Sh. Devinder Singh, Kurukshetra vs Assessee

Sh.Devinder Singh, Vs. The Income Tax Officer, Opp.Hotel Heritage, Ward 1, Sector 7, Urban Estate, Kurukshetra. Kurukshetra. PAN No. ATQPS1986A

(Appellant) (Respondent)

Appellant by : Shri Ajay Jain Respondent by : Shri R.K.Gupta, D R

Date of hearing : 09.06.2015 Date of Pronouncement : 16.06.2015

PER H.L.KARWA, VP :

This appeal filed by the assessee is directed against

the order of the learned Commissioner of Income Tax

(Appeals), Karnal dated 3.3.2011 relating to assessment year

2006-07.

2. In this appeal, the assessee has raised following

grounds :

"1. That the Learned Commissioner of Income (appeal) Karnal has erred in confirming the addition of Rs 12 lakhs without 2

appreciating the fact that the Father & Uncles (donors) has confirmed the gifts to the appellant out of their joint family agricultural income & also produced the proof of joint ownership of agricultural land measuring approx 50 acres at Village Chak In Hissar .

2. That the Learned Commissioner of Income Tax (appeal) Karnal has erred by accepting the assessment order passed under section 147 without appreciating the fact that the reopening under section 147/148 of the Act is bad as the assessing officer has no reason to believe that the income chargeable to tax has escaped assessment & the assessing authority has initiated the proceedings on the basis of reason to suspect only."

4. Vide ground No.2 of the appeal, the assessee

challenged the validity of re-opening of assessment under

section 147/148 of the Income Tax Act, 1961 (in short 'the

Act').

5. Briefly stated, the facts of the case are that the

assessee filed return of income on 20.11.2006 declaring total

income of Rs.74,850/-. The return was processed under

section 143(1) of the Act on 1.3.2007 and returned income

was accepted. Subsequently, on behalf of information

received from the Joint Sub-Registrar, Ambala Cantt, notice

under section 148 of the Act was issued on 12.12.2008. The

reasons recorded for issuing the notice is reproduced as

under:

"As per information received from the Joint-Registrar, Ambala Cantt. The assessee has purchased land for a consideration of 3

Rs. 15,00,000/- + Registration charges of Rs.l.50 lac on 01.7.2005. in the return of income filed on 20.11.2006 declaring taxable income of Rs. 74,850/-, the transaction of Rs. J5,00,000/- made for purchases of land is not verifiable from return filed by the assessee.

I have, therefore, reason to believe that income to the tune of Rs.15,00,000/- (Rs. fifteen lac only) has escaped assessment. "

After receipt of this notice, the assessee has filed his reply on 15.01.2009 contending that "that the return of income for the assessment year 2006-07 had been filed with your good office on 20.11.2006 vide acknowledgement No. 15,671 and the same should be treated to be return of income under section 148 of the Act. "

6. The Assessing Officer noticed that the assessee has

not declared aforesaid property in his return. The Assessing

Officer required the assessee to submit the details and source

of investment made during the year under consideration. In

response to the above query, the assessee submitted the reply

as under :

"The assessee has purchased agricultural land measuring 9 kanal at Shahpur, G.T. Road, Distt.- Ambalaon 01.7.2005 for Rs.15.00 lac. further an expenditure of Rs. 1.50 lac was borne for registration and misc. expenditure by my assessee making an total investment of Rs. 16.50 lacs. The total investment of Rs.16.50 lacs was made of money received by my client from his father/uncles as per the details given below:-

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(a) Gift of Rs. 7.00 Lac from father:-

The assessees father Sh. Prithvi Singh got retired as District Revenue Officer and gifted Rs. 5.00 lac from his terminal benefits. Moreover, his father jointly owns agricultural land of approx 50 acres at his native village of Panihar Chak Chaudhary Vas in Distt. Hissar and also gifted Rs. 2.00 lac from his agricultural income to enable his son to purchases the said property. The father of my client withdrew such amount from his saving bank account No. 676010100019252 with bank of India, Hissar branch. The copy of bank account, affidavit of his father is attached herewith and copy of Jamabandi/Furd of agricultural land holding of his father is attached herewith to substantiate our claim.

