The entire issue is in two parts, one is legal issue by challenging the jurisdiction of notice u/s 148 and the jurisdiction of the ld. AO related to calculation of capital gain of the assessee without referring the issue to DVO. The last issue was challenged by the assessee in ground no. 4. After a thoughtful consideration from all four amended grounds, we found that the assessing authority had passed the order beyond his jurisdiction by calculating the cost of acquisition on basis of his own assumption. So, the entire issue is setting aside to the ld. AO and the issue should be referred to DVO for considering the cost of acquisition of the property before computing the total income. Both the revenue and the counsel of the assessee had not made any objection for remanding back the issue before the ld. AO. Needless to say, that the AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidence/explanation submitted by assessee in its defiance shall be admitted by the AO, and adjudicated on merits in accordance with law.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), Bathinda, [in brevity the ld. CIT(A)] bearing appeal no.145, 147, 129 & 146-IT/17-18, date of order 22.02.2019, the order passed u/s 250 (6)of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2010-11. The impugned order was emanated from the order of the ld. Income Tax Officer, Ward-2(1), Bathinda, (in brevity the AO), order passed u/s 143/147 of the Act date of order 3 1.10.2017.
2. The assessee has taken the following grounds which reads as under:
“1) That the Ld. A. O was not having any relevant material before recording reasons for reopening on which a reasonable person could have formed a requisite belief, further had no reasons to believe that such escapement has occurred by reason of either omission or failure on part of the assessee and is a case of borrowed satisfaction and assessment is bad-in-iaw.
2) That the sanction of Principal CIT, Bathinda for re-opening is mechanical in nature, invalid and bad-in-law.
3) That the Ld. A. O recorded reasons for Rs. 40,89,010 as escaped income/ capital gain but amount determined for Addition = Rs. 39,15,026 and the whole addition is liable to be deleted, when the addition is not made as recorded in the reasons.
4) That the CIT(A) has erred in law, as well as, on facts by ignoring that the Id. A. O has wrongly estimated the cost of land and Capital Gain, suo-motu by ignoring section 55(2)(b) and 55A of Income Tax Act, respectively before calculating the Capital Gain and order of A. O require to be set-a-side.”
3. Brief fact of the case is that the assessee’ s case was reopened u/s 147 on basis of information related to sale of land amount to Rs.40,89,010/-. The assessment was completed after calculation of capital gain by allowing the benefit of index cost of acquisition Rs.1,75,127/-. The addition was fixed amount to 39,15,028/-. The assessee challenged both legal and factual grounds before the ld. CIT(A). The ld. CIT(A) upheld the order of the ld. AO.
4. The aggrieved assessee filed an appeal before us.
5. The ld. Counsel of the assessee filed a paper book which is kept in the record. The ld. Counsel first challenged the legal ground related to jurisdiction for issuance of notice u/s 148 by the ld. AO. During hearing the ld. Counsel pointed out the ground nos. 1, 2, 3 and 4 related to jurisdiction for issuance of notice u/s 148. The ld. Counsel had respectfully referred the order of the Hon’ble Supreme Court in the case of Goyanka Lime & Chemicals Ltd. (2015) 64 taxman. 313 (SC) and challenged the satisfaction of the Commissioner related to writing ‘Yes’ against the observation of the ld. AO for approval of reopening u/s 148. He further argued and relied on the Standard Procedure of CBDT dated 10.01.2018 which is binding on the ld. AO. The ld. Counsel has annexed the CBDT Standard Procedure in page no. 246 and 247 of the APB. The relevant paragraph of the Standard Instruction is extracted as below:
“i. 1st paragraph: Reasons recorded will include details of the assessee, nature of business activity, brief details of return of income filed earlier along with details of processing of return! scrutiny assessment! reassessment proceeding.
ii. 2nd paragraph: It will contain details of information and material received! collected! found by the AO subsequent to processing of original! reopened assessment proceedings along with time period! date of collection or receipt of information. In the cases where information is received from the Investigation Wing or any other law enforcement agency, details of letter, brief summary of information along with relevant portion of such report and details of relied upon documents may be mentioned.
