2020 (11) TMI 647 - AT - Income Tax

Reopening of assessment u/s 147 - purchase of the land was out of gifts/ loan received from relatives/ friend - Notice merely on the basis of presumption and on the basis of information received - whether any tangible material and live link of concealment of income? - contention of the assessee is that the assessing officer has not applied his mind before reopening of the assessment - HELD THAT - No merit in this contention of the assessee as the material regarding purchase of property was not available before the assessing officer. As the claim of the assessee was before the assessing officer was that he received gift from his family members and friend. In the absence of material evidence supporting such claim the assessing officer was justified in reopening of assessment. Admittedly, in response to notice issued before reopening of the assessment, it was stated that the source of investment was gift and loan from relatives and friend. But no evidence proving creditworthiness of persons was placed before assessing officer. It is noticed that grand-mother, mother, mother-in-law and wife of the assessee from whom he received gift are housewives. They do not have independent source of income except the gift received and savings made out of household expenses. The assessee did not place any evidence proving their independent source of income. Hence, no fault can be found in the action of assessing officer for reopening of assessment. Addition and enhancement made by the Ld. CIT(A) invoking the provision of section 68 - HELD THAT - Looking to the facts of the present case when the assessee is claiming that the source of investment was from the gifts given by the family members and considering the facts that the assessing officer has verified the factum of gifts received by the assessee and partly granted the relief. There was no credible evidence before the Ld. CIT(A) to rebut the findings of assessing officer. The assessee placed documents related to sale of property by father-in-law and mother-in-law - entire evidence could not be brushed aside without making proper verification. The Ld. CIT(A) was not justified enhancing the income. Therefore, we direct the assessing officer to delete the addition. Addition on declaration made in the return - assessee had placed on record all evidences regarding receipt of gifts etc. from the family members - HELD THAT - It is settled law that only the receipt that partake character of income is required to be taxed. If receipt is in the nature of gift which does not partake character of income would certainly be not taxable - issue related to gift/loan received from wife, relatives and friend is restored to the file of the assessing officer for verification of veracity of the claim of the assessee - AO is hereby directed to re-examine the issue of gift and loan of the aforesaid persons. If the claim of the assessee is found correct he would delete the remaining addition made in this respect. The grounds of the assessee are partly allowed in the terms indicated hereinabove. Disallowance of opening balance of capital - As contended on behalf of the assessee that the ld. CIT(A) did not consider opening capital as out of gift from father and other family members - HELD THAT - As the opening balance was part of the enhancement made by the ld. CIT(A) as we have deleted the enhancement. Therefore, this ground of the assesseee s appeal is allowed. Low marriage Expenses addition - HELD THAT - Looking to the facts of the case, we do not see any infirmity into the finding of the authorities below. The addition made on account of low marriage expenses is hereby sustained. Penalty u/s 271(1)(c) - HELD THAT - In this case in quantum appeal substantial addition made by the assessing officer has been deleted and rest of the additions made has been set aside for verification of the assessing officer. Under these facts, we hereby set aside the penalty order and direct the AO to delete penalty in respect of additions deleted and additions in respect of issues which have been set aside to the file of Assessing officer for verification.

Issues Involved:
1. Legality of reopening the assessment under Section 148 of the Income Tax Act.
2. Addition of ?31,10,000 under Section 68 of the Income Tax Act.
3. Addition of ?1,00,000 on account of low marriage expenses.
4. Enhancement of income by ?34,64,150 by the CIT(A).
5. Addition of ?8,43,150 on account of opening capital.
6. Chargeability of interest under Sections 234B and 234C of the Income Tax Act.
7. Penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Legality of Reopening the Assessment Under Section 148:
The appellant challenged the reopening of the case, arguing it was based on mere presumption and lacked tangible material or a live link of concealment of income. The Tribunal found no merit in this contention, stating that the material regarding the purchase of property was not available before the Assessing Officer (AO). The reopening was justified as the AO had sufficient grounds to believe that income chargeable to tax had escaped assessment due to the unexplained investment in property. The Tribunal dismissed the appellant's grounds on this issue.

2. Addition of ?31,10,000 Under Section 68:
The appellant argued that the addition of ?31,10,000 was wrongly maintained by the AO and further enhanced by the CIT(A). The Tribunal noted that the appellant provided ample documentary evidence to establish the identity and creditworthiness of the donors and the genuineness of the transactions. However, the AO did not accept the explanation for certain amounts, leading to the addition. The Tribunal directed the AO to re-examine the issue of gifts and loans received from relatives and friends, and if the claims were found correct, to delete the remaining addition.

3. Addition of ?1,00,000 on Account of Low Marriage Expenses:
The appellant contended that the addition was based on assumptions and lacked evidence. The Tribunal upheld the AO's addition, stating that the appellant failed to provide satisfactory evidence to support the claimed marriage expenses.

4. Enhancement of Income by ?34,64,150 by the CIT(A):
The appellant challenged the enhancement made by the CIT(A), arguing that Section 68 talks about the satisfaction of the AO and not the CIT(A). The Tribunal found that the CIT(A) was not justified in enhancing the income without proper verification and directed the AO to delete the enhancement of ?34,64,150.

5. Addition of ?8,43,150 on Account of Opening Capital:
The appellant argued that the opening capital was part of the enhancement made by the CIT(A) and should not be added again. The Tribunal agreed with the appellant, stating that the opening balance was part of the enhancement and should be deleted.

6. Chargeability of Interest Under Sections 234B and 234C:
The appellant challenged the interest charged under Sections 234B and 234C. The Tribunal noted that the interest is consequential and mandatory, and directed the AO to charge interest as per law on the amount of income that may be finally assessed.

7. Penalty Proceedings Under Section 271(1)(c):
The appellant argued that the penalty was imposed without specific charges and was unjustified. The Tribunal set aside the penalty order, directing the AO to delete the penalty in respect of additions deleted and to re-examine the issues set aside for verification.

Conclusion:
The Tribunal partly allowed the appeals, directing the AO to re-examine certain issues and delete specific additions and penalties. The Tribunal upheld the legality of the reopening of the assessment and the addition on account of low marriage expenses.

← Previous Next →