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Bhalchandra A. Rakvi (HUF)C/o. Sanjay Rakvi,Flat No.704, Nisarg Co-Housing Society Ltd., Dahisar(W),Mumbai-400 068 Vs. I.T.O. 20(1)(2)Mumbai
October, 12th 2012
             IN THE INCOME TAX APPELLATE TRIBUNAL
                  MUMBAI BENCHES " B ", MUMBAI

     BEFORE SHRI B. R. JAIN, AM AND SHRI VIVEK VARMA, JM

                         ITA No. : 2374/Mum/2011
                         Assessment Year : 2006-07

Bhalchandra A. Rakvi (HUF)                I.T.O. ­ 20(1)(2)
C/o. Sanjay Rakvi,                        Mumbai
Flat No.704, Nisarg Co-Housing
Society Ltd., Dahisar (W),
                                    Vs.
Mumbai-400 068

PAN NO: AADHS 9229 D
         (Appellant)                               (Respondent)

                                           Shri K. Shivaram &
                     Appellant by     :
                                           Shri Parag S. Sarla

                   Respondent by      :    Shri Mohit Jain

                  Date of hearing     :    01.10.2012
          Date of Pronouncement       :    10.10.2012





                                 ORDER


PER B. R. JAIN, A.M. :


      This appeal by the assessee is against the order dated 27.12.2010
of Ld. CIT(A)-31, Mumbai by raising the following grounds in appeal :-

      "Legal
      1. The Ld. CIT(A) failed to appreciate the fact that the assessing
         officer did not have jurisdiction to issue the notice u/s.148 and
         hence reassessment order is bad in law.

      2. Without prejudice to above, the Ld. CIT(A) failed to appreciate the
         fact that no recorded reasons were furnished to the appellant and
         hence reassessment order is bad in law.
                                     2               ITA No :2374/Mum/2011
                                              M/s. Bhalchandra A. Rakvi (HUF)

         ON MERITS
      3. The Ld. CIT(A) failed to appreciate the fact that the long term
         capital gains were not at all taxable in the impugned assessment
         year.
      4. The Ld. CIT(A) erred in confirming the 1/4th long term capital gain
         of 10 plots at `.75,19,012/- instead of `.28,07,693/-, without
         considering the details filed during the course of assessment
         proceedings.

            a. The Ld. CIT(A) erred in taking the 1/5th sale consideration of
                10 plots at `.1,10,00,000/- instead of `.66,50,000/- which
                is as per the agreement. The CIT(A) failed to consider the
                confirmation given by Mr. Sanjay Punamiya.
            b. The Ld. CIT(A) Assessing Officer erred in taking the 1/5th
                cost of acquisition as on 01.04.1981 at `.7,00,400/- (i.e.
                200/- per sq. Mts) instead of `.7,73,100/- as per the
                valuation report filed during the course of assessment
                proceedings.
      5. On merits the appellant denies its liability to the levy of penal
         interest u/s.234A, 234B and 234C."

2.    The assessee has also moved an application dated 02.03.2012 for
admission of additional grounds as under :-

      "Legal Grounds

      1. The Ld. CIT(A) failed to appreciate that the reasons were recorded
         as 26.10.2007 i.e. after the issue of notice u/s.148 dt. 16.10.2007,
         and hence the entire reassessment is bad in law and the order is
         liable to be quashed.
      2. Without prejudice to above, even the reasons recorded are without
         application of mind and without following the due process of law.
      3. Without prejudice to above, the Ld. CIT(A) failed to appreciate the
         fact that the notice u/s.148 was issued by ITO, Ward 2(1), Thane,
         whereas subsequently reassessment was made by ITO-20(1)(2),
         Mumbai. As the Assessing Officer who issued notice u/s.148 did
         not have jurisdiction the reassessment is bad in law and liable to
         be quashed."

3.    Having heard parties on the admission of additional grounds we find
that the ground no. 1 raised in the appeal memo covers the entire
controversy that is sought to be raised through the additional grounds by
                                        3               ITA No :2374/Mum/2011
                                                 M/s. Bhalchandra A. Rakvi (HUF)

the assessee. The same being infructuous are, therefore, not required to
be admitted.     Accordingly, the assessee's application for admission of
additional grounds in appeal stands dismissed.

4.    On the legal ground no. 1 in appeal, the assessee's case is that a
notice u/s.148 of the Income Tax Act, 1961 hereinafter referred to as "the
Act" has been issued by the Assessing Officer on 16.10.2007 without
recording    reasons   thereto.   The       information   sought   through   RTI
application has revealed that the reasons were recorded subsequently on
26.10.2007.     Since the reasons were not recorded prior to issuance of
notice u/s.148 of the Act, the reassessment becomes invalid.

5.    On the other hand, the Ld. Departmental Representative (DR)
produced the assessment record. He fairly admits the fact that the
assessee has obtained information under Right to Information Act with
respect to issuance of notice u/s.148 of the Act and recording of reasons
thereto.    It is also correct that the Assessing Officer did not record the
reasons prior to issuance of notice u/s.148 of the Act in this case.

6.    Heard parties with reference to material on record. The requirement
of mandate as contained       u/s.148(2) of the Act is that the Assessing
Officer shall, before issuing any notice under this section, record his
reasons for doing so.      The Assessing Officer thus is bound to record
reasons for issuance of notice u/s.148(2) of the Act. The language of
section 148(2) does not permit recording of reasons after the date of
issuance of notice. In the case at hand, admittedly the notice u/s.148 has
been issued on 16.10.2007, whereas the reasons have been recorded
subsequently on 26.10.2007, a date subsequent to issuance of notice on
16.10.2007.     This fact has been verified from the assessment record
produced by the Ld. DR before us.           Since the reasons have not been
recorded prior to issuance of notice u/s.148 of the Act, the notice so
                                       4              ITA No :2374/Mum/2011
                                               M/s. Bhalchandra A. Rakvi (HUF)




issued is hereby quashed and assessment so made becomes invalid. This
view finds support from the judgment rendered by the Hon'ble Gujarat
High Court in the case of Rajoo Engineers Ltd. Vs. Dy. CIT [2008] 218 CTR
(Guj) 53. Accordingly, the ground no. 1 raised in appeal by the assessee
stands allowed.

7.      Since the reassessment has been held invalid whatever follows
thereafter shall also become invalid and accordingly it is not considered
necessary to render any decision on the merits of the other grounds raised
in appeal in the light of the judgment rendered by Hon'ble Calcutta High
Court    in   the   case   of   Rawatmal   Harakchand    v.    CIT [1981]   129
ITR 346 (Cal).

8.      In the result, the assessee's appeal stands allowed.

        Order pronounced in the open court on 10.10.2012.


                    Sd/-                                Sd/--

           ( VIVEK VARMA )                        ( B. R. JAIN )
          JUDICIAL MEMBER                     ACCOUNTANT MEMBER
MUMBAI, Dt: 10.10.2012
Copy   forwarded to :
  1.    The Appellant,
  2.    The Respondent,
  3.    The C.I.T.
  4.    CIT (A)
  5.    The DR,     - Bench, ITAT, Mumbai
                     //True Copy//
                                                        BY ORDER


                                                ASSISTANT REGISTRAR
                                            ITAT, Mumbai Benches, Mumbai
Roshani
 
 
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