage, what is required is "reason to believe" but not the established f act of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have f ormed a requisite belief . Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the f ormation of belief by the AO is within the real m of subjective satisf action (see ITO v Selected Dalurband Coal Co.P.Ltd. (1996) 217 ITR 597 (S.C) Raymond Woollen Mills Ltd. v ITO (1999) 236 ITR 34 (S.C).
The scope and effect of Section 147 as substituted w.e.f . April 1 1989 as also Section 148 to 152 are substantially different f rom the provisions as they stood prior to such substitution. Under the old provisions of Section 147, separate cl auses (a) and
(b) laid do wn the circumstances under which income escaping assessment f or the past assessment years 11 could be assessed or reassessed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied : firstly the AO must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice u/s 148 read with Section 147(a) But under the substituted Section 147 existence of only the first condition suffices.
In other words if the AO for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however to be noted that both the conditions must be fulfilled if the case fails within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and not the proviso.
In view of the discussion above and following the ratio of the abovesaid decision of the Hon'ble Supreme Court, this ground of appeal is dismissed."
8. It is undisputed fact that the case of the assessee was processed u/s 143(1) of the Act on 15.06.2004. Therefore, the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (supra) squarely covers the issue raised by the assessee as is clear from the ensuing discussion of the relevant and operative part of the said decision :
"Re-assessment-Intimation-Provision f or initiating re- assessment appl ied-only one of two conditions to be complied with-Only reason to believe that income 12 chargeable to tax has escaped assessment-"Reason to believe"-Formation of belief within subjective satisf action of Assessing Off icer-Principle rel ating to 'change of opinion' Not applicable-Income-tax Act,1961 ss. 143(1)(a),147.
Income escaping assessment-Intimation-Clai m of assessee f or bad debts-Notice for re-assessment on the basis that conditions f or allo wance were not fulf illed-Val id-Within jurisdiction of AO-Income-tax Act,1961, ss. 36(1)(vii), (2) 132(1)( a), 147,148.
Words and phrases _"Reason to believe", "Assessment', "Intimation" meanings of .
Under the scheme of Section 143(1) of the Income-tax Act,1961, as substituted w.e.f . April,1989 and prior to its substitution w.e.f . June 1,1999, what were permissible to be adjusted under the f irst proviso to Section 143(1)(a) were : (1) only apparent arithmetical errors in the return, accounts or documents accompanying the return (ii) loss carried forward, deduction, allo wance or relief , which was prima f acie admissible on the basis of inf ormation avail able in the return but not claimed in the return, and simil arly ( iii) those cl aims which were, on the basis of the information avail able in the return, prima f acie inadmissible and were to be rectif ied/allo wed/disallo wed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The AO had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the AO had no po wer to go behind the return, accounts and documents, either in allo wing or in disallo wing deductions, allo wance or relief . Though technically the intimation issued was deemed to be a demand notice under Section 156, that did not preclude the 13 right of the AO to proceed u/s 143(2) that right is preserved and not taken away.
With effect f rom April 1, 1998, the second proviso to Section 143(1)(a) was substituted. During the period between April 1, 1998 and May 31,1999, sending of an intimation was mandatory. The legislative intent is very clear f rom the use of the word 'intimation' as substituted f or 'assessment' that two different concepts emerge. While making an assessment, the AO is f ree to make any addition af ter grant of opportunity to the assessee. By making adjustments under the f irst proviso to Section 143(1) no addition which is impermissible by the inf ormation given in the return could be made by the AO. The intimation u/s 143(1) cannot be treated to be an order of assessment.
Under the f irst proviso to the ne wl y substituted Section 143(1), with eff ect f rom June 1,1999, except as provided in the provision itself , the ackno wledgement of the return shall be deemed to be an intimation u/s 143(1) where (a) either no sum is payable by the assessee, or (b) no ref und is due to him. It is signif icant that the acknowledgement is not done by any AO, but mostly by ministerial staff. It cannot theref ore be said that an 'assessment' is done by them. The intimation u/s 143(1) was deemed to be a notice of demand u/s 156 f or the apparent purpose of making machinery provisions rel ating to be payable in the intimation became permissible. Nothing more can be inf erred f rom the deeming provisions. Therefore, there being no assessment u/s 143(1)( a), the question of change of opinion does not arise.
