Jagdish Narayan Sharma Vs. ITO (ITAT Jaipur)
A perusal of sections 246 to 251 of the Act makes it clear that any questions arising out of the assessment orders in an appeal by the assessee can be possible and wide powers are given to the appellate authority, but these powers are circumscribed by the assessment order in the matters arising thereof or a matter arising out of the proceedings. Even the appellate authority has suo motu power to consider the questions arising thereof but there is no provision to go beyond the matter arising out of the proceedings before the assessing authority, more particularly as separate provisions for that are made in the Act. The Tribunal has elaborately discussed the provisions of the Act and the case law on the subject and has rightly come to the conclusion that new sources not mentioned in the return or considered by the ITO are beyond the scope of powers of the AAC.
FULL TEXT OF THE ITAT JUDGMENT
These are appeals filed by the assessee against the respective orders of the ld CIT(A) Alwar for A.Y 2006-07, A.Y 2007-08 and A.Y 2008-09 respectively. All these appeals were heard together and are being disposed off by this consolidated order.
2. Firstly, we shall take up appeal in ITA No. 751/JP/2015 for A.Y 2006-07 against the order of the ld CIT(A)- 3, Jaipur dated 31.08.2015 wherein the assessee has taken the following grounds of appeal:-
“1. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of Rs. 12,93,175/- towards alleged unexplained deposits in the bank account of the assessee. The action of ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 12,93,175/-.
2. In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of ld. AO in making addition of Rs. 1,59,32,450/- although having decided that the entire transaction of alleged sale of land do not pertain to the AY 2006-07 and pertain to the AY 2007-08.
3. (a) In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of the ld. AO in making addition of Long Term Capital Gain at Rs. 23,41,244/-. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 23,41,244/-.
(b) In the facts and circumstances of the case and in law the ld. CIT(A) has erred in confirming the action of the ld. AO in applying the provisions of section 50C of the Income Tax Act, 1961 and adopting the sale consideration at Rs. 23,57,148/- against the declared sale consideration of Rs. 18,46,095/-. The action of the ld. CIT(A) is illegal, unjustified arbitrary and against the facts of the case. Relief may please be granted by accepting the sales consideration at Rs. 18,46,095/- as evidenced by the sale deed.
(c) In the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the action of ld. AO in taxing the capital gain amounting to Rs. 23,41,244/- arising out of sale of land. The land sold was agricultural land, which is not a capital asset as per section 2(14) of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the said addition of Rs. 23,41,244/- and accepting the land being agricultural land and not a capital asset as per section 2(14) of the Income Tax Act, 1961.”
3. The facts of the case are that pursuant to issuance of notice u/s 148, the assessee filed his return of income disclosing agricultural income of Rs. 1,10,000/- and prior to that, no return of income was filed by the assessee. The assessment thereafter was completed u/s 147 read with 143(3) at a total income of Rs. 1,95,71,930/-. On appeal, the assessee got partial relief from the ld CIT(A) and for the additions so sustained by the ld CIT(A), the assessee is in appeal before us.
4. Firstly, we take up the additional ground of appeal which has been taken by the assessee wherein the assessee has challenged the reopening of the assessment u/s 147 of the Act. The ld. AR has submitted that it is a purely legal ground, all relevant facts are available on record and no new facts are required to be evaluated nor any further enquiry is needed. It was submitted that the provisions of law are to be applied on the facts as already available on record. It was submitted that the omission to raise this legal ground while filing the appeal before the Tribunal was inadvertent. In support, the assessee has drawn reliance on the decision of Hon’ble Supreme Court in case of NTPC Ltd. [1998] 229 ITR 383 (SC). Further, the ld. AR submitted that the above ground was taken by the assessee before the ld. CIT(A) and even though this ground was not pressed before the ld. CIT(A), the assessee is not precluded from taking the said legal ground before the Tribunal. In support, reliance was placed on the decision of Hon’ble Punjab and Haryana High Court in the case of Vijay Kumar Jain v. CIT [1975] 99 ITR 349 wherein it was held that by giving up the ground, the assessee could not confirm jurisdiction on the Income Tax Officer where he had none and it was further held in that case that the Tribunal was bound to hear the appeal of the assessee and could not reject the appeal on the ground that certain grounds were not agitated before the appellate ACIT and thus could not be permitted to be agitated before the Tribunal.
