2015 (11) TMI 1608 - AT - Income Tax

Validity of reopening of assessment - formation of opinion - Held that - A.O. at the time of issuing notice u/s 148 of the Act is not necessarily to establish the fact that there is an escapement of income. But what is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material which suggests that there is an escapement of income chargeable to tax. Therefore the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department. The CIT(A) has elaborately discussed on the issue and rejected the assesse arguments. Therefore we upheld the reopening of the assessment and reject the ground raised by the assessee. - Decided against assessee Addition towards alleged on money received by the assessee based on third party statement relied upon by the assessing officer - Held that - A.O. is not correct in coming to the conclusion that the on money is exchanged between the parties based on a loose sheet found in the premises of a third person and also admission by a third person. To sustain the addition the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done if so what is the correct value of the property. Further the A.O. did not brought on record any evidence to support his contention to say that there is on money exchanged between the parties. In the absence of proper enquiry and sufficient evidences we find no reason to confirm the addition made by the A.O. Therefore we reverse the CIT(A) order and direct the Assessing Officer to delete the addition. - Decided in favour of assessee

Summary

Issues Involved:
1. Validity of reopening of the assessment.
2. Addition on merits regarding alleged on-money received by the assessee.

Analysis of the Judgment:

1. Validity of Reopening of the Assessment:
The assessee challenged the reopening of the assessment on the grounds that the notice under section 148 of the Income Tax Act, 1961 was issued solely based on information from the investigation wing without any independent inquiry or tangible material. The Tribunal held that the Assessing Officer (A.O.) had the authority under section 147 to reassess income if there was a reason to believe that income had escaped assessment. The A.O.'s belief was based on information from the investigation wing, which is a valid basis for issuing a notice under section 148. The Tribunal upheld the reopening of the assessment, stating that the A.O. is not required to conduct an independent inquiry or gather material to form his opinion, as long as there is some relevant material suggesting escapement of income.

2. Addition on Merits Regarding Alleged On-Money:
The A.O. made an addition of Rs. 2,79,10,000/- as undisclosed income based on seized documents and statements from the partners of M/s. Classique Farms & Estates, which indicated that the assessee received on-money over the declared sale consideration of Rs. 48 lakhs. The assessee denied receiving any money in excess of what was recorded in the sale deed. The Tribunal noted that the seized documents were loose sheets found in the premises of the vendee firm and were not in the handwriting of any partner of the assessee firm. The A.O. relied on third-party statements without corroborative evidence. The Tribunal emphasized that assessments cannot be based on conjectures and surmises or the theory of probability. There must be primary evidence to tax any particular receipt. The Tribunal found that the A.O. failed to bring any reliable and cogent material evidence to support his findings or corroborate the statements of the vendee firm.

The Tribunal referred to several case laws, including the ITAT Hyderabad Bench decision in Smt. K.V. Lakshmi Savitri Devi Vs. ACIT, which held that loose sheets found in third-party premises without corroborative material cannot be used to sustain an addition. The Tribunal also cited the Hon'ble Supreme Court decision in CIT Vs. P.V. Kalyana Sundaram, emphasizing that the burden of proving the actual consideration in property transactions lies with the Revenue, and mere suspicion or conjectures cannot replace material evidence.

The Tribunal concluded that the A.O. did not conduct any independent inquiry about the value of the property or bring on record any evidence to support the contention that on-money was exchanged. Therefore, the addition made by the A.O. was not justified. The Tribunal reversed the CIT(A) order and directed the A.O. to delete the addition.

Conclusion:
The Tribunal upheld the validity of reopening the assessment but found that the addition on merits regarding alleged on-money was not substantiated with sufficient evidence. The Tribunal directed the deletion of the addition made by the A.O. The appeal filed by the assessee was partly allowed.