Reopening assessment merely on basis of CIB Report, no tangible material in possession of A.O.
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Case Details: |
Shujaat Ali Khan vs. ITO |
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Appeal No.: |
170/JP/2019 |
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Order pronounced by: |
ITAT Jaipur |
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Date of Order: |
05-01-2021 |
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In favour of: |
Assessee |
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Assessment Year: |
2008-09 |
Source: www.itat.gov.in
Brief Facts:
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The assessee sold a flat as a Power of Attorney (POA) Holder on behalf of one Sh. Nishikant Khopkar for sales consideration of Rs. 7 Lakhs. Since, the assessee was the POA holder, the registry documents were presented by the assessee before sub-registrar. The A.O. got certain CIB information that the assessee has sold a property whose stamp duty value is Rs. 7,17,286/-. |
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The case of assessee was reopened u/s 147 of the Act on the ground of alleged sale of immovable property by the assessee holding him the owner of the said property and the assessment u/s 143(3) was completed making an addition of Rs. 7,17286/- being alleged undisclosed short term capital gain. The assessee preferred an appeal before the ld. CIT(A) who also sustained the findings of the A.O. Thus, the aggrieved assessee is in appeal before the Tribunal. |
Submission of ld. A/R:
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The ground so taken by the A.O. to reopen the assessment is factually incorrect. To sale something in someone’ own right, firstly, the person must own the same and there is no such evidence that the assessee was having the ownership of the said property. Therefore, the reasons so recorded were on wrong presumption and without looking into the correct facts of the case. The ld. A/R relied upon the decision of Shailash Kumar Chaturvedi vs. ITO (ITA No. 1026/JP/2019 order dated 07.07.2020). |
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In the instant case, the reasons were recorded by the A.O. on 25.03.2015 on the basis of CIB information available that a property has been sold by the assessee and on the basis of said information and non-filing of return, it was concluded that the income has escaped the assessment. After recording the reasons, a notice u/s 133(6) dated 03.08.2015 was issued to Sub-Registrar to obtain the copy of Registered Sale Deed of the transaction. It is important to note that the registered sale deed was obtained by the A.O. after recording the reasons, thus, at the time of recording the reasons, there was no tangible material in the hands of the A.O. to have any reason to believe that income has escaped assessment. |
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The CIB Report was not sufficient to draw a conclusion that the income has escaped the assessment. To convert reason to suspect into reason to believe some tangible material was needed. However, the A.O. merely gone by the CIB Report. The ld. A/R relied upon the decision of Hon’ble Delhi High Court in the case of Meenakshi Overseas Pvt. Ltd. vs. ITO (2017) 395 ITR 677 (Delhi) where it was held that the reopening of assessment u/s 147 cannot be invoked casually or mechanically. The reasons to be recorded should be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently during assessment proceedings. |
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The ld. A/R relied upon the decision of Jaipur Bench in the case of M/s Balaji Health Care Pvt. Ltd. vs. ITO (ITA No. 566 & 567/JP/2018)- There is no dispute that the A.O. can reply upon the information received but at the same time, where he is assuming jurisdiction u/s 147, he is required to carry out further examination to make a establish formation of belief that income has escaped, whereas, nothing of this sort has been done. |
Observations & Ruling of the Tribunal:
The CIB report is more of a generic report and not containing exact specifics of immoveable property. It is therefore expected that the A.O. on receipt of such report should carry out further examination before arriving at the prima facie view that the income has escaped assessment and the matter is fit for issuance of notice u/s 148 of the Act. Such examination is to be carried out before issuance of notice u/s 148 as the same is required for the A.O. to form his own independent opinion that the income has escaped assessment. In the instant case, there is no such examination and investigation carried out by the A.O. and infact, only after recording of the reasons, he has sought copy of sale deed from the Sub-Registrar where the assessee has been shown as POA holder of the owner of the property which again raises a question mark on the tangible nature of the CIB report. We therefore find that the A.O. has merely gone by the CIB report and was not even in possession of the sale deed and the exact specifics of the transaction at the time of recording of the reasons and therefore, it is a case where the proceedings are vitiated for want of tangible material in possession of the A.O. and lack of reason to believe which is more in the realm of suspicion rather than formation of opinion that income has escaped the assessment. The reasons thus recorded and/or the documents available on record, therefore, don’t show a link/nexus and relevancy to the opinion formed by the A.O. regarding escapement of income. Consequently, the Hon’ble decided in favour of the assessee and quashed the assessment order.
Read complete order: Shujaat Ali Khan vs. ITO- ITAT Jaipur
Disclaimer: The above article is based upon the ruling of ITAT Jaipur and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article.