(b) Gift of Rs. 5.00 Lacs from uncle (Mahender Singh)

Assessees uncle Sh. Mahender Singh jointly owns agricultural land of approx 50 Acres at his native village of Panihar Chak Chaudhary Vas in Distt. Hissar and gifted Rs.5.00 lac from his agricultural income to enable his nephew to purchase the said property. The affidavit and copy of Jamabandi/Furd of agricultural land holding of Shri Mohinder Singh are attached herewith to substantiate our claim.

(b) Gift of Rs. 5.00 Lacs from uncle (Umed Singh):-

Assessees uncle Sh. Umed Singh jointly owns agricultural land of approx 50 Acres at his native village of Panihar Chak Chaudhary Vas in Distt. Hissar and gifted Rs.5.00 lac from his agricultural income to enable his nephew to purchase the said property. The affidavit and copy of Jamabandi/Furd of agricultural land holding of Sh. Umed Singh are attached herewith to substantiate our claim."

7. The Assessing Officer recorded the statement of Shri

Prithvi Singh, father of the assessee, who has stated that Rs.5

lacs were given to the assessee out of his terminal benefits

and Rs.2 lacs from his agricultural income. The Assessing 5

Officer accepted the gift of Rs.5 lacs as genuine. However,

the Assessing Officer did not accept the gift of Rs.2 lacs

stating that Shri Prithvi Singh (father of the assessee) has

stated that he owns no agricultural land individually.

Therefore, the factum of payment made to his son out of his

agricultural produce does not arise. The Assessing Officer

also recorded statement of S/Shri Mohinder Singh and Umed

Singh (uncles of the assessee) on 1.12.2009 as both the

uncles of the assessee gifted Rs.5 lacs each to the assessee.

In their statements, S/Shri Mohinder and Umed Singh stated

that they gifted the amount in question to his nephew (the

assessee) out of the income from their agricultural land. The

Assessing Officer rejected the claim on the ground that both

the donors failed to produce 'J' form which relates to sale of

agricultural produce. Consequently, the Assessing Officer

disallowed Rs.12 lacs (Rs.2 lacs + Rs.5 lacs + Rs.5 lacs = 12

lacs) and added the same to the total income of the assessee

under sections 68 and 69 of the Act.

8. Aggrieved by the order of the Assessing Officer the

assessee carried the matter in appeal before the learned CIT

(Appeals). It appears that the assessee did not challenge the

validity of re-opening of the assessment before the learned CIT

(Appeals). However, on merits, the learned CIT (Appeals)

confirmed the addition of Rs.12 lacs, and hence the assessee

is in appeal before the Tribunal.

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9. Vide ground No.2 of the appeal, the assessee has

challenged the validity of re-opening of the assessment.

10. I have heard the rival submissions and have also

perused the reasons recorded for re-opening of the

assessment. As per the information received from Joint Sub-

Registrar, Ambala Cantt, the assessee has purchased

agricultural land for a consideration of Rs.16.50 lacs only

(Rs.15 lacs, cost of the land + Rs.1.50 lacs, registration and

other charges). Admittedly, the assessee filed return of

income on 20.11.2006 for assessment year under

consideration. It is also an admitted fact that the assessee

did not declare this land/property and the investment made in

his return of income. When the Assessing Officer asked the

assessee to disclose the source of investment made in the

property; and for the first time the assessee submitted his

reply on 10.11.2009. Now, I have to examine as to whether

the re-opening of the assessment was valid or not? In the

case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., 291

ITR 500 (SC). The Hon'ble Supreme Court had observed that

if the Assessing Officer for whatever reason has reason to

believe that the income has escaped assessment, it confers

jurisdiction to re-open the assessment. The Hon'ble Supreme

Court also observed that the word "reason" in the phrase

"reason to believe" would mean cause or justification to know

or suppose that the income had escaped assessment, it can

be said to have reason to believe that the income had escaped

assessment. The Hon'ble Supreme Court categorically 7

observed that that expression cannot be read to mean that the

Assessing Officer should have finally ascertained the fact by

legal evidence or conclusion. What is required is "reason to

believe" but not the established fact of escapement of income.