5. We find that the additional ground of appeal which has been taken by the assessee wherein the assessee has challenged the reopening of the assessment u/s 147 of the Act is a purely legal ground and the same is admitted following the Hon’ble Supreme Court decision in case of NTPC (supra).
6. Now, coming to the merits of the additional ground and the contentions advanced by the ld AR, it was submitted by the ld. AR that it is a settled legal proposition that the reasons to believe should be based on some relevant material and there should be a live link between the material and the formation of belief that income has escaped assessment. In the present case, from perusal of the reasons recorded by the AO, it is evident that the AO, as per information available i.e. copies of sale deed, formed a belief that income has escaped assessment. It was submitted that the ld. AO recorded the reasons in most arbitrary manner because the sale took place in AY 2007-08 i.e. subsequent year and not in AY 2006-07 i.e the year under consideration. It was submitted that ld. CIT(A) has accepted this fact that the sale took place in AY 2007-08 and has relied on the date of stamp paper, date of execution of documents, date of registry of the document. It was submitted that the documents relied upon by the ld. CIT(A) are different pages of the same sale deed which was available with the ld. AO at the time of framing the reasons to believe. It was submitted that the only reasonable inference that can be drawn is that the ld. AO has recorded the reasons in most casual and carefree manner without applying his mind as ld. AO while recording reasons did not even cared enough to flip pages of only information in form of sale deed which was available with him. It was submitted that complete proceedings are triggered on the basis of sale deed and ld. AO failed to refer to the same. In support, reliance was placed on the decision of Hon’ble Allahabad High Court in case of CIT and another vs. Dr. Ajay Prakash (2014) 89 CCH 085 All. It was further submitted that the other precondition for reopening u/s 147 is contained in section 151 which states that no notice u/s 148 can be issued unless a superior authority is satisfied that the reasons recorded are correct. It was submitted that the superior authority is expected to discharge his duties in a diligent manner after application of his mind. In the present case, from perusal of reasons recorded, the ld. AO has made a patent error as stated above and the ld. JCIT has also granted the sanction to the AO u/s 151 and the only inference which can be drawn is that ld. JCIT has not seen the underlying document on the basis of which reasons are recorded. It was submitted that where he would have seen the sale deed, he would never have granted the sanction for reopening the case of AY 2006-07 as it is very evident that sale took place in AY 2007-08 and it was submitted that the basic requirement of invoking the provisions of section 147 is not complied with and the safeguards were treated lightly by ld. AO as well as ld. JCIT and, therefore, the reopening is bad in law and lacks jurisdiction. In support, reliance was placed on the decision of Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 (SC). Further reliance was placed on the decision of Bombay High Court in the case of Smt. Kalpana Shantilal Haria vs. ACIT. It was further submitted by the AR that in terms of provisions of section 148 of the Act, the impugned notice can be issued only to the assessee and if we analysed the definition of the term “assessee” as defined in section 2(7) of the Act, the appellant does not fall into the cited categories and therefore the notice issued u/s 148 is bad in law. In support, reliance was placed on the provisions of section 142(1) where the legislature has used the term “person” as well as section 153A which again refer to any “person”. It was accordingly submitted that where the legislature has clearly made reference to the term “assessee” u/s 148 of the Act, it is obligatory on the part of the AO to comply with the same and the appellant not falling in the definition of the term “assessee”, the present proceedings are without any legal justification and the same deserves to be quashed.
7. In order to appreciate the contentions so advanced by the ld. AR, it would be relevant to refer to the reasons which have been recorded by the AO before issuance of notice u/s 148 of the Act and the same are reproduced as under:-
“As per information available (copies of sale deed) with this office, the assessee has sold the following properties during the year under consideration.
