Delhi High Court
Commissioner Of Income Tax - 15 ... vs Shri Chintoo Tomar on 23 December, 2014
$~12.
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ INCOME TAX APPEAL NO. 790/2014
Date of decision: 23rd December, 2014
COMMISSIONER OF INCOME TAX - 15 (ERSTWHILE CIT-IX)
..... Appellant
Through Ms. Suruchi Aggarwal, Sr. Standing
Counsel, Mr. Aamir Aziz & Mr. Shashank
Menon, Advocates.
versus
SHRI CHINTOO TOMAR ..... Respondent
Through Nemo.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE V. KAMESWAR RAO
SANJIV KHANNA, J. (ORAL):
The present appeal by the Revenue under Section 260A of the
Income Tax Act, 1961 (Act, for short) arises out of proceedings initiated by
the Assessing Officer by issue of notice under Section 148 of the Act
recording the following reasons:-
"Assessment of Chintoo Tomar for the A.Y. 2007-08 was
completed in summary at an income of Rs.1,99,613/-. It
apparent from the records that the during the financial
year 2006-07, the assessee has earned capital gain of
Rs.2,69,47,709/- out of which Rs.2,55,56885/- was
claimed exempted u/s 54 by investing in residential
property and remaining portion was set off against
brought forward capital loss. It is observed that the
property transferred by the assessee was agriculture land
not a residential property. Therefore, the capital gain
arising out of it is not eligible for exemption u/s 54. The
ITA No. 790/2014 Page 1 of 5
same has resulted in under assessment of taxable income
of Rs.2,55,56,885/-.
In view of the above facts, I have reason to believe that
an income of Rs.2,55,56,885/- has escaped assessment
within the meaning of section 147 of income -tax Act,
1961 thereby making it a fit case for issue of notice under
section 148 of the income-tax Act, 1961."
2. We have carefully scrutinised and read the said reasons, but are
unable to appreciate and comprehend the nexus between the reasons
recorded and the conclusion/inference drawn that income had escaped
assessment.
3. The Assessment Year in question is 2007-08 and the reasons
recorded state that the return filed for the said year was subjected to
summary scrutiny and not assessment under Section 143(3) of the Act,
which is factually correct. It further states that the assessee had earned
capital gains of Rs.2,69,47,709/- out of which Rs.2,55,56,885/- was
claimed as exempt under Section 54 of the Act by investing in residential
property and the remaining portion was set off against brought forward
capital loss. This is the statement of fact recorded by the Assessing Officer
on the basis of the return of income filed. The next portion is relevant.
The Assessing Officer has recorded that the property transferred by the
assessee, i.e. the property sold, was an agricultural land and not a
residential property. This is not correct. It is accepted by the counsel for
the Revenue that the assessee had furnished details of the property sold,
ITA No. 790/2014 Page 2 of 5
which was a farm house located within the municipal limits of the National
Capital Territory of Delhi. These details were available before the reasons
to believe were recorded. In the return of income, the assessee had
disclosed sale consideration of Samalkha property and had also disclosed
having purchased a residential property at Vasant Vihar and 50% share in a
DLF house for claiming exemption under Section 54 of the Act. It is not
understood on what basis the Assessing Officer assumed that Samalkha
property was agricultural land. The property was located in Rajokri in the
National Capital Territory of Delhi and had a built-up area of 3,605 sq. ft.
and was also subjected to property tax. The records reveal that on 21 st
October, 2011, the assessee had informed the Assessing Officer that they
had sold the said property and had enclosed the papers including his wealth
tax return, house tax notice, valuation report, etc. and also the factum that
the property before sale was self occupied. Notice under Section 148 of the
Act is dated 27th March, 2012 and was subsequent to the letter dated 21st
October, 2011. It is clear that the Assessing Officer assumed facts without
even trying to look at the return of income and other papers on record. The
aforesaid assumption was a mere suspicion without any foundation or
footing and, therefore, nothing more than gossip. It is a case of non-
application of mind.
4. The Assessing Officer thereafter has observed that as the land sold
was agricultural land, capital gains arising out of the said sale was not
ITA No. 790/2014 Page 3 of 5
exempt under Section 54 of the Act. The said statement is obviously
incorrect and an erroneous statement. In case the land was agricultural
land, then the sale was not a sale of a capital asset within the meaning of
Section 2(14) of the Act and no capital gains tax would have been payable.
Therefore, the inference of escapement and that tax had not been paid
because investment was made under Section 54 of the Act, is illogical and
irrational.
5. In the present case, the time period stipulated for issue of notice
under Section 143(2) of the Act had expired and, therefore, the Assessing
Officer could have only issued notice under Section 148 of the Act, if the
jurisdictional pre-conditions mentioned in Section 147 of the Act were
satisfied. The Assessing Officer should have formed a prima facie opinion
that income chargeable to tax had escaped assessment and recorded these
reasons in writing. The reasons so recorded should have some basis or
support and not a mere gossip. The reasons cannot be a mere pretence and
should be held in good faith. The expression "reasons to believe"
predicates a belief which is founded and induced by existence of palpable
or cogent material or information. Reason to suspect cannot amount to
reason to believe. As it is the beginning of the inquiry, having a prima facie
opinion is sufficient; and irrebuttable conclusive evidence or finding is not
required. But the prima facie formation of belief should be rational,
coherent and not ex facie incorrect and contrary to what is on record. As
ITA No. 790/2014 Page 4 of 5
noticed in paragraph 3 above, the facts recorded are incorrect. Secondly,
the reasons must have live nexus and must disclose on what basis or
evidence the Assessing Officer feels and has reason to believe that income
chargeable has escaped assessment. The reasons must be germane and
genuine. For grounds elucidated in paragraph 4 above, this requirement
falters. The reasons recorded by the Assessing Officer do not meet and
satisfy the said basic and limited pre-jurisdictional requirement. There is
no rational connection between the reason recorded and the formation of
belief that income had escaped assessment.
6. The Tribunal in the impugned order has observed that the Assessing
Officer did not ultimately make any addition for the said reason as has
been noted and quoted above. It is obvious that the Assessing Officer
could not have proceeded on the basis of the reasons recorded because they
did not show any link with the escapement of income and were also
factually incorrect being contrary to what was apparent from the record at
the initiation stage itself.
The appeal, therefore, has to fail and is accordingly dismissed.
SANJIV KHANNA, J.
V. KAMESWAR RAO, J.
DECEMBER 23, 2014
VKR
