2018 (10) TMI 1599 - AT - Income Tax

Reopening of assessment - addition on account of alleged on money against purchase of flat - addition on document found during search and seizure action u/s 132 in the case of Marvel Group wherein one of the partner had admitted to have collected on money from various flat purchasers - whether course of search should have been initiated proceedings u/s 153C of the Act and not u/s 147/148 - Held that - It is an undisputed fact that the case of assessee was re-opened on the basis of a document found during search and seizure action u/s 132 in the case of Marvel Group wherein one of the partner had admitted to have collected on money from various flat purchasers. As per those details, it was noted that assessee had also paid on money of ₹ 6,65,000/-. Thus, it is seen that the re-opening was on the basis of search carried out at Marvel Group, wherein the documents pertaining to the assessee was found. AO had initiated re-assessment proceedings and had framed the assessment u/s 143(3) r.w.s. 147 of the Act. It is assessee s contention that AO should have proceeded u/s 153C of the Act instead of Sec.147 / 148. As find that identical issue arose in the case of V.L. Khandge and others in 2018 (4) TMI 1607 - ITAT PUNE and others, wherein the Co-ordinate Bench of the Tribunal has held that AO after receipt of information belonging to assessee that was found during the course of search should have been initiated proceedings u/s 153C of the Act and not u/s 147/148. It was further held that in such a situation, the re-assessment proceedings passed u/s 148 of the Act does not stand - decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment framed under section 143(3) read with section 147 of the Income Tax Act.
2. Addition of ?6,65,000 on account of alleged "on money" against the purchase of a flat.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Framed Under Section 143(3) Read with Section 147 of the Income Tax Act:

The assessee originally filed a return of income for the assessment year 2005-06 on 29.07.2005, declaring a total income of ?2,35,420. The case was reopened by issuing a notice under section 148 of the Act on 19.03.2012, and the assessment was framed under section 143(3) read with section 147 on 15.03.2013, determining the total income at ?9,00,420. The reopening was based on documents found during a search and seizure action under section 132 in the case of "Marvel Group," where a partner admitted to collecting "on money" from various flat purchasers. The assessee contended that the correct course of action should have been under section 153C, not sections 147/148, as the proceedings were initiated based on documents found during the search. The Tribunal referred to the decision in the case of V.L. Khandge and others, where it was held that the AO should have initiated proceedings under section 153C when documents pertaining to the assessee were found during a search. The Tribunal concluded that the reassessment proceedings under section 148 were not warranted and held the assessment framed by the AO to be null and void.

2. Addition of ?6,65,000 on Account of Alleged "On Money" Against the Purchase of a Flat:

The addition of ?6,65,000 was made based on documents found during the search at Marvel Group, indicating that the assessee had paid "on money" for the purchase of a flat. The assessee challenged this addition, arguing that the proceedings should have been initiated under section 153C. The Tribunal, having held that the reassessment proceedings under section 148 were not warranted, did not adjudicate the issue on merits, rendering it academic in nature.

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the reassessment order passed under section 148 was null and void. Consequently, the issues raised on merits became academic and were not adjudicated. The appeal of the assessee was allowed, and the assessment framed by the AO was set aside.