The Hon'ble Supreme Court also held that at the stage of

issue of notice under section 148 of the Act, the only question

is whether there was relevant material on which a reasonable

person could have formed the requisite belief. It was also

observed by the Hon'ble Supreme Court that whether material

would conclusively prove escapement of income is not the

concern at this stage because the formation of the belief is

within the realm of the subjective satisfaction of the

Assessing Officer. In the instant case also, the return was

processed under section 143(3) of the Act and notice under

section 148 of the Act was issued on 12.12.2008. The

Hon'ble Supreme Court in the above case held that taxing

i n c o me e s c a p i n g a s s e s s me n t i n t h e c a s e o f an intimation under

section 143(1)(a) is covered by the main provision of section

1 4 7 a n d i n i t i a t i n g r e - a s s e s s me n t p r o c e e d i n g s i n t h e c a s e o f

i n t i m a t i o n wo u l d b e c o v e r e d b y t h e m a i n p r o v i s i o n o f s e c t i o n

147 and not the proviso thereto. In other words, if the

Assessing Officer for whatever reason has reason to believe

that the income has escaped assessment, it confers

jurisdiction to re-open the assessment. The question whether

the material would conclusively prove the escapement of

income is not the concern at this stage. In the instant case,

the Assessing Officer received the information from the Joint

Sub-Registrar, Ambala Cantt. that the assessee has purchased 8

agricultural land for a consideration of Rs.15 lacs. and

incurred registration charges and other charges of Rs.1.50

lacs on 1.7.2005. It means that there was a credible

information with the Assessing Officer that vide a registered

sale deed the assessee had purchased agricultural land for a

consideration of Rs.15 lacs and paid registration charges and

other charges of Rs.1.50 lacs. on 1.7.2005. In my opinion,

the above information/material received by the Assessing

Officer was relevant and afforded a live link or nexus to the

formation of the prima facie belief that the income chargeable

to tax had escaped assessment in assessee's hands. I have

already observed here-in-above that in the return of income

filed by the assessee no such investment made or assets

created was disclosed. No one can say that the information

as received by the Assessing Officer was vague or incomplete

in any sense. In the case of Rajat Export Import India Pvt.

Ltd Vs. ITO (2012) 341 ITR 133 (Delhi) wherein the Hon'ble

Delhi High Court observed as under:-

"At the stage wh e n reasons are recorded f or r e o p e n i n g t h e a s s e s s me n t , t h e A s s e s s i n g O f f i c e r is not required to build a f ool proof case f or m a k i n g a d d i t i o n t o t h e a s s e s s e e ' s i n c o me ; a l l that he is required to do at that stage is to f orm a prima f acie opinion or belief that i n c o me has escaped a s s e s s me n t . The relevancy of the material bef ore the Assessing Off icer is to be judged only f rom that perspective and not f rom t h e p e r s p e c t i v e a s t o - wh e t h e r t h e m a t e r i a l i s suff icient or adequate to sustain the addition ultimately. That wi l l be an aspect wh i c h the 9

A s s e s s i n g O f f i c e r wi l l e x a m i n e a n d d e c i d e i n t h e course of the r e a s s e s s me n t proceedings af t e r hearing the assesses in the manner required by l a w. "

8. In the above case, Investigation Wing provided the

information along with cheque number and bank details that

the assessee has taken cheque from entry provider and the

Hon'ble Delhi High Court held that there is reason to believe

prima-facie that income chargeable to tax had escaped

assessment in the hands of the assessee. The Hon'ble High

Court further held that material before the Assessing Officer

was relevant and afforded a live link or nexus to the formation

of the prima facie belief that income chargeable to tax had

escaped assessment in the assessee's hands.

9. In view of the above, I do not see any merit in the

ground No.2 of the appeal stating that the re-opening of the

assessment is bad as the Assessing Officer has no reason to

believe that the income chargeable to tax has escaped

assessment. Accordingly, I dismiss this ground of appeal.

