Mahesh Kumar Gupta Vs. CIT’, 363 ITR 300<\/a> (All) (APB-46-50).<\/p>\n5. It has been contended that during the course of assessment proceedings before the AO vide letter dated 04.03.2015 (APB-51-53), it was specifically submitted before the AO that the alleged escapement of income has been presumed without having any idea about the purchase cost, or the year in which purchase was made and without which, no working of capital gain could have been arrived at by any person of ordinary prudence and reasonable intelligence and, therefore, no allegation can be made that sale of property resulted into capital gain, which capital gain, whether it was long term or short term and which represents income that had escaped assessment. 5 6. It has further been submitted that the Hon’ble jurisdictional Allahabad High Court, in the case of ‘Mahesh Kumar Gupta Vs CIT’, (supra) quashed the notice under section 148, which was issued on the basis of reasons recorded where the reopening was beyond 4 years and there was no allegation in the reasons recorded that the amount of escapement was of more than Rs.1,00,000\/-; that it was duly submitted before the AO that in the facts of the present case, the rationale of the said decision fully applies; that in the case at hand, while recording the reasons, the AO had only mentioned the sale consideration as mentioned in the sale deed alongwith deemed consideration under section 50-C of the Act; that however, in the reasons recorded, nowhere the amount of escapement is quantified and it is also not mentioned that the escapement is of more than Rs.1,00,000\/-; that therefore, the present case stands on a weeker footing, as in the case under consideration, besides non quantification of income, the assessee has wrongly been stated as having not filed income tax return, leading to presumption of escapement on wrong assumption of facts and total non-application of mind.<\/p>\n
7. The ld. Counsel for the assessee states that the said objection was also raised before the AO in similar terms; and that however, the AO as is verifiable from the letter dated 05.03.2015 (APB 54-55), had chosen not to dispute the factual weakness crept in the reasons recorded that the reasons recorded do not meet the requirement of law provided under section 149(1)(b) of the Act.<\/strong><\/p>\n8. It has been pointed out that the ITAT, Agra Bench, in the case of ‘Pataria Vs. ITO’ (APB 56-73), in ITA No. 29\/Agra\/2015, had the occasion to deal with an identical case, where the AO, while recording the reasons, did not specify the quantum of income alleged to have escaped assessment; and that the Agra Bench, following the Judgment of ‘Mahesh Kumar Gupta Vs. CIT’, 363 ITR 300 (All.) (supra) and ‘Amar Nath Agarwal Vs. CIT’, 371 ITR 183 (All), has held the similar notice under section 148 to be null and void-ab-intio.<\/p>\n
9. The ld. DR, on his part, has objected that no return of income was filed and therefore, the AO correctly formed his belief of escapement of income. The ld. DR also objects that no objections were raised by the assessee before the AO challenging the initiation of the reassessment proceedings and that so, she cannot do so now.<\/p>\n
10. To these objections, the ld. Counsel for the assessee has contended that as per the reasons recorded, escapement is assumed on the basis of assumption of the fact, as stated to be based on records available in the Department, that the assessee had not filed her return of income and the assessee, according to the reasons recorded, is not assessed to income tax and therefore, the income as a result of capital gain resulted into escapement of income and to assesses it, issuance of notice under section 148 was considered necessary by the AO. It has been further contended that the very basis leading to the issuance of the notice was shown to be wrong before the AO, as in its first communication made in compliance to the notice dated 20.03.2014, issued under section 148, the assessee intimated the AO vide letter dated 22.04.2014, that the original return stood filed on 30.03.2008 and enclosed copy of the acknowledgment of the return originally filed, in which, long term capital gain was duly shown at Rs. 6,07,538\/- (APB-74). Thus the re-opening is based on incorrect assumption of facts and even the sanction obtained, if any, under section 151 of the Act stood vitiated. This specific objection, raised by the assessee vide letter dated 04.03.2015 (APB-51-53), was not rebutted by the AO in his letter dated 05.03.2015 (APB54-55). Even the notice issued under section 148 of the Act does not mention about any sanction having been obtained by the AO before issuing the notice under section 148 of the Act to the assessee and Grounds of Appeal Nos. 4 & 5 challenge the action of the AO in not allowing the cost of acquisition alongwith improvement, as claimed by the appellant evidenced by the balance sheet(s) filed on an year to year basis with the Department, purely on consideration of suspicion and surmises, without any evidence to negate the claim of the assessee based on the income tax return and accompanying balance sheet. 