2019 (12) TMI 757 - AT - Income Tax

Reopening of assessment u/s 147 - unexplained investment - cash payment by the assessee in respect of the land purchased by them - addition based on seized material - HELD THAT - As perused the statements of Shri Madan Mohan Gupta as produced before us as per directions of the Bench to the Department as well as statements of Shri Shankar Lal Saini and Shri Kanhiya Lal Saini and found that nothing incriminating has been stated in the statement of Shri Madan Mohan Gupta as well as in the statement of Saini brothers about the cash payment by the assessees in respect of the land purchased by them. Therefore, even if the seized material along with the statements of Shri Madan Mohan Gupta and Saini brothers are taken into consideration nothing has come out to be regarded as any incriminating material or fact to reveal any cash payments by the assessees for purchase of lands in question. The addition made by the AO is solely on his own presumption of payment of cash without any tangible material or evidence in support of his decision. When the seized material found from Shri Madan Mohan Gupta as well as other material gathered during post search inquiry has not established any direct or proxy connection with the transaction of purchase of land by the assessees then the assumption and presumption of the AO that the assessee might have paid cash over and above the consideration shown in the sale deeds is only surmises and conjectures. We note that the AO of the Saini brothers and father while framing the assessment U/s 144 r.w.s. 147 of the Act dated 18.03.2015 accepted the sale consideration as recorded in the sale deeds for the purpose of the assessing the capital gain. The AO however, made additions on account of unexplained investment by them on account of cash payment reflected in the seized material. AO has not disturbed the sale consideration received by Saini brothers and father in respect of sale of land to the assessees before us. The said finding of the AO in case of Saini brothers and father demolished the case of the AO presuming the payment of cash by the assessees before us for purchase the land from Saini family members. Accordingly, when the transaction of sale of land and sale consideration is accepted by the AO of the Saini family members as recorded in the sale deeds then the addition made by the AO on account of cash payment by the assessees U/s 69B of the Act has no legs to stand in the absence of any incriminating material but the said addition is merely based on assumption of the AO. Reopening after 4 years - no approval u/s 151 - absence of any valid sanction the notice issued u/s 148 - HELD THAT - As perused the statements of Shri Madan Mohan Gupta as produced before us as per directions of the Bench to the Department as well as statements of Shri Shankar Lal Saini and Shri Kanhiya Lal Saini and found that nothing incriminating has been stated in the statement of Shri Madan Mohan Gupta as well as in the statement of Saini brothers about the cash payment by the assessees in respect of the land purchased by them. Therefore, even if the seized material along with the statements of Shri Madan Mohan Gupta and Saini brothers are taken into consideration nothing has come out to be regarded as any incriminating material or fact to reveal any cash payments by the assessees for purchase of lands in question. The addition made by the AO is solely on his own presumption of payment of cash without any tangible material or evidence in support of his decision. When the seized material found from Shri Madan Mohan Gupta as well as other material gathered during post search inquiry has not established any direct or proxy connection with the transaction of purchase of land by the assessees then the assumption and presumption of the AO that the assessee might have paid cash over and above the consideration shown in the sale deeds is only surmises and conjectures. We note that the Assessing Officer of the Saini brothers and father while framing the assessment U/s 144 r.w.s. 147 of the Act dated 18.03.2015 accepted the sale consideration as recorded in the sale deeds for the purpose of the assessing the capital gain. AO made additions on account of unexplained investment by them on account of cash payment reflected in the seized material. AO has not disturbed the sale consideration received by Saini brothers and father in respect of sale of land to the assessees before us. The said finding of the Assessing Officer in case of Saini brothers and father demolished the case of the AO presuming the payment of cash by the assessee before us for purchase the land from Saini family members. Accordingly, when the transaction of sale of land and sale consideration is accepted by the AO of the Saini family members as recorded in the sale deeds then the addition made by the AO on account of cash payment by the assessees U/s 69B of the Act has no legs to stand in the absence of any incriminating material but the said addition is merely based on assumption of the AO. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening the assessment under Section 148 of the Income Tax Act, 1961.
2. Justification of the addition under Section 69B for unexplained and undisclosed investment in the purchase of immovable properties.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment:

The primary issue raised by the assessee was the validity of reopening the assessment under Section 148 of the Income Tax Act, 1961. The assessee argued that the reopening was illegal, unjustified, arbitrary, and without any basis. The additional ground raised by the assessee contended that the notice under Section 148 was issued without obtaining proper sanction under Section 151, making the action illegal and without jurisdiction.

The Tribunal noted that the original assessment was completed under Section 143(3) of the Act, and the reopening was initiated after four years. According to the proviso to Section 147, no action can be taken unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The Tribunal found that the Assessing Officer (AO) did not allege any failure on the part of the assessee to disclose material facts fully and truly. Therefore, the reopening after four years was not sustainable.

Additionally, the Tribunal observed discrepancies in the approval dates for the sanction under Section 151. The approval granted by the Commissioner of Income Tax (CIT) was dated 14.04.2014, whereas the notice under Section 148 was issued on 20.03.2014. This discrepancy indicated that the approval was not validly obtained before issuing the notice, further invalidating the reopening.

2. Justification of the Addition under Section 69B:

The Revenue's cross-appeal questioned the deletion of the addition under Section 69B made by the AO for unexplained and undisclosed investment in the purchase of immovable properties. The AO had made the addition based on the statements recorded during search and seizure proceedings under Section 132, which indicated on-money payments for land purchases.

The Tribunal examined the seized material and statements of individuals involved in the transactions. It found that the seized material did not contain any incriminating evidence against the assessee regarding the payment of on-money. The statements of the individuals involved also did not reveal any cash payments by the assessee. The AO's addition was based on assumptions and presumptions without any tangible evidence.

The Tribunal noted that the AO of the sellers (Saini family members) accepted the sale consideration recorded in the sale deeds for the purpose of assessing capital gains. The AO did not disturb the sale consideration, which contradicted the presumption of on-money payments by the assessee. Therefore, the addition made by the AO under Section 69B was not sustainable.

Conclusion:

The Tribunal dismissed the Revenue's appeals and upheld the deletion of the addition under Section 69B. It also quashed the reopening of the assessment under Section 148 for the assessee, citing the absence of any failure to disclose material facts and discrepancies in the approval process. The cross-appeals of the assessee were dismissed for not pressing the issue of validity of reopening, except for one case where the appeal was allowed.