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Judgment
Surya Kant, J.—This order shall dispose of four appeals bearing IT Appeal Nos. 54 to 57 of 2012 out of which IT Appeal Nos. 54 and 55 of 2012 are at the instance of the husband (Arun Kumar Goyal) while IT Appeal Nos. 56 and 57 of 2012 are by his wife (Smt. Parveen Goyal). The assessees have preferred these appeals against the order(s) dt. 17th Nov., 2011 passed by the Tribunal. Since the Tribunal has decided the appellants'' four appeals by assigning identical reasons, we propose to decide these appeals by passing a common order as the facts are interconnected and overlapping. The facts giving rise to these appeals are that the assessees (husband and wife) filed their separate returns of income declaring business income, long-term capital gains and agricultural income for the asst. yr. 2000-01. Subsequently, on the basis of proceedings initiated for the asst. yr. 2003-04, they received notices on 5th May, 2006 under s. 148 of the IT Act, 1961 (in short, ''the Act'') alleging that they had purchased two-third share in SCO Nos. 60-61, Sector 17-D, Chandigarh for a consideration of Rs. 85 lacs as per the ''agreement to sell'' dt. 14th Oct., 1999 but the sale deed was got registered at Rs. 19.20 lacs in the asst. yr. 2003-04 and thus the assessees made undisclosed payment to the tune of Rs. 65.80 lacs to the sellers and thus escaped assessment for the asst. yr. 2000-01 to the extent of undisclosed payment of their respective share.
The case of the assessees was that they had entered into an ''agreement to sell'' dt. 3rd Feb., 2000 in respect of the subject property for a total sale consideration of Rs. 16 lacs and its possession was taken immediately and stood acknowledged in their name on 3rd Feb., 2000 itself i.e., in the asst. yr. 2000-01 which was duly reflected in the returns for the asst. yr. 2001-02 also wherein the rent received from the showroom was shown as income from the house property. The appellant-assessees claimed that earlier the subject property was being managed through one J.D. Gupta who was a ''property dealer'' and had initially negotiated at their instance with the seller(s) and pursuant thereto that the ''agreement to sell'' dt. 14th Oct., 1999 was executed in which the figure of Rs. 85 lacs was fraudulently entered into as a sale consideration by J.D. Gupta for his own/personal benefit. The assessees further claimed that the said ''agreement to sell'' was got signed from them by J.D. Gupta without letting them see the contents of the agreement. The property in question was statedly a resumed property and had no buyer as it was in possession of the Estate Officer. Hence the realizable price of the property was very low. The assessees asserted that the sale consideration of Rs. 85 lacs was a fake entry made by J.D. Gupta in the ''agreement to sell'' dt. 14th Oct., 1999 for his personal gains and without giving any sanctity to the said agreement, the parties in fact bound themselves down with a fresh agreement on 3rd Feb., 2000 depicting the agreed sale consideration of Rs. 16 lacs. The appellant-assessees also explained that though they were in possession of the property and had been receiving its rental income since February, 2000 yet they had to approach the Civil Court and it was pursuant to the decree passed in their favour that a local Commr. was appointed who got the sale deed executed on 13th Feb., 2002 for a sale consideration of Rs. 12.80 lacs. Thereafter only that the said J.D. Gupta lodged a false complaint with the IT authorities which led to the issuance of notices under s. 148 of the Act to the assessees.
The AO vide order dt. 17th March, 2006 for the asst. yr. 2003-04 held that the assessees themselves have accepted the execution of ''agreement to sell'', dt. 14th Oct., 1999 as also the payment of earnest money of Rs. 10 lacs. Their plea regarding second agreement to sell dt. 3rd Feb., 2000 or the agreed sale consideration amounting to Rs. 16 lacs only, was disbelieved concluding that the assessees had made an undisclosed payment of Rs. 65.80 lacs to the sellers and both of them had invested Rs. 43,86,667 out of their undisclosed income. The AO applied the same reasoning while reopening and passing a fresh assessment order dt. 28th Nov., 2007 for the asst. yr. 2000-01. Penalty proceedings under s. 271(1)(c) of the Act were also initiated.
The assessees went in appeal(s) which were dismissed by the CIT(A) relying upon the decision of the Hon''ble Supreme Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd., Still aggrieved, the assessees preferred appeal(s) before the Tribunal but the same have been turned down vide order(s) dt. 17th Nov., 2011 on the strength of the decision cited above.
The short point urged before us on behalf of the appellant-assessees is peripheral to the scope of s. 147 of the Act, especially the phrase "reason to believe" as according to them the assessment has been reopened by the AO on mere suspicion without verifying the correctness of the information received by him nor did he record his satisfaction about correctness of the said information. According to them, the Revenue has failed to discharge its onus in proving that the consideration mentioned in the sale deed dt. 20th Sept., 2002 was less than what was actually agreed to or paid to the sellers and the only evidence relied upon against them is the statement of a third party, namely, J.D. Gupta who had an axe to grind against the assessees due to non-payment of the commission. Since the vendors and vendees have unequivocally denied the receipt or payment of consideration in excess to what was mentioned in the ''agreement to sell'' dt. 3rd Feb., 2000 and there is no other material to establish that consideration of Rs. 85 lacs ever exchanged hands, no case of escaped assessment within the ambit of s. 147 of the Act is made out. The decision in Rajesh Jhaveri''s case (supra) was statedly distinguishable. The appellant-assessees relied upon a decision of the Delhi High Court in Commissioner of Income Tax Vs. Ved Prakash Choudhary, and two decisions of this Court i Commissioner of Income Tax Vs. Smt. Paramjit Kaur, and Paramjit Singh Vs. Income Tax Officer, , to urge that:
(i) where the assessee and the alleged recipient have denied transfer of money between them, no contrary inference could be drawn unless the material on record says otherwise;
(ii) reassessment proceedings cannot be initiated unless the AO on examination of the information received is personally satisfied of escaped income; and
(iii) no oral evidence contrary to the terms of a document is admissible, hence the sale consideration shown in a registered sale deed cannot be doubted or substituted on the basis of oral evidence.