iii. 3rd paragraph: It will include analysis of information collected/received/found by the AO – details of parties involved, nature and details of transactions, details of relied upon material/ document and prima facie conclusion.
iv. 4th paragraph: It will contain enquiries made by the AO which must have a ‘live link’ with the information received/collected/found by the AO. The enquiries may include analysis of return of income, audited P&L A/c and balance sheet, assessment folder in cases where assessment have been made u/s 143(3)/ 147 of the Act, information as available on ITBA portal on ITS/ 360 degree profile, enquiry made from other agencies which may include scrutiny of the information available on MCA website, information as available on internet website and details of other enquiries made by the AO through issue of letter u/s 133(6)/ summon u/s 131 from assessee and other relevant parties.
v. 5th paragraph: It will contain summary of findings of the AO on the basis of analysis of information received/collected/found by the AO and the result of follow up enquiries made by the AO.
vi. 5th paragraph: It will include ‘basis of reason to believe’ along with nature and quantum of income escaping The AO will draw link between the findings and reasons to believe and will also give a categorical finding that reason to believe is based on his/her application of mind on the facts and information received/collected/found and it is not a case of change in opinion.
vii. 7th paragraph: It will give detail and instances along .with corroborative material to prove that the assessee had not disclosed full and truly all material facts necessary for his assessment or that the facts of the case are covered by the Explanation 1 to section 147 of the Act. This paragraph shall be included only in the cases where scrutiny assessment has been made and four years from the end of the relevant year had expired.
viii. 8th paragraph: This paragraph is required in cases involving income in relation to any assets (including financial interest in any entity) located outside India which is chargeable to tax and has escaped assessment. This paragrph will include details of assets, nature of income earned in relation to the assets. The AO must highlight that since it is a case of escapement of income in relation to assets located outside India, first Proviso to the section will not apply.”
6. The ld. Counsel further argued that the issue was agitated before the ld. CIT(A) but the ld. CIT(A) had not considered the legal issue in the order.
7. The ld. Sr. DR relied on the order of the revenue authorities. The relevant part of the ld. AO is extracted as below:
“The assessee has not furnished the consideration of purchase rate of this property. So, I apply section 49(1)(iii)(a) for calculating the cost of acquisition of this property market rate as on 1981, the collector rate of the immoveable property for the year 1981 was not available because there was no any collector rate prevailing and with the best of my enquiry, the rate of the property of 1981 are deemed in the calculation @ Rs.5,000/- per bigha and total value of 33-Bigha 12-bisba land works out at Rs. 1,66,000/- with the cost inflation index at 632 of the year 2009-10 rate due to property received on inheritance.”
8. We heard the rival submission and relied on the documents available on the record. The entire issue is in two parts, one is legal issue by challenging the jurisdiction of notice u/s 148 and the jurisdiction of the ld. AO related to calculation of capital gain of the assessee without referring the issue to DVO. The last issue was challenged by the assessee in ground no. 4. After a thoughtful consideration from all four amended grounds, we found that the assessing authority had passed the order beyond his jurisdiction by calculating the cost of acquisition on basis of his own assumption. So, the entire issue is setting aside to the ld. AO and the issue should be referred to DVO for considering the cost of acquisition of the property before computing the total income. Both the revenue and the counsel of the assessee had not made any objection for remanding back the issue before the ld. AO. Needless to say, that the AO shall provide proper and adequate opportunity of being heard to the assessee in set aside proceedings. The evidence/explanation submitted by assessee in its defiance shall be admitted by the AO, and adjudicated on merits in accordance with law. We order accordingly.
Accordingly, the appeal of the assessee is remanded back to the ld. AO as per above terms.
9. In the result, the appeal of the assessee bearing ITA No. 340/Asr/2019 is allowed for statistical purposes.
Order pronounced in the open court on 11.11.2022