The expression "reason to believe" in Section 147 would mean cause or justif ication. If the AO has cause or jurisdiction to kno w or suppose that income 14 had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the AO should have f inally ascertained the f act by legal evidence or conclusion. What is required is "reason to believe" but not the established f act of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief . Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the real m of the subjective satisf action of the AO.
ITO v Selected Dalurband Coal Co. P.Ltd. (1996) 217 ITR 597 (S.C) and Raymond Woollen Mills Ltd. v ITO (1999) 236 IT R 34 (S.C) f ollo wed.
Taking income escaping assessment in the case of an intimation u/s 143(1)(a) is covered by the main provision of Section 147 as substituted w.e.f . April 1,1989 and initiating re-assessment proceedings in the case of intimation would be covered by the main provision of Section 147 and not the proviso thereto. Only one condition has to be satisf ied. Failure to take steps u/s 143(3) will not render the AO po werless to initiate re-assessment proceedings when intimation u/s 143(1) has been issued.
Adani Exports v Deputy CIT (Assessment) (1999) 240 ITR 224 (Guj) distinguished.
Held accordingly that the AO had jurisdiction to issue notice u/s 148 f or bringing to tax income escaping assessment in an intimation u/s 143(1)( a) n the ground that the claim f or bad debts by the assessee was not acceptable as the conditions f or 15 allo wance specif ied in Section 36(1)(vii) and (2) were not f ulf illed.
Decision of the Gujrat High Court in Rajesh Jhaveri Stock Brokers P.Ltd. v. Asstt.CIT (2006) 284 ITR 593 reversed."
9. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v ITO (1991) 191 ITR 662 for initiation of action u/s 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction (see ITO v Selected Dalurband Coal Co.P.Ltd. (1996) 217 I TR 597 (S.C) Raymond Woolen Mills Ltd. v I TO (1999) 236 I TR 34 (S.C).
10. As discussed above, the case was processed u/s 143(1) of the Act. The Government of India reposed great confidence in the tax-payers and introduced the summary acceptance of returns, filed by them, without making any inquiry and requiring the presence of the tax-payers. In this noval experiment, while processing the return u/s 143(1) of the Act, no inquiries are made and the returns are accepted 16 as such. It is settled law that the AO has no power or jurisdiction to make any inquiry while processing returns u/s 143(1) of the Act. It is further added that in such type of processing of returns, there is no formation of opinion by the AO. Therefore, the question of change of opinion does not arise. Similarly, no opinion was ever expressed or formed by the AO, while processing the return under the said scheme. The change of opinion presupposes the existence of any opinion formed by the AO, in the earlier proceedings. The formation of opinion is positive act on the part of the AO. Thus, an opinion can be said to have been formed where there is application of mind, with reference to the material on record and the relevant provisions of the statute. Hence, under such proceedings, no such opinion is formed by the AO and if there is an escapement of income, then it cannot be contended that the re-assessment proceedings are initiated on mere change of opinion.
11. The case laws cited by the assessee, in the synopsis, reproduced above, on the issue of re-opening the case are not applicable to the facts of the present case, being factually different and distinguishable. The facts narrated in the present case by the AO while recording reasons u/s 148 of the Act, are definite, relevant, credible and have direct nexus to the factum of escapement of income. These reasons are not based on surmises as contended by the ld. 'AR', while placing reliance on the decisions indicated in the synopsis, in the matter. Thus, we are of the considered opinion that none of the case law is applicable to the facts 17 of the present case. The facts of the case are squarely covered by the decision of the Hon'ble Supreme Court, in the case of Rajesh Jhaveri Stock Brokers P.Ltd. (supra).
