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2019 (4) TMI 623 - AT - Income TaxValidity of reopening u/s 147 - satisfaction note by the A.O. relates to initiation of proceedings u/s 153C and not u/s 147 - curable defect u/s 292B - HELD THAT - The assumption of jurisdiction would begin from the recording of satisfaction by the A.O. that certain income has escaped assessment pertaining to a particular assessment year. Admittedly, the assessee has not challenged the validity of notice u/s 148. The assessee was duly supplied satisfaction recorded u/s 153C of the Act. The assessee considered it as a satisfaction recorded u/s 148 of the Act and filed return in response thereto. This fact is not controverted by the assessee. It is also a fact that the manner in which the satisfaction u/s 147 is required to be recorded is not prescribed under the law. Therefore, considering the totality of the facts and under the peculiarity of the facts of the present case, in our considered view section 292B comes to rescue of the Assessing Officer. Hence, the grounds of the assessee s appeal is hereby dismissed. Addition based on diary of third party - addition without confronting the same with the assessee and giving opportunity of cross examination - HELD THAT - There is no dispute with regard to the fact that the addition has been made on the basis of the statement of employee of one Shri Nilesh Ajmera recorded in relation to the certain transaction recorded in the diary of Shri Nilesh Ajmera. The assessee was not confronted with the employee of Shri Nilesh Ajmera nor any cross examination of Nilesh Ajmera or his employee was given to the assessee. The addition is based on a diary of a third party. As relying on SHRI PUKHRAJ SONI 2019 (2) TMI 733 - MADHYA PRADESH HIGH COURT evidence in the nature of diary or loose papers which are not maintained in the course of business by the third party would not be a good piece of evidence. Therefore, we are of the view that the assessing officer was not justified in making the addition without confronting the same with the assessee and giving opportunity of cross examination to the assessee. - Decided in favour of assessee.
Issues Involved:
1. Competence of CIT(A) to take a different view from binding SC/HC decisions. 2. Legitimacy of the addition of ?4 lakhs by the AO. 3. Costs of the appeal under section 254(2B) of the IT Act. 4. Validity of proceedings initiated under section 148. 5. Request for interim relief and stay of demand. Detailed Analysis: 1. Competence of CIT(A) to Take a Different View from Binding SC/HC Decisions: The assessee contended that the CIT(A) was not competent to take a view different from the binding decisions of the Supreme Court or High Court. The Tribunal, however, did not specifically address this issue in isolation, as it was intertwined with other grounds of appeal. 2. Legitimacy of the Addition of ?4 Lakhs by the AO: The AO added ?4 lakhs to the assessee's income under section 69D of the Income Tax Act, based on the assertion that Shri Nilesh Ajmera had borrowed money in cash from the assessee. The CIT(A) upheld this addition. The Tribunal, however, found that the addition was made solely on the basis of a third-party statement and entries in a diary not maintained in the regular course of business. The Tribunal referenced the Hon'ble Jurisdictional High Court’s judgment in the case of PCIT-1 Vs. Pukhraj Soni, which held that such evidence (diary or loose papers) is inadmissible. Consequently, the Tribunal directed the AO to delete the addition, allowing this ground of the assessee’s appeal. 3. Costs of the Appeal Under Section 254(2B) of the IT Act: The assessee sought costs of the appeal, arguing that the CIT(A) did not follow the binding decision of the Supreme Court. The Tribunal found no merit in this submission and rejected this ground of the appeal. 4. Validity of Proceedings Initiated Under Section 148: The assessee challenged the validity of the proceedings initiated under section 148, arguing that the AO did not record proper satisfaction for reopening the assessment. The Tribunal examined the satisfaction note and found it related to section 153C, not section 147. The Tribunal noted that the satisfaction required under section 147 was not recorded, which is a condition precedent for issuing a notice under section 148. However, the Tribunal concluded that section 292B of the Act, which allows for certain procedural lapses to be ignored, came to the rescue of the AO. Hence, the Tribunal dismissed this ground of the appeal. 5. Request for Interim Relief and Stay of Demand: The assessee requested interim relief and stay of demand, arguing that the case was covered by a Supreme Court decision and similar stays were granted in previous years. As the Tribunal had already directed the deletion of the ?4 lakhs addition, this ground was rendered infructuous. Conclusion: The appeal was partly allowed. The Tribunal directed the deletion of the ?4 lakhs addition made by the AO, dismissed the grounds related to the validity of proceedings under section 148 and the costs of the appeal, and rendered the request for interim relief and stay of demand infructuous.
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