2018 (8) TMI 1765 - AT - Income Tax

Reopening of assessment - assessee failure to discharge onus to negate cogent evidence found in the form of Banakhat/agreement to sale (executed by the assessee along with other co-owners) as a futile and hollow document - basis of initiation of proceedings under s.147 is a Banakhat found in the course of search proceedings under s.132 in the case of a third party namely Rameshbhai B. Agrawal group - right course in the facts and circumstances as argued could probably be invocation of Section 153C - Held that - The agreement to sale (Banakhat) and consequent final sale deed in our considered opinion provides sound basis for formation of belief towards escapement of income to a person instructed in law. The AO thus has acted within the bounds of law while exercising its power under s.147. Merely because a part of the total sale consideration fall in other assessment year the action of the AO cannot be curtailed to deny the exchequer of its rightful dues. Notwithstanding the technical defect of such nature can be cured under ss.150(1) & 153(6) of the Act as rightly observed on behalf of the Revenue. Thus the first additional ground raised on behalf of the assessee is a damp squib. The additional ground on this score is thus dismissed. The scheme of Act does not suggest that mere search action revealing incrementing material against the person other than searched person would automatically oust the power of the AO over the assessee concerned under S. 147 of the Act. The overriding provisions of S. 153C merely enables the AO to set aside the pending reassessment proceedings and grants primacy to Section 153C of the Act. As noted earlier exercise of power under S. 153C is governed without any stringent fetters of holding reason to believe contemplated u/s 147. Therefore while exercise of overriding power under S. 153C will render S. 147 otiose the converse case of clipping the powers available under S. 147 in search cases per se is not found to be reconcilable to the scheme of the Act. In the light of scheme of the Act narrated above we are of the view that the AO of the assessee (person other than searched person) cannot be compelled to pursue remedy necessarily under s.153C of the Act in exclusion to remedy available to the AO u/s 147. Thus on this count also the action of the AO under s.147 is within the four corners of law and not be faulted. In the instant case where the onerous proceedings under s. 153C of the Act has not been invoked and could not possibly be invoked there was no impediment for initiating proceedings under s.147 of the Act by the AO as discussed in elaboration above. Therefore in Cargo Clearing Agency and other decisions of the co-ordinate bench cited on behalf of the assessee rendered on similar lines do not give rise to any conflict and are of no assistance to the assessee. Consequently the second additional ground is also dismissed. On merits of addition we notice that the CIT(A) has found that Banakhat was notarized and duly signed by the assessee and the other parties. CIT(A) also observed that such Banakhats are typically prepared in the land transactions by the middlemen/investors and the lands are first acquired against consideration and thereafter arranged to be transferred directly from the owner to the actual buyer in the final deed to gain benefit of differential proceeds. The aforesaid narrative appears quite credible in the light of execution of Banakhat. It is for the assessee to demonstrate the circumstances for execution of Banakhat when the proposed seller was not the owner. The assessee is in audacious denial even on the face of tangible documentary evidence towards payment of Rs. 1, 50, 00, 000/- in cash as mentioned in Banakhat. The assessee has also not declared any commission income flowing from such Banakhat if any as propounded. The Banakhat executed was not shown to have been eventually cancelled. Therefore the entire story led on behalf of the assessee is a smoke screen with an intent to mislead the Revenue and deny it of its lawful taxes. Ostensibly the assessee does not seek to come out with clean hands and wishes to play hide and seek. Hence we find apparent plausibility in the reasoning given by the CIT(A). The inference drawn by the CIT(A) is not without legal foundation. The balance of probabilities are skewed against the assessee. The plea raised on behalf of the assessee appears marginal and peripheral when seen in totality - Decided against assessee.

Issues Involved:
1. Validity of invoking provisions of Section 147 read with Section 148 of the Income-tax Act, 1961.
2. Legitimacy of the addition of Rs. 1,22,24,800/- as unexplained investment.
3. Correct assessment year for the addition of Rs. 1,22,24,800/-.
4. Applicability of Section 153C over Section 147 in case of search assessments.

Issue-wise Detailed Analysis:

1. Validity of invoking provisions of Section 147 read with Section 148 of the Income-tax Act, 1961:
The assessee challenged the reopening of the assessment under Section 147, contending that the transaction was not disclosed in the return filed and thus, the assessment was reopened based on additional information received post the original assessment. The Tribunal upheld the reopening, stating that the AO had additional information about the transaction, which was not disclosed during the original assessment. The Tribunal found that the AO was justified in reopening the assessment under Section 147, as the transaction was not investigated during the original proceedings.

2. Legitimacy of the addition of Rs. 1,22,24,800/- as unexplained investment:
The CIT(A) and the Tribunal both upheld the addition made by the AO. The Tribunal noted that the Banakhat (agreement to sale) indicated that the assessee, along with other co-owners, agreed to purchase land for a total consideration of Rs. 6,11,24,000/-, with the assessee's share being Rs. 1,22,24,800/-. The Tribunal found that the assessee failed to provide any evidence to negate the Banakhat or to explain the source of the investment. The Tribunal also noted that the Banakhat was notarized and signed by the parties, and the assessee did not disclose this transaction in the return of income.

3. Correct assessment year for the addition of Rs. 1,22,24,800/-:
The assessee argued that the payments mentioned in the Banakhat were made in the previous assessment year (AY 2011-12) and thus, the addition should not be made in AY 2012-13. The Tribunal dismissed this argument, stating that the AO formed the belief towards escapement of income with reference to the total sale consideration, not just the advance payments. The Tribunal held that the AO was justified in invoking Section 147 for AY 2012-13, as the final sale deed was executed in that year.

4. Applicability of Section 153C over Section 147 in case of search assessments:
The assessee contended that the proceedings should have been initiated under Section 153C instead of Section 147, as the document (Banakhat) was found during a search in a third party's case. The Tribunal rejected this argument, stating that the provisions of Section 153C could not be invoked unless the document seized belonged to the assessee. The Tribunal noted that the document merely pertained to the assessee and thus, the AO was within his rights to invoke Section 147. The Tribunal also highlighted that the legislative amendment to Section 153C, effective from 1-6-2015, allowed the AO to proceed under Section 147 if the document merely pertained to the assessee.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the validity of the reopening of the assessment under Section 147, the addition of Rs. 1,22,24,800/- as unexplained investment, and the assessment year for the addition. The Tribunal also held that the AO was justified in invoking Section 147 instead of Section 153C.

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