12. A bare perusal of the reasons recorded by the AO u/s 148 of the Act clearly reveals that there is existence of documentary evidence, in the form of Agreement to Sell dated 14.10.1999 and registered Sale Deed, with specific details, as is evident from the perusal of the reasons recorded and reproduced above. There is a rationale, live and direct nexus between the reasons recorded by the AO and escapement of income within the meaning of Section 147 read with Section 148 of the Act. It is a settled proposition that source of information is different from application of mind by the competent authority, while invoking the provisions of Section 148 of the Act. In the present case, the source of information is the Investigation Wing of the Income Tax Department, Chandigarh and the application of mind is of the AO who categorically recorded that in view of the facts of the case, he has reason to believe that investment to the extent of Rs.21.94 lacs remained unexplained in the hands of Shri Arun Kumar Goyal which led to the issuance of notice u/s 148 of the Act. In the present case, the AO has furnished specific details such as date of Agreement to Sell and date of registration including the consideration involved therein. Such vital, relevant and definite information cannot be treated as vague and irrelevant information as sought to be termed by the ld. 'AR'. There is a complete application of mind, to the facts of the 18 case as is evident from in the reasons recorded u/s 148 of the Act, by the AO and hence, it cannot be said as pointed out by the ld. 'AR' that there is no application of mind, at the level of the AO, who invoked provisions of Section 148 of the Act. We hold that in this case, the AO applied his mind, to the fact situation of the case and validly invoked the provisions of Section 147 read with Section 148 of the Act. We, further, hold that the facts of the present case are squarely covered by the decision of the Hon'ble Supreme Court, in the case of Rajesh Jhaveri Brokers P.Ltd.(supra). Therefore, having regard to the fact situation of the present case, clear findings of the CI T(A) and true ratio of the decision of the Hon'ble Supreme Court in the case of Rajesh Jhaveri (supra), we uphold the findings of the CI T(A) and consequently, the Ground of Appeal of the assessee is dismissed.
13. Now, we turn to consider the issue of addition made by the AO and challenged by the assessee in Ground No.2 on merit. The AO made an addition of Rs.2 lacs as unexplained investment/ u/s 69 of the Act. The ld. CIT(A), upheld the said addition by passing a detailed and speaking order. We consider it essential to reproduce the findings of the ld. CIT(A) on the issue in question for the purpose of proper appreciation of the same :
"I have caref ully considered the entire material on record. The main contention of the assessee is that agreement dated 14.10.1999 is not genuine. The sequence of events and surrounding circumstances would reveal that the inf ormation/documents in 19 possession of the department can be relied upon. The following f actors are relevant :
i) "Original" attested true copy by Notary, Chandigarh was conf ronted to the assessee.
ii) The assessee has not denied that there was no agreement prior to another agreement dated 3.2.2000.
iii) The assessee in his state ment and also in written submissions accepted that the assessee had great f aith in Mr.J.D.Gupta and signed on the dotted lines.
iv) The assessee has admitted that it was in the kno wledge of the assessee that the sale consideration was Rs.85 lacs out of which Rs.10 lacs was paid as earnest money. It also bore the signatures of the assessee and his wif e.
v) The assessee was allo wed cross examination of Shri J.D.Gupta on 23.4.2007 who stuck to his stand, being witness No.1, that there existed an agreement to sell dated 14.10.1999.
vi) Four demand draf ts mentioned in para-11 above are exactl y same as in the registered sale deed.
vii) Shri P.C.Singla, the Notary public accepted that the photocopy agreement dated 14.10.99 bears his signature.
viii) The assessee was allo wed cross-examination of Shri J.D.Gupta (placed as Annexure-5).
18. In the backdrop of these f actors, it is to be decided whether the copy of agreement has any evidentiary value. It is true that in normal course, any photocopy of document cannot be admitted as an evidence. In the present case, suff icient corroborative evidence has been brought on record. The assessee has been conf ronted with original attested copy of that agreement. The other corroborative evidence is that ultimately, the property has been bought by the assessee and his wif e and registered in assessment year 2003-04. The state ments of Shri J.D.Gupta and P.C.Singla are also corroborative evidences. What can be a greater evidence where the assessee himself accepts the existence of this agreement wherein the consideration mentioned isRs.85 lacs and payment of earnest money of Rs.10 lacs. 20
19. Taking into account all f acts and circumstances, I am of the vie w that this agreement can be treated as document which can be rel ied upon as evidence.
20. The ld. counsel for the assessee has raised various points saying that such documents cannot be relied upon. Certain inconsistencies have been highlighted in its replies. The main contentions along with remarks are given as belo w :
S.No. Remarks by the CIT(A)
1 Property is a resumed This fact has been mentioned on P-1 of the
property agreement. It is despite that total
consideration is Rs.85 lacs.
2 Buyers & Sellers had The buyers would not sign blindly. The price
great faith in Shri of the property is the first thing which is
J.D.Gupta and signed asked and noted. Atleast, price mentioned in
on dotted lines the agreement is checked. Even otherwise,
the department has to take decision as per evidence on record.
