In the Case, Commissioner of Income Tax vs Ram Kumar Duhan, Punjab and Haryana High Court jointly held that the Assessing Officer (AO) has no power to review original assessment without any fresh tangible material.
The assessee in the instant case is an individual and being a farmer has filed his return of income for the relevant assessment year declared his income from salary. During the assessment proceedings the Assessing Officer (AO) noticed that the Assessee had purchased an immovable property situated in Maharashtra and the sales deed was in the name of the Assessee and the Assessee was asked to show the source of income invested in the property.
In response counsel for the Assessee Advocate Inderpreet Singh submitted that a company was incorporated during the year 2006 with three promoter directors and one of them being Mr Niwas Thakur. The Assessee joined the Company during the year 2007. The Company purchased certain lands in the name of Niwas Thakur. During the year the Company wanted to convert the agricultural land to non-agricultural land as it was engaged in the business of developing and residential township.
As per the laws in the state of Maharashtra, the transfer of land in the name of a Company was only possible, if the land was in the name of at least of its two Directors who had farmer status. Only for this purpose some of the land in the name of Niwas Thakur was transferred in the name of Assessee without any consideration. But the AO refused to accept the contents of the Assessee and he made an addition of Rs. 1,13,02,800 to the income of the Assessee on account of investment made to purchase land from the undisclosed source of income.
On appeal, CIT(A) and Income Tax Appellate Tribunal (ITAT) granted relief to the Assessee by deleting the addition made by the AO. Aggrieved by the order of the lower authorities the Revenue approached the Court on further appeal.
After considering the facts and circumstances of the issue, High Court Chief Justice S.J.Vazifdar and Justice Avneesh Jhingan observed that “that transfer of land in favour of the Assessee was to facilitate the conversion of agricultural land to non-agricultural land as per the state laws. The land though in the name of the Assessee was shown in the balance sheet of the company and the Memorandum of Association entered between the company and its Directors was that property will be in name of Directors but it will remain the property of the Company. Even the AO in its remand report admitted that the sale proceeds were received by the Company and the assessment of the company was framed under Section 143 (3) of the Income Tax Act and the AO has no power to review the original assessment without any fresh tangible material.”
The Court further observed that “question raised by the Revenue in the appeal is a question of fact and not a question of law, much less a substantial question of law. Under the jurisdiction of Section 260-A of the Act cannot re-appreciate the evidence, especially when no perversity is established”.