2016 (3) TMI 1388 - AT - Income Tax

Validity of reopening of assessment - assumption of jurisdiction by the Id AO u/s 147 - Addition towards income from house property - HELD THAT - No mention of the Annexure or reference to any material found during the course of search or any statement recorded of the seller or the broker in reasons recorded by AO for reopening of assessment It is also not mentioned that on which date the alleged cash have been paid by the assessee and to whom. It is also not available that from whose possession this information was found and what he had to say on these details. AO according to material available before us shows that based on the information received from the Investigation Wing notice u/s 148 has been issued. According to us the aforesaid reasons do not satisfy the requirement of section 147 as information referred to is very vague and without reference to any documents or statement. Even the Annexure which has been reproduced is not mentioned in the reasons, even otherwise this annexure cannot be considered as a material or evidence with prima facie shows or establishes a nexus which shows escapement of income. Further it is apparent that the AO did not apply his own mind to the information and examined either the builder or the broker on the alleged cash payment but accepted the information in a mechanical manner. Reopening is improper and illegal and therefore cannot survive. - Decided in favour of assessee.

Summary

Issues:
1. Reopening and addition of unaccounted payment for property
2. Addition towards income from house property
3. Validity of interest charged under section 234B

Issue 1 - Reopening and Addition of Unaccounted Payment for Property:
The assessee, an HUF, filed its return showing income from house property. The AO received information about unaccounted cash payment made by the assessee for property purchase. A notice u/s 148 was issued, and the AO added the unaccounted cash payment to the income. The CIT(A) confirmed the reopening and addition. The assessee contended that no cash payment was made, and the reopening was invalid. The AO's reasons were based on information from the Investigation Wing. The Tribunal found the information vague and scanty, lacking material evidence. The AO did not apply his mind or examine the builder or broker. Citing precedents, the Tribunal held the reopening improper and illegal, allowing the appeal on this ground.

Issue 2 - Addition Towards Income from House Property:
The appeal also challenged the addition towards income from house property. The Tribunal allowed this ground based on the improper reopening of assessment and the lack of material evidence against the assessee. The addition of unaccounted payment was linked to this issue, and since the reopening was deemed improper, the addition was dismissed.

Issue 3 - Validity of Interest Charged under Section 234B:
Grounds 4 and 5 of the appeal pertained to interest charged under section 234B. Ground 4 was not pressed, and ground 5 was against the interest charged. The Tribunal dismissed both these grounds as consequential. The appeal was partly allowed based on the findings related to the reopening and addition of unaccounted payment for property.

In conclusion, the Tribunal found the reopening of assessment and the subsequent addition of unaccounted payment to be improper and lacking in material evidence. The appeal was allowed on these grounds, leading to the partial allowance of the assessee's appeal.