3 The agreement showing The assessee has been showing a true copy of consideration of Rs.85 agreement. The assessee himself accepted lacs never existed. The that agreement was torn. That means the complainant created agreement existed.
agreement
4 The signatures on the This fact will not affect the validity of
agreement has same agreement.
spacing & chronology
5 Shri Arun Go yal put The stamp is generally put on the paper
signature on stamp. It without at times, looking on the signature.
is not possible. This fact will not invalidate the agreement.
6 The agreement to sell As far as Income Tax is concerned, this fact
is not Rs.3 stamp paper is not material
7 Record of Notary No need of seeing the record of Notary
Public not examined Public. Statement of Notary Public recorded.
8 Receipt appearing as The stamp is generally put on the paper
annexure. Signatures without, at times, looking on the signature.
appearing on stamp of This fact will not invalidate the agreement.
Notary
9 Agreement requires to No need. The assessee himself agrees that
be examined by there was agreement which was torn. There is
Forensic Expert no denial of signatures on the agreement.
10 The agreement was The agreement mentions the amounts in
without mentioning the figures as well as in wo rds and it has been
amount typed. Moreover, the assessee has accepted
that there was consideration of Rs.85 lacs.
21. The next question arises what is the year of taxabil ity. Once it is held that this agreement has evidentiary value, then the assessee is l iable to tax on the undisclosed investment either in A.Y. 2000-01 or A.Y. 2003-04. One thing is clear that there is no 21 escape f rom taxability of income. In my vie w the AO has rightly taxed in assessment year 2003-04 when the assessee got the property registered in his name. There was dispute and that is why the matter went into court. That means, when the litigation came to an end, the assessee exercised his f ull rights. The rental income sho wn by the assessee f rom assessment year 2000-01 does not conf er the f ull o wnership. All the payments are f inal ized at the time of execution of registered document. The agreement to sell is only the promise to effect the transaction.
22. In vie w of the above discussion, the action of the AO is justif ied and in result, appeal of the assessee is dismissed."
13(i) It is pertinent to highlight that the assessee appellant duly confirmed the existence of Agreement to Sell, dated 14.10.1999, wherein demand drafts are also recorded as payment made in pursuance of the said agreement. The important and significant factor to be noted is that the same demand drafts are appearing in the subsequent 'Agreement to Sell' dated 03.02.2000, which came into existence after four months of the original Agreement to Sell dated 14.10.1999. It is unbelievable to accept that such demand drafts were purchased in pursuance of the Agreement to Sell dated 03.02.2000 even prior to its existence These demand drafts are dated 12.10.1999 and it is beyond comprehension that any rational human being would prepare such drafts and record the same in the original Agreement to Sell dated 14.10.1999 and then claim that such drafts were purchased in pursuance to the Agreement to Sell dated 03.02.2000, 22 which was executed subsequent to the original Agreement. As indicated earlier, the Agreement to Sell dated 03.02.2000, existed in the womb of futurity, and, hence, said drafts dated 12.10.1999 cannot be purchased in pursuance of such Agreement to Sell. The time latches between the original Agreement dated 14.10.1999 and the purchase of said drafts is just two days. Whereas it is almost four months in respect of subsequent Agreement dated 03.02.2000. The sequence of events in the case runs contrary to the probability of human conduct and surrounding circumstances of this case. The assessee failed to explain and rebut such documentary evidence to prove the genuineness of Agreement to Sell dated 03.02.2000 and to prove the non-genuineness of agreement dated 14.10.1999.