8 11. The ld. DR has also objected that no computation of income was filed with the return of income and so, there was no disclosure by the assessee, of all facts relevant to the assessment and that since the AO has, in the reasons, stated the escapement to be of more than three lacs rupees, no precise quantification is required. To this, the ld. Counsel for the assessee has responded that these objections do not emanate from the reasons recorded, that the AO has nowhere stated the figure to be that of more than three lacs rupees, and that it is the entire sale consideration which has been wrongly treated by the AO as income having escaped assessment.<\/p>\n
12. Heard. The assessee’s contention regarding her having filed the return of income is correct. The very basis leading to the issuance of the notice was shown to be wrong before the AO, as in its first communication made in compliance to the notice dated 20.03.2014 issued under section 148, the assessee intimated the AO vide letter dated 22.04.2014, that the return stood filed on 30.03.2008. The assessee also enclosed copy of the acknowledgment of the return originally filed, in which, long term capital gain stood shown at Rs. 6,07,538\/-(APB-74). <\/p>\n
This specific objection raised by the appellant vide its letter dated 04.03.2015 (APB-51- 53) was not rebutted by the AO in his letter dated 05.03.2015 (APB54-55). The observation of the assessee having not filed return is erroneous and against the record. So, the Department’s objection in this regard is factually incorrect. It is rejected. Then, as correctly contended, apropos the objection regarding computation of income having not been filed with the return of income, this objection nowhere arises from the reasons recorded. The reasons recorded, it is trite, are to be read as they are, they cannot be improved upon. Further, as available from the reasons, the AO has taken the entire sale consideration as income escaping assessment and there is no quantification.<\/p>\n
13. Apropos the issue regarding the assessee having allegedly not taken any objection to the reassessment proceedings before the AO, the assessee took the following objections (APB 51-53) dated 04.03.2015 before the AO:<\/p>\n
“<\/em>Sir,<\/em> In the captioned case assessment proceedings are in<\/em> progress before your good-self. On the last date of<\/em> hearing assessee was required to show cause as to why<\/em> Long Term Capital Gain (<\/em>‘<\/em>LTCG<\/em>’<\/em>) be not computed at<\/em> amount of Rs. 18,31,965\/- In this connection it is<\/em> respectfully submitted as under:-<\/em><\/p>\n2. That in this case proceedings came to commenced<\/em> by issuance of Notice under section 148 of the Act based<\/em> on reasons that <\/em>“ <\/em>The information has been received<\/em> from Jt. CIT, Range-4, <\/em>Agra<\/em> that Smt Usha Agarwal,95,<\/em> Kaveri Kunj, Phase-2, Kamla Nagar, <\/em>Agra<\/em> sold the<\/em> property on <\/em>02-12-2006<\/em> for Rsl.14,00,000\/- whereas its<\/em> valuation for the purpose of stamp duty was at<\/em> Rs.17,40,000\/-, thus taking into the value according to<\/em> section 50-C of the Act, taking its purchase cost , the net<\/em> capital gain does arise above the taxable limit prevailing<\/em> in the year in question. From the record available in this<\/em> office, the assessee has not submitted its return for the<\/em> year under consideration, Since, the assessee is not<\/em> assessed to tax and therefore the income as a result of<\/em> capital gains resulted into escapement of assessment and<\/em> to assess it, issuance of notice under section 148 is<\/em> considered necessary as it is a case of income escaping<\/em> assessment, under the provision of section 147 of the<\/em> Act<\/em>” <\/em>(emphasis supplied)<\/em><\/p>\n3. From the perusal of the said reasons it is<\/em> abundantly clear that the so called <\/em>‘<\/em>Reasons<\/em>’ <\/em>are no<\/em> ‘<\/em>reasons<\/em>’ <\/em>in the eyes of law and the proceedings are<\/em> initiated for verification based on pure suspicion and<\/em> surmises. Reasons are based on incorrect assumption of<\/em> facts and shows total lack of application of mind and do<\/em> not meet the test of law in this regard. From the perusal<\/em> of the so called "Reasons Recorded" it is revealed that no<\/em> sanction has been sought from the Joint Commissioner of<\/em> Income Tax, Range-4, <\/em>Agra<\/em> as is apparent from the<\/em> reasons recorded.