2017 (10) TMI 1374 - AT - Income Tax

Validity of re-opening under section 147 - absence of sanction / approval from the authority prescribed under section 151(2) - Held that - No such approval of Joint CIT has been obtained by the Assessing Officer in terms of section 151(2) before issuance of notice under section 148 of the Act. When the provisions contained under the statute mandate a particular act to be done in a particular manner, it has to be done in that manner only. AO being bound by statutory provisions has to strictly comply with and act in accordance with the relevant statutory provisions. The argument of the Department that absence of approval from Joint CIT would not invalidate the assessment proceedings, since, the approval has been obtained from a higher authority is too specious an argument to be accepted. Obtaining of sanction from a higher authority does not satisfy the statutory mandate. In absence of sanction / approval from the authority prescribed under section 151(2) issue of notice under section 148 is invalid. Consequently, the assessment order passed in pursuance thereto is also invalid. Assessee is confronted with the adverse material in possession of the Assessing Officer, he cannot be expected to rebut them considering the fact that the from very beginning the assessee has consistently stated that he has not paid any on-money over and above the declared sale consideration. The learned Commissioner (Appeals) while deciding the issue has clearly brought out the aforesaid factual aspect in his order. Commissioner (Appeals) that once the assessee has furnished the details of transactions relating to purchase of flat and has stated that he has not paid on-money over and above the declared sale consideration, burden shifts to the AO to falsify assessee s claim by bringing cogent evidence on record. Merely, referring to certain adverse material and statement of third parties, but, without confronting them to the assessee the AO cannot make the addition. No infirmity in the order of the learned Commissioner (Appeals) in deleting the addition. Accordingly, we uphold the order of the learned Commissioner (Appeals) by dismissing the ground raised by the Revenue.

Summary

Issues Involved:
1. Validity of re-opening of assessment under section 147 of the Income-tax Act, 1961.
2. Addition of on-money payment to the income of the assessee.

Issue-wise Detailed Analysis:

1. Validity of Re-opening of Assessment under Section 147:

The assessee filed a return of income on 31st July 2007, declaring a total income of ?7,75,521. The return was initially processed under section 143(1) of the Income-tax Act, 1961 (the Act). Subsequently, based on information from DIT (Inv.)-II, Mumbai, regarding on-money payment of ?79,26,400 to M/s. Crescendo Associates for the purchase of flats, the Assessing Officer re-opened the assessment under section 147 by issuing a notice under section 148 on 30th March 2014.

The assessee challenged the re-opening on two grounds: lack of sanction from the competent authority as required under section 151 of the Act and the failure of the Assessing Officer to dispose of the assessee's objections independently before completing the assessment. The Tribunal found that the Assessing Officer obtained sanction from the CIT instead of the Joint CIT, which was mandatory under section 151(2) for the issuance of notice under section 148. The Tribunal held that the absence of the Joint CIT's approval invalidated the notice under section 148 and consequently, the assessment order.

2. Addition of On-money Payment to the Income of the Assessee:

During the assessment proceedings, the Assessing Officer added ?79,26,400 to the assessee's income, alleging it as on-money payment for the purchase of a flat. The assessee contended that no on-money was paid other than the declared sale consideration of ?1,75,45,800 and provided necessary details to support this claim. The Commissioner (Appeals) deleted the addition, noting that the Assessing Officer did not provide any adverse material or allow cross-examination of the concerned persons whose statements were relied upon.

The Tribunal upheld the Commissioner (Appeals)'s decision, stating that the Assessing Officer failed to provide the adverse material to the assessee and did not allow cross-examination of third parties. The Tribunal emphasized that the burden of proof lies with the Assessing Officer to substantiate the addition with cogent evidence, which was not done in this case.

Conclusion:

The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, declaring the re-opening of assessment invalid due to the lack of proper sanction and upholding the deletion of the addition of on-money payment due to insufficient evidence. The order was pronounced in the open court on 13.10.2017.