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| DATE: | August 21, 2013 (Date of publication) |
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| Click here to download the judgement (Intezar_Ali_ITO_Harassment.pdf) |
CBDT directed to inquire into conduct of AO in framing assessment with ill-will/ ulterior motive
The assessee sold agricultural land for Rs. 1.20 crore and deposited the cash proceeds in his bank account. He filed a return in which the transaction was disclosed and claimed to be not chargeable to tax. However, as the sale deed showed the transaction at Rs. 22 lakh and because the purchasers claimed that the sale value was only Rs. 22 lakh, the AO treated the difference of Rs. 97.80 lakhs as income from undisclosed sources. The AO admitted that the evidence produced by the assessee to show that the land was in fact worth Rs. 1.20 crore and that he had in fact received the said sum from the purchasers prima facie supported the version of the assessee though he still made the addition. The CIT(A) upheld the stand of the AO though the Tribunal reversed it on the ground that the evidence on record showed that the assessee had offered the entire sale proceeds and that the purchasers had sought to undervalue the land. On appeal by the department to the High Court HELD dismissing the appeal:
The assessee is an honest citizen who deposited the entire amount in the bank and voluntarily filed return. He also made a complaint to the registering authority that the sale deed has been registered at a value much below the amount actually received. The other evidence produced by the assessee was more than sufficient to discharge the burden which the AO had unreasonably placed on the assessee. The ITO did not act in a bonafide manner. He discarded the overwhelming evidence led by the assessee without giving any reasons at all. The assessment was framed only on the ipse dixit of the AO which gives us reason to believe that he had exceeded his authority with some ill will or with ulterior motive. The CBDT should cause an enquiry into the conduct and motives of the ITO in framing the assessment and raising demand of income tax against the assessee.
The stance taken by the AO is prima facie odd; and, by any standard, sounds extremely ridiculous, rather un-worldly. In today’s context of supervening realities, an instance of this type is not-=an-unheard of real life story. That is, despite resistance by an honest seller, at the instance of purchaser who, for his own other ‘personal’ reasons (not only for saving on stamp duty) pressurizes, and seller being faced with an awkward predicament eventually, for practical reasons, obliged to yield / succumb to pressure from purchaser.
If viewed differently, on the facts and circumstances as understood, going by pure common sense, and empathizing with seller, it is the purchaser who should have been subjected by the AO, in order to prove his mettle, to a detailed inquiry and forensic investigation. Interestingly but surprisingly, it has been left unknown as to what really transpired from the side of the Stamp duty authority !
Right decision by Allahabad H C in protecting the fundamental rights of assesses
In this case, I am yet to understand what is the serious mistake the Assessing Officer had committed. The department had made a substantive assessment in the case of the purchaser already. It sale/purchase deed was not made by the Assessing Officer. It was made between the purchaser and seller. This deed is as per the Transfer of Property Act and Indian Stamp Act and is a legal document. It was showing the sale price of the property at Rs.20 Lakhs. From the judgement, it is not clear, at what time the seller made a complaint to the stamp authority regarding the under valuing of the property. It appears that the case came to the Assessing Officer due to the cash deposit in bank and then only the assessee tried to explain the source of the cash. In his return, he has not explained that he had received this money as consideration of sale of agricultural land. Only when the Assessing Officer asked him regarding the source of the cash, he tried to explain it as the unrecorded sale consideration. In my view, it is really unfortunate to blame the Assessing Officer in this case. What he tried is just to protect the interest of the revenue, for which he is employed by the Government. I fully support the Assessing Officer. There is nothing in this case to show that he was having any malafide intention.
