Case Law Details
Brief Facts
1. The assessee has filed return of income declaring income of Rs. 74,850/- The return was processed under section 143(1)of the Act. Subsequently, AO received some information from Joint Sub-Registrar, based on that information notice under sect ion 148 of the Act was issued on 12.12.2008. Information was as under:
”As per information received from the Joint-Registrar, Ambala Cantt. 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. 5,00,000/- 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. “
2. The assessee has purchased land for a consideration of assessee has purchased land for Rs 15 lacs and has also incurred registration fees of Rs 1.50 Lacs”.
3. Assessee in response to query raised by AO, submitted that the total investment of Rs.16.50 lacs was made out of money received from (a) his father Rs 7 lacs (Rs.5 lacs out of terminal benefit and Rs 2 lacs out of agriculture income received out of joint family property) (b) from his uncles Rs 10 lacs (Rs 5 lacs each from two uncle) out of agriculture income of his uncle
4. AO has added Rs 12 lacs (Rs 2 lacs received from father and Rs 10 received from uncle, out of agriculture income). CIT(A) confirm the action of the AO and thereby rejected the claim of the assessee.
Issue
1. Whether, AO is correct in holding 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.
2. Whether CIT(A) has erred in confirming the addition of Rs 12 lacs without appreciating the facts of the case 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 InHissar .
Assessee’s Contention
1. That the AO has 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.
2. 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.
3. 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.
4. That the donors had given Rs.12 lacs as gift to the assessee out of agricultural income.
Revenue contention
1. 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.
2. The donors failed to produce ‘J’ form which relates to sale of agricultural produce.
ITAT Held that
1. The Hon’ble Supreme Court of India in case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt . Ltd. , 291 ITR 500 (SC), 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 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 sect ion 148 of the Act, the only quest ion 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 format ion of the belief is within the realm of the subjective satisfaction of the Assessing Officer.
2. AO has in possession information about the purchased of 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, which has not been declared by assessee in his return of income. It means that there was credible information with the Assessing Officer The above information/material received by the Assessing Officer was relevant and afforded a live link or nexus to the format ion of the prima facie belief that the income chargeable to tax had escaped assessment in assessee’s hands. 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. Therefore, reopening is valid.
3. 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. Since, as per the Statement recorded by AO it is been observed that that Shri Prithvi Singh (father of the assessee) 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.
4. 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. Donors grow kapas, bajra, chana, jawar , etc. on their agricultural land. There are entries in the khasra girdawari to prove that the donors are growing different crops on their agricultural land.
5. Therefore, it appears that the authorities below have not properly considered the documentary evidence produce by the assessee. And non product ion of ‘J’ form cannot be a ground for reject ion of the explanation of the assessee. Hence, set aside the order of CIT(A) and remanded back the matter to file of the AO to decide the issue afresh.
Analysed by CA Rahul Sureka