14. The AO, as also the CI T(A), appreciated the existence of documentary material to support their findings. It is undisputed fact that original attested true copy by Notary Chandigarh was confronted to the assessee. The Notary also accepted in his statement the contents of the certified Agreement to Sell dated 14.10.1999, in the lieu of such certification by him. In this connection it is pertinent to highlight that the AO is not fettered by technical rules of evidence and pleadings, and he is entitled to act on material which may not be accepted as evidence in a Court of law as held by the Hon'ble Apex Court in the case of Dhakeshwari Cotton Mills Ltd. (1954) 26 ITR 23 775/Dhakeshwari Cotton Mills V CIT (1955) 27 ITR 126 (S.C). Further, such judicial precedent of the Hon'ble Apex Court stands vindicated by a bare perusal of the provisions of Section 143 of the Act. The AO is required to frame the assessment on the basis of material to support his findings whereas the assessee is required to adduce evidence to support the contents of his return of income. Therefore, the CI T(A), to support his findings, in the present case placed reliance on the cogent, credible and corroborative material, in the form of Agreement dated 14.10.1999, statement of Shri J.D.Gupta, statement of Sh P.C.Singla, Notary Public, Statement of witness as also statement of the assessee. The assessee has failed to rebut the contents of such documentary evidence, as also the deposition made by various parties directly connected to the Agreement dated 14.12.1999. The assessee himself admitted the existence of the agreement prior to the subsequent agreement dated 03.02.2000. The assessee has duly accepted signature on this original agreement dated 14.10.1999 and consideration recorded therein. Bare assertion on the part of the assessee about the ignorance of the contents of the said agreement is nothing but a mere prevarication of factual matrix of the impugned agreement. Such assertions purely founded on surmises and conjectures, cannot rebut the documentary corroborative and credible material evidences against the assessee. Incidentally, it is pointed out that copies which are made from original by mechanical process, which in themselves 24 assure the accuracy of the copy and copies compared with such copies as also the copies made from or compared with the original are evidence within the meaning of Section 63 of the Indian Evidence Act, 1872. In the original Agreement to Sell dated 14.10.1992, the consideration of the impugned property is clearly recorded as Rs.85 lacs whereas the consideration of the same property has been recorded as Rs.16 lacs in the subsequent agreement dated 03.02.2000. The subsequent agreement dated 03.02.2000 was executed after four months of the original Agreement to Sell, dated, 14.10.1999. Such a drastic decline in the sale consideration viz-a-viz these two agreements remains inexplicable and un- rebuttable by the assessee appellant. In this context, it is pertinent to mention here that the assessee appellant admits the existence of the original agreement dated 14.10.1999 and also admits that the said original agreement was torn by him. Bare assertions on the part of the assessee that he has not seen the contents of the original agreement dated 14.10.1999 and signed the same accordingly is a specious and self-serving explanation, unsupported by any evidence brought on record by the assessee. No rational person would appreciate that the impugned Agreement to Sell dated 14.10.1999 has been signed without even knowing contents of the same. However, such assertions cannot substitute the cardinal material on the basis of which the CI T(A) has upheld the findings of the AO. The ld. CI T(A), has passed a detailed and speaking order 25 after appreciation of the relevant material and submissions filed by the assessee, as reproduced above.
15. In view of the above legal and factual discussions, we do not find any infirmity in the findings of the ld. CIT(A), and, hence the order of the ld CI T(A) is upheld. Consequently, this ground of appeal raised by the assessee are dismissed.
16. Resultantly, the appeal filed by Shri Arun Kumar Goyal, the assessee appellant is dismissed. Similar findings would hold good in respect of appeal by the assessee appellant vide ITA No. 206/Chd/2009, as similar issues are involved.
ITA Nos. 203 & 204/Chd/2009 - Smt.Parveen Goyal
17. A bare perusal of the Grounds of Appeal raised by the assessee-appellant reveals that such Grounds of Appeal are identical to that of the Grounds of Appeal raised by the assessee Shri Arun Kumar Goyal, husband of the present appellant in ITA Nos. 205 & 206/Chd/2009. The adjudication made by us, in the case of Shri Arun Kumar Goyal herein before is also applicable to these appeals. Consequently, the grounds of appeal raised by the assessee- appellant in I TA No. 203& 204/Chd/2009 are dismissed.
18. In the result, appeal of the assessee appellant Shri Arun Kumar Goyal bearing I TA Nos. 205 & 206/Chd/2009 A.Y. 2000-01 and 2003-04 and appeals of Smt.Parveen Goyal 26 bearing I TA Nos. 203 & 204/Chd/2009 A.Y. 2000-01 and 2003-04 are dismissed.
Order pronounced in the Open Court on 17 t h Nov.,2011.
Sd/- Sd/- (H.L.KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 17 t h Nov.,2011. 'Poonam' Copy to:
The Appellant,The Respondent, The CI T(A), The CI T,DR Assistant Registrar, I TAT Chandigarh