Dangerous situation for poor AO. Consider this. I have agricultural land which I sell actually for a consideration of X amount which is also the figure in registered sale deed. I deposit an X + Y amount in my bank. On being asked about the source I give the same story as in above case. I also claim that my land is worth X+Y amount as their is no standard measure for such assets in India. You can only estimate it. The purchaser denies giving X+Y amount and only confirms giving X amount. How the AO assess unexplained cash deposit in book as no document demonstrates the fact of receiving X+Y amount. The fact of sale of land and valuation do not prove the factual of receipt of excess amount of Y amount. Of AO adds this amount he is seen as harassing the assessee and if accepts the evidence then Deptt will haul him under vigilance proceedings. The HC order is obtained by some smart senior advocate and must be contested in SLP before Hon’ble Apex Court where Ld. SG or ASG appear for the Deptt.
Who won in this case? The Govt., Seller or the Purchaser? The seller deposited cash in bank and did not pay tax as it was sale proceeds of agricultural land and not taxable. The purchaser did not accept that he paid the amount so was out of tax net. The Govt lost on two counts,
1) no tax was received by Govt. thanks to the ruling of Hon’ble Allahbad HC (If you remember some time back the Hon’ble Apex Court said some nice things about the functioning of this Hon’ble HC )
2) the money got laundered very cleanly without any effort. People take lot of effort and spend lot of money to do so.
As one is expected to be aware, any tax issue in general, particularly in a case of this kind, in order to be regarded a truly objective view, it must be decided having primary regard to the ‘facts and circumstances’ of the given case.
On that premise, anyone, even if endowed by nature only with the least intelligence or integrity, can rightly afford to and bypass the following:
1. The difference between the two amounts spoken of (i.e. 1.2 crores and 22 lacs) is strikingly quite significant. The noted cavernous gap is so patent that it required to have been gone into in greater details, through a proper intelligent investigation.
2. In any event, the subject matter being agricultural land, just a basic inquiry into the field realities, had it been prudently made, could have been more than sufficient and be of help to the higher authorities in forming at least a tentative opinion as to which of the two amounts could be reasonably believed to be at least close to (the legally accepted concept of) ‘fair market value’. For this purpose, as “valuation of property” is a special area requiring expert knowledge and exposure, the legislature, in its wisdom , has provided the machinery for resort to by AO.
There appears to be no mention; if so, no way to know what exactly are the findings, if any, on the foregoing clinching aspects.
From the court judgment, however, there is no clue as to whether at all even the registering authority himself, responsible for collecting proper stamp duty, considered it necessary / fit, hence went into the above indicated aspects.
In short, having been left clueless, as of now, none can sanely claim to be any wiser. The only solace is that, the law has been benevolent in providing for one more stage of adjudication. Be that as it may, it is anybody’s guess why and how any such issue firstly came to be allowed to be taken to court as a “substantial question of law” within its legal meaning; especially, if as surmised, had not there been brought on record the findings on all the requisite facts and circumstances, depending on which alone court would be in a position to appropriately adjudicate / decide the issue (s).
Over to law experts/luminaries; in the fond hope of eminent elucidation and enlightenment.
Rider >
On a reading of the judgment, in particular the verdict as recorded in paragraph 9, if perceptively viewed, the court, it may have been noted, has dismissed the appeal essentially on the ground that the questions raised by the department, contrary to the stance of the department, are not amenable to adjudication as ‘substantial questions of law’. Does not that not conclusively decide the dispute, with no scope for any further proceedings ?
The High Court judgement may be correct, but how in this case the Court can say that the Assessing Officers actions are malafide and give the comment that the seller of the land as an honest person?
in my view decision given by hon,ble highcourt is correct by following correct interprtation of law
Dear adv. Sharma ji
Would you clarify what is the correct interpretation of law done.
How can u call the assessee honest. Did he pay any tax on the capital gains. He new that as the land is agricultural land he didnot loose anything by informing dept. So he ‘honestly’ informs.
Surprisingly Honorable SC has directed for enquiry into the conduct and motives
of the ITO in framing the assessment ignoring the fact that the assessment framed
was confirmed by CIT(A) and when reversed by ITAT, I T Department gone through
the matter properly and then only filed further appeal in HC.
So why only the ITO is responsible and his Department is not.