<\/em> 11 4. Even if any sanction was obtained, on the said<\/em> ‘<\/em>reasons<\/em>’ <\/em>before issuing Notice under section 148 it is no<\/em> sanction in the eyes of the law having been sought on the<\/em> basis of wrong facts being presented before the<\/em> sanctioning authority, that assessee filed no Return of<\/em> Income for the year under consideration and working out<\/em> alleged escapement of Income without having any<\/em> slightest idea about the purchase cost or the year in<\/em> which purchase was made and without which no working<\/em> of capital gain could have been arrived by any person of<\/em> ordinary prudence and reasonable intelligence and<\/em> consequently no bonafide allegation can be made that<\/em> Sale<\/em> of property resulted into Capital gain which Capital<\/em> Gain, whether was Long Term or Short Term and which<\/em> represents Income that has escaped assessment.<\/em><\/p>\n5. Hon<\/em>’<\/em>ble <\/em>Allahabad<\/em> High Court in the case of<\/em> Mahesh Kunar Gupta Vs CIT & Ors in Writ Tax No.<\/em> 1086 of 2007 vide Judgement dated <\/em>17-04-2013<\/em> quashed<\/em> Notice under section 148 which was issued on the basis<\/em> of reasons recorded where the reopening was beyond 4<\/em> years and there was no allegation in the reasons<\/em> recorded that amount of escapement is of more than<\/em> Rs.1,00,000\/-.<\/em><\/p>\n6. In the facts of the present case the ration of the<\/em> said decision fully applies as in the case in hands only<\/em> Sale<\/em> consideration as mentioned in the sale deed is<\/em> mentioned alongwith deemed consideration under section<\/em> 50-C but nowhere amount of escapement is quantified<\/em> and it is also not mentioned that escapement is of more<\/em> than Rs.1,00,000\/- , rather the case in hands stands on a<\/em> more weaker footing as in the case under scrutiny wrong<\/em> facts have been mentioned leading to presumption of<\/em> escapement which also vitiates the proceedings. Xerox<\/em> copy of the Judgment is filed herewith.<\/em><\/p>\n7. It may also be mentioned here that the above<\/em> objection since goes to the root of jurisdiction can be<\/em> raised at any stage even at the stage of Hon<\/em>’<\/em>ble ITAT as<\/em> has been held by the Hon<\/em>’<\/em>ble <\/em>Allahabad<\/em> High Court in<\/em> the case of Abdul Majid Vs CIT (2005) 199 CTR (All)<\/em> 364.<\/em>”<\/em><\/p>\n14. The AO disposed of the assessee’s aforementioned objections vide order (APB 54-55) dated 03.03.2015, as follows:<\/p>\n
“<\/em>Please refer to written submission dated 4.03.2015, which has<\/em> been received at very late stage when the assessment<\/em> proceedings are going to be barred by limitation, objecting<\/em> income escaping assessment proceedings u\/s 147 in the case<\/em> cited as above for A.Y. 2007-08.<\/em><\/p>\n2. Going by the said submissions dated 4.3.2015, it is<\/em> considered that the objections raised are not tenable,<\/em> particularly when the information was in possession that the<\/em> assessee has not shown capital gains in term of provisions of<\/em> section 50C of the Act, thus a case of income escaping<\/em> assessment by not disclosing the full facts necessary for<\/em> assessment by the assesses herself, secondly, the reasons were<\/em> property recorded, as per information in possession in the spirit<\/em> of provisions of section 148(2) of the Act and after having prior<\/em> permission\/ approval from the Range-Head , the notice was<\/em> issued well in time, as envisaged under section 149 of the Act.<\/em><\/p>\nAnyhow, the objections raised stating inter alia that the<\/em> proceedings were initiated for verification based on pure<\/em> suspicion and surmises are not correct in the given facts of the<\/em> case, and more so, sufficiency of the reasons recorded could<\/em> not be argued or questioned and more importantly, only one<\/em> condition is required to be satisfied, i.e. existence of reasons to<\/em> believe that income has escaped assessment, which in turn has<\/em> been complied with by recording reasons in writing and<\/em> communicated to the assessee on demand, therefore, the<\/em> assessee’s objections considering incapable of being weighed<\/em> are hereby disposed of accordingly and assessee is directed to<\/em> attend or comply the proceedings and the notices issued, failing<\/em> which the assessment proceedings will be finalized as best<\/em> judgment assessment by invoking the provisions of section 144<\/em> of the Act on the basis of material available on record. Please<\/em> note that the compliance date is fixed for 12.3.2015 and on the<\/em> date fixed no further adjournment will be entertained because<\/em> of time constraints.<\/em>”<\/em><\/p>\n15. Concerning the assessee’s contention that the AO did not specify the quantum of income in the reasons recorded, the assessee took the following Ground No. 2 before the ld. CIT(A):<\/p>\n
“<\/em>2. Because the purported reasons are no reasons in<\/em> the eyes of law in the light of fact that no amount of<\/em> escapement is quantified in the so called reasons<\/em> recorded and as such reopening is bad in law in view of<\/em> the binding decision of Hon’ble <\/em>Allahabad<\/em> High Court in<\/em>