We have heard learned counsel for the appellant-assessees and gone through the record.
Sec. 147 of the Act enables the AO to assess or reassess any income chargeable to tax, if he has reason to believe that such income has escaped assessment. Such a recourse is available to the AO before the expiry of four years from the end of the relevant assessment year if for whatever reason he has reason to believe that the income has escaped assessment. The first proviso to s. 147 further confers jurisdiction on the AO to reopen the assessment if the income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return under s. 139 or in response to a notice issued under s. 142(1) or s. 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Sec. 148(1) contemplates that before making the assessment, reassessment or recomputation under s. 147, the AO shall serve on the assessee a notice requiring him to furnish the prescribed information. Sec. 149 reinforces that no notice under s. 148 shall be issued for the relevant assessment year if four years have elapsed from the end of the relevant assessment year unless the case falls in cls. (b) and (c) of the provision.
The assessment of an income chargeable to tax which has escaped assessment is thus permissible provided that the AO has ''reason to believe'' so.
The expression ''reason to believe'' undoubtedly is different from ''reason to suspect'' and to draw this distinction the former phrase has been construed suggesting that the belief must be that of an honest and reasonable person based upon reasonable grounds instead of mere gossip or rumour. The AO thus cannot have ''reason to believe'' on mere subjective satisfaction when reasons to support such belief are nonexistent. The reason must be held in good faith and cannot be a mere pretence, for the reasons to be assigned by the AO are always open to the judicial review by a Court [Ref.--(i) Calcutta Discount Company Limited Vs. Income Tax Officer, Companies District, I and Another, (ii) Sheo Nath Singh Vs. Appellate Assistant Commissioner of Income Tax, Calcutta, ; and (iii) Income tax Officer, Calcutta and Others Vs. Lakhmani Mewal Das,
With reference to the scope of jurisdiction exercisable under s. 147 as it stood prior to 1st April, 1989, it was ruled that the AO was required to satisfy the twin test that: (i) he has ''reason to believe'' that income, profits or gains chargeable to income tax have escaped assessment; and (ii) that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. [Ref.- S. Ganga Saran and Sons (Pvt.) Ltd., Calcutta Vs. Income Tax Officer and Others,
There is, however, a sea-change after the amendment in s. 147 for determining jurisdictional scope for reassessment of the escaped income. The Hon''ble Supreme Court in Rajesh Jhaveri''s case (supra) has explained and laid down that under the substituted s. 147 "existence of only the first condition suffices. In other words if the AO for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment". It was further held that "so long as the ingredients of s. 147 are fulfilled, the AO is free to initiate proceeding under s. 147 and failure to take steps under s. 143(3) will not render the AO powerless to initiate reassessment proceedings even when intimation under s. 143(1) had been issued".
The expression "reason to believe" thus cannot be restrictively construed to say as if the AO is obligated firstly to finally ascertain the factum of escaped income on the basis of admissible evidence and then only to issue show cause to the assessee. The Supreme Court held that the final outcome of the proceedings initiated under s. 147 is not relevant and what is of relevance is the existence of reasons to make the AO believe that there has been under-assessment of the assesee''s income for a particular year. [Ref.- Central Provinces Manganese Ore Co. Ltd. Vs. I.-T.O., Nagpur,
It is explicit from the post-amendment decisions cited above that once there are reasons for the AO to believe, whether such reasons originate out of the record already scrutinized or otherwise, he shall be within his competence to initiate the reassessment proceedings. The formation of belief by the AO must always be tentative and not a firm or final conclusion as the latter will negate the very object of giving an opportunity of hearing to the assessee as it will amount to post-decisional healing.
There can be no escape in the light of the above-referred interpretation of s. 147 that there existed sufficient reasons for the AO to believe that the undisclosed income in the hands of the appellant-assessees escaped assessment in the year 2000-01. The agreement to sell dt. 14th Nov., 1999 was admittedly signed by both of them. The Notary Public also supported the cause of Revenue regarding execution of the said agreement. J.D. Gupta was cross-examined by the assessees at length but he withstood the test of credibility. The agreement to sell dt. 14th Nov., 1999 referred to four demand drafts which were exactly the same as mentioned in the sale deed dt. 13th Sept., 2002. These very demand drafts appeared in the subsequent agreement to sell dt. 3rd Feb., 2000 also. In the light of this overwhelming material brought on record, the AO was fully justified in disbelieving the subsequent agreement dt. 3rd Feb., 2000. Similarly, the far-fetched plea taken by the assessees that their signatures on the agreement to sell dt. 14th Oct., 1999 were obtained without disclosing its contents to them, cannot be accepted.
The decisions relied upon by the appellants have no bearing on the point in issue. In the case before the Delhi High Court, the AO relied upon a MoU of an agricultural land which was eventually not sold to the assessees and the vendee was not party thereto. That was not a case of escaped assessment under s. 147 of the Act. In Smt. Paramjit Kaur''s case (supra), the action initiated under s. 147 was set aside by the Tribunal holding that the nexus between the material and escapement of income was not established. In Paramjit Singh''s case (supra), oral evidence led to prove ostensible sale consideration contrary to what was mentioned in the document i.e., the sale deed, relied upon by the assessee, was disbelieved by the CIT and the Tribunal and this Court affirmed that view. For the reasons aforestated, these appeals fail and the same are dismissed.