10. As regards ground No.1 of the appeal, Shri Ajay

Jain, appearing for the assessee vehemently argued that the

authorities below have not properly appreciated the facts of

the case and the evidence produced by the assessee. He

further submitted that the donors (assessee's father and two

uncles) have jointly owned 50 acres of agricultural land at

village Panihar Chak Chaudhary Vas in Distt. Hissar and

proof of ownership (fard/jamabandi) of the said land was

produced before the Assessing Officer at the time of 10

assessment. He further submitted that the statements of

three donors were recorded by the Assessing Officer and the

donors have categorically stated that they have made the gift

to the assessee. Shri Ajay Jain, learned counsel for assessee

submitted that the grand-father of the assessee, Shri Amar

Singh died on 13.9.2002. After the death of Shri Amar Singh,

assessee's father Shri Prithvi Singh and his two uncles S/Shri

Mohinder Singh and Umed Singh inherited about 50 acres of

land. Shri Ajay Jain, learned counsel for assessee submitted

that the Assessing Officer as well as the learned CIT (Appeals)

has not properly appreciated the statements of the donors.

He further submitted that the donors had given Rs.12 lacs as

gift to the assessee out of agricultural income. The proof of

ownership of agricultural land was produced before the lower

authorities. According to the learned counsel for assessee,

the best evidence is documentary evidence which was rejected

by the lower authorities without assigning any reason. He,

therefore, submitted that the order of the learned CIT

(Appeals) may be set aside and the claim of the assessee be

accepted. Shri R.K.Gupta, learned D.R for the Revenue, on

the other hand, supported the orders of the authorities below.

It is observed that the Assessing Officer has wrongly stated

that Shri Prithvi Singh, father of the assessee has stated in

his statement that he had no agricultural land in his name.

The relevant para of the statement of Shri Priithvi Singh

(English Version) reads as under:

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Q u e s t i o n : P l e a s e t e l l t h e f i r m n a m e wh e r e y o u s e l l i n g the agriculture produce and from wh e r e you get money, J Far m if any please sub mit the s ame. You have how much agriculture land?

Ans. I have personally never purchased any land. My f ather and my uncles have about 150 acres agricultural land. The agricultural produce sale by m y u n c l e a n d a f te r s e l l i n g t h e a g r i c u l t u r a l p r o d u c e t h e a mo u n t wi l l b e k e p t a t h o m e . W e r i p e K a p a s , Bajr a, Chan a, Jawar e tc. in the ir f ields.

11. From the above, it is clear that Shri Prithvi Singh

has stated that he has personally never purchased

agricultural land. But his father and his uncles had about

150 acres agricultural land. Therefore, the observation made

by the Assessing Officer that Shri Prithvi Singh was not

having any agricultural land in his name is incorrect. As per

jamabandi for the year 2005-06, all the three donors are

recorded as owners in possession of agricultural land

approximately 50 acres at their native village Panihar Chak

Chaudhary Vas in Distt. Hissar. It is claimed that the donors

grow kapas, bajra, chana, jawar, etc. on their agricultural

land. Shri Ajay Jainl learned counsel for assessee submitted

that there are entries in the khasra girdawari to prove that

the donors are growing different crops on their agricultural

land. It appears that the authorities below have not properly

considered the documentary evidence produced by the

assessee. They have rejected the claim of the assessee

merely on the ground that the donors failed to produce 'J'

form to prove the sale of agricultural produce. In my 12

opinion, non production of 'J' form cannot be a ground for

rejection of the explanation of the assessee. Thus considering

the entire facts and circumstances of the present case, I think

it appropriate to set aside the order of the learned CIT

(Appeals) on this issue and remand the matter to the

Assessing Officer with the direction to decide the issue afresh

in accordance with law after affording due and reasonable

opportunity of being heard to the assessee.

12. In the result, the appeal of the assessee is allowed

partly for statistical purposes.

Order pronounced in the open court on this 16th day

of June, 2015.

Sd/-

(H.L.KARWA) VICE PRESIDENT

Dated : 16 t h June, 2015

*Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh