Mere participation in section 147 proceedings not confers jurisdiction upon AO

Attar Singh Vs ITO (ITAT Delhi)

Admittedly, in the instant case, the assessee was regularly filing his return of income at Delhi with his PAN No. linked with the Assessing Officer at Delhi and he was residing at PS, Dwarka-Sector-9, South West District, New Delhi, in government accommodation and was getting salary from the Delhi Police, therefore, merely because the assessee has received the notice, which was sent in his Gurgaon address and has participated in the assessment proceedings will not give jurisdiction to the Assessing Officer at Gurgaon to have jurisdiction over the assessee. So far as the argument of the ld. DR that the assessee has participated in the assessment proceedings and, therefore, has apparently given his consent to the transfer of jurisdiction to the Assessing Officer of Gurgaon is concerned, the same, in our opinion, would not confer jurisdiction upon the Assessing Officer who otherwise was not the Assessing Officer of the assessee. The Hon’ble Bombay High Court in the case of CIT vs. Lalitkumar Bardia (supra) has held that mere participation in proceedings or acquiescence would not confer jurisdiction upon the Assessing Officer who otherwise was not the Assessing Officer of the assessee. The Hon’ble Apex Court in the case of Kanwar Singh Saini (supra) has held that there can be no dispute regarding the settled legal proposition that conferment of jurisdiction is a legislative function and it can neither be conferred with the consent of the party nor by a superior court.

FULL TEXT OF THE ITAT JUDGEMENT

The above batch of cross appeals filed by the respective assessees and the Revenue are directed against the common order dated 20^th February, 2018 of the CIT(A)-1, Gurgaon, relating to assessment year 2011-12.

2. Since common issues are involved in all these appeals, therefore, these were heard together and are being disposed of by this common order, for the sake of convenience.

ITA No.2682/Del/2018 (by the assessee) & ITA No.2913/Del/2018 (by the  Revenue)

3. Facts of the case, in brief, are that the assessee is an individual and derives income from ‘Salary’ and ‘Income from other sources.’ He filed his return of income on 5^th March, 2013, declaring the total income at Rs.1,94,860/- which was revised to Rs.3,81,630/- on 6^th March, 2013. On the basis of the information received that the assessee has entered into a transaction of sale of immovable property during taxguru.in  the F.Y. 2010-11 for Rs.46,85,30,000/- to different parties and the land sold is situated at a distance of less than 8 kms. from the Municipal Corporation limit of Gurgaon for which the land is qualified to be a capital asset u/s 2(14) of the IT Act, 1961 and as the assessee has not shown any capital gain tax in his income-tax return, the Assessing Officer reopened the assessment by recording reasons and issued notice u/s 148 of the IT Act on 25^th March, 2015. The notice was duly served on the assessee. In compliance of the said notice u/s 148, the assessee submitted that the return filed on 6^th February, 2013, vide acknowledgement No.5697256900603 should be considered as return filed in response to notice u/s 148. The assessee also requested for copy of reasons for reopening of the case u/s 148 of the IT Act which was provided to the assessee.

4. The Assessing Officer issued notice u/s 142(1) along with questionnaire requiring the assessee to submit the following information:-

I. Furnish the copy of return, computation of income, balance sheet and profit and loss account of the relevant year and last two years.

II. Furnish details of properties/assets along with the sale/purchase made during the year as under: (a) Sale consideration (b) Mode of receipt of sale consideration (c) Destination of sale consideration. In case any deduction u/s 54, 54B, 54EC, 54F has been claimed, then furnish documentary evidence thereof.

III. Details of bank accounts giving name with complete address of your banks, nature of account with account numbers in which transaction relating to sales/purchase of properties have been made.

5. On the fixed date of hearing, none appeared before the Assessing Officer. However, on 12^th October, 2015, the AR of the assessee raised objection to issue of notice u/s 148 stating that a notice dated 25^th March, 2015 proposing to reopen the assessment for assessment year 2011-12 on 6^th April, 2011 was received and another notice u/s 148 dated 16^th April, 2015 received on 23^rd April, 2015 for the same assessment year. It was submitted that a notice u/s 148 cannot be issued during the pendency of any proceeding till the conclusion of the previous proceeding. Therefore, the notice issued on 16^th April, 2015 is illegal. The Assessing Officer disposed of the various objections raised by the assessee by rejecting the same and issued a show cause notice asking for various details.

