2017 (3) TMI 114 - HC - Income Tax

Reopening of assessment - accrual of income - unexplained cash received - difference between sale deed and sauda chitthi as received by the assessee in cash - Held that - There is no tangible material available with the AO to form a reasonable belief that the amount of ₹ 18,23,19,011/- has been received by the respective petitioners assessee in cash. As observed herein above, as such there is no material whatsoever with the AO that any amount of sale consideration has been received by the respective petitioners assessee. The formation of opinion by the AO thus seems to be on surmise and conjecture, which cannot be the basis for reopening the assessment of concluded assessment, in exercise of powers under Section 147 of the Income Tax Act. Even as per the statement of Shri Rajesh Vaghani, the sauda chitthi was immediately cancelled. There is no tangible material along with the sauda chitthi that any sale consideration is received by the respective assessee. As observed herein above, subsequently the sale deeds have been executed by the original land owners in favour of one Shri Popat Kakadiya and the original land owners have received full sale consideration of ₹ 56,39,500/- . Under the circumstances, it cannot be said that any income had accrued to the assessee. Once no income had accrued to the assessee, the formation of opinion by the AO that the assessee have received ₹ 18,23,19,011/- in cash has been vitiated and as such, for which, there is no basis. Under the circumstances also, the impugned notice to reopen the assessment for AY 2009-10 deserves to be quashed and set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of the notice under Section 148 of the Income Tax Act.
2. Validity of reopening assessment for AY 2009-10 based on "Sauda Chitthi."
3. Tangibility of material/evidence for reopening assessment.
4. Applicability of the reassessment beyond the four-year period.

Detailed Analysis:

1. Legality of the notice under Section 148 of the Income Tax Act:
The petitioner challenged the notice dated 03.03.2016 under Section 148 of the Income Tax Act, which sought to reopen the assessment for AY 2009-10. The petitioner argued that the notice and reassessment proceedings were "bad in law and contrary to the provision Section 147 of the Act." The reopening was based on a "Sauda Chitthi" found during a search at the premises of a third party, which was allegedly signed by the petitioner. The court noted that the "Sauda Chitthi" was immediately canceled, and no transaction took place between the petitioner and any other person. The court concluded that there was no tangible material available to form a reasonable belief that any amount was received by the petitioner, thus rendering the notice under Section 148 invalid.

2. Validity of reopening assessment for AY 2009-10 based on "Sauda Chitthi":
The "Sauda Chitthi" dated 12.03.2008 indicated a sale consideration of ?18,79,58,511/-, but the actual sale deed executed was for ?56,39,500/-. The revenue argued that the difference was received in cash by the petitioner. However, the court noted that the petitioner was never the owner of the land in question, and the sale deed was executed by the original landowners. The court found that there was no evidence that the petitioner received any sale consideration. The reliance on the "Sauda Chitthi" alone, without corroborative evidence, was insufficient to justify reopening the assessment.

3. Tangibility of material/evidence for reopening assessment:
The court emphasized that there was no tangible material with the AO to form a reasonable belief that the petitioner received ?18,23,19,011/- in cash. The statement of Shri Rajesh Vaghani, from whose possession the "Sauda Chitthi" was found, confirmed that the document was canceled, and no payment was made to the petitioner. The court held that the formation of opinion by the AO was based on "surmise and conjecture," which is not a valid basis for reopening an assessment.

4. Applicability of the reassessment beyond the four-year period:
The petitioner argued that the reopening was beyond the period of four years from the last date of the assessment year and was therefore time-barred. The court noted that there was no failure on the part of the petitioner to disclose any material facts for assessment. The court concluded that in the absence of any tangible material and given the time-barred nature of the reassessment, the notice under Section 148 and the reassessment proceedings were invalid.

Conclusion:
The court quashed and set aside the impugned notices dated 03.03.2016 and the reassessment proceedings for AY 2009-10. The court ruled that there was no tangible material to justify the reopening of the assessment and that the proceedings were based on conjecture and surmise. The petitions were allowed, and the notices under Section 148 of the Income Tax Act were declared invalid.