6. The Assessing Officer noted that the assessee along with his brothers Sh. Parvinder Kumar and Sh. Devinder Kumar (all sons of Late Sh. Harichand) and others (in total 21 persons, hereafter referred as owners), have entered into a collaboration agreement on 14th Dec 2006 with M/s Bestech India Pvt. Ltd, Gurgaon (hereafter referred as developer). The said collaboration agreement was not registered. As per the said collaboration agreement, the owners were having total of 253 Kanals, 01 Marla of land in revenue village Nakhrola, Gurgaon with their different land holdings. The owners and developer have entered into the said collaboration agreement as the owners were desirous of developing Group Housing complex or commercial/cyber over the said land. As owners were not fully equipped to execute and complete the proposed work of Group housing complex, they entered into this agreement with the developer due to his reputation/ experience /expertise and capability to obtain permission for change of land use and to obtain license from the Government for the development/construction of the said housing complex. The Assessing Officer analysed the various clauses of the collaboration agreement. He noted that the owners issued a special power of attorney in 2006 in favour of one Shri Sunil Satija and Shri Dharmendra Bhandari, Directors of Bestech India Pvt. Ltd., nominees of the company for the purpose of representing before the Government Authorities to get the change of land use, sanction, LOI and permission for construction/development of the housing project on the said land for building, carrying out construction and other legal requirements. The owners through M/s Bestech India Pvt. Ltd., made an application on 04.01.2007 to the Government of Haryana to grant permission to construct a residential project over the said land. The Government of Haryana through the Director, Town & Country Planning has issued LOI and consequently the licence on 31.05.2008 to construct the Group housing complex on the said land. The licence was granted in the names of the land owners in collaboration with Bestech India Pvt. Ltd. subject to the condition that the licensee will not give any advertisement for the sale of space before the approval of layout/building plan. On going through the copy of account of the assessee with M/s Bestech India Pvt. Ltd., it is noticed that he has received a total payment of Rs.15,61,76,676/-. Subsequently, the assessee along with his brothers Shri Devender Singh and Shri Parvinder Kumar, has executed/registered sale deed in respect of 20 Kanals (out of above land) on 28^th February, 2011 for a total consideration of Rs.46,85,30,000/- in favour of M/s Bestech India Pvt. Ltd. In the said sale deed, there is a reference of above collaboration agreement dated 14^th December, 2006 vide which the owners were having share of 35% out of the saleable area. It has further been mentioned that they are now not interested in obtaining duly constructed space of 35% and wanted Bestech to purchase the above land along with all rights accrued to them by virtue of above collaboration.

7. The Assessing Officer observed that as per the statement of the assessee, he filed his return of income u/s 139 on 6^th March, 2013 for assessment year 2011-­12. However, the assessee has not shown any income from the above transaction of receipt of Rs.15,61,76,676/- from M/s Bestech India Pvt. Ltd. on account of sale of space to the extent of his share in the residential group housing project. Therefore, the assessee is liable to explain as to why the income to the tune of Rs.15,61,76,676/- should not be charged to tax. Rejecting the various explanations given by the assessee, the Assessing Officer brought to tax an amount of Rs.15,28,82,122/- under the head ‘Business or profession’ and an amount of Rs.81,59,714/- as accrued long-term capital gain. The relevant observations of the Assessing Officer from para 4 onwards read as under:-

“4. In view of these facts the assessee was asked to explain vide order sheet entry dated 12.10.2015 and letter dated 23.11.2015 as to why income accrued/earned on this transaction should not be assessed as income under the head business/profession. In response of the same, there was no submission made the assessee or the AR.

In view of the detailed facts and reason as above, it is clear that the land owners including the assessee converted their land holding collectibly with the help of developer to develop the same as constructed space (Units/Apartments) where the cost/market of each unit depends on various parameters as discussed above. The land owners were facing the risk and rewards involved w.r.t. the market condition in respect of potential sale consideration of the units (reward in case of appreciation and risk if there is depression in the rates of apartments depending upon market conditions). The owners including the assessee have taken a series of activities like: