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2021 (6) TMI 648 - AT - Income TaxReopening of assessment u/s 147 - unexplained cash payment - Two notices issued u/s 148 - whether the AO can issue second notice u/s 148 and initiate fresh reassessment proceedings before completion/conclusion of proceedings initiated by way of first notice u/s 148 either by way of dropping the first reassessment proceedings or completing the proceedings by passing the reassessment order u/s 147? - HELD THAT - Both the notices u/s 148 have been served on the assessee and the assessee has in turn responded to these two notices individually vide his letter of even date 21.01.2015 and has filed his objections to the reasons so recorded by the Assessing officer. It is therefore not in dispute that both these notices u/s 148 have been issued by the AO and duly served on the assessee and thus, two separate proceedings have been initiated by the AO u/s 147 by virtue of these two separate notices issued u/s 148 carrying separate reasons in respect of independent transactions of purchase of property by the assessee and stating as to why the AO has formed the belief that income has escaped assessment. There is nothing on record that the AO has disposed off the objections so raised by the assessee and dropped the first reassessment proceedings either by way of passing a specific order or even by way of any noting in the ordersheet and in absence thereof, it cannot therefore be presumed that such proceedings have been concluded by the AO - AO has issued a fresh notice u/s 148 basis fresh reasons cannot by implication be read and held as conclusion of first reassessment proceedings. We therefore find that it is a case where pending conclusion of the first reassessment proceedings, fresh reassessment proceedings have been initiated which cannot be sustained in the eyes of law and on this reason alone, the present reassessment proceedings initiated by way of notice u/s 148 dated 28.03.2014 are vitiated and same deserve to be set-aside. Non-disposing off objections raised by the assessee before the AO - The fact that the assessee has raised his objections against such reassessment proceedings is a matter of record and we find that the AO has not disposed off the said objections by way of passing any specific order and has proceeded ahead by way of issuing a show-cause calling for further information/clarification and passing the reassessment order. The said act of the AO is in clear violation of the law declared in case of GKN Driveshaft India 2002 (11) TMI 7 - SUPREME COURT and in case of K.C Mercantile Ltd 2017 (11) TMI 1915 - RAJASTHAN HIGH COURT . Therefore, on account of non-disposing off the objections raised by the assessee, the present proceedings are again vitiated and deserves to be set-aside. Unexplained investment in land - capital gains so offered by assessee s HUF - CIT(A) has deleted the addition on account of capital gains in the hands of the assessee on compulsory acquisition of such land by RIICO holding that the capital gains has been declared and accepted by the Revenue by way of assessment order passed u/s 143(3) in the hand of appellant s HUF and therefore, the same cannot be taxed in the hands of the assessee in his individual capacity. And on perusal of the computation of capital gains of ₹ 87,91,732 so offered by assessee s HUF, we find that the assessee HUF has claimed the aforesaid amount of ₹ 50 lacs towards purchase of land besides other costs and which has been accepted and allowed by the AO while assessing the capital gains in the hands of assessee s HUF. Therefore, where the investment has been claimed and allowed as the cost in the hands of the assessee s HUF, any addition towards the source of such investment, where remain unexplained, can be made in the hands of assessee s HUF and not in his individual capacity. Further, we also note that the assessee has explained the source of such investment by way of will dated 20.03.2003 executed by assessee s father containing the fact that the amount of ₹ 50 lacs has been handed over by his father to him for purchase of land, and the source of such funds is the agriculture income and past savings of his father and which is reasonably demonstrated by the Jamabandi of the land holdings of the his late father. Therefore, even on merits, the addition so made and sustained by the ld CIT(A) is directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings initiated under section 147 of the IT Act, 1961. 2. Addition of ?50,00,000 on account of alleged unexplained cash payment. Detailed Analysis: 1. Validity of Proceedings Initiated under Section 147 of the IT Act, 1961: Assessee's Arguments: - The assessee contended that the Assessing Officer (AO) recorded reasons for reopening the assessment twice, showing uncertainty about which income had escaped assessment. - The AO issued notices under section 148 on 10.03.2014 and 24.03.2014, but failed to dispose of the objections raised by the assessee before proceeding with the reassessment. - The assessee argued that the reopening was based on a change of opinion, which is not permissible. Revenue's Arguments: - The AO received specific information indicating that income had likely escaped assessment. - The AO followed proper procedures, including issuing notices and providing opportunities for the assessee to respond. - The AO's actions were in line with the Supreme Court's decision in GKN Driveshafts (India) Ltd. Vs. ITO. Tribunal's Findings: - The Tribunal noted that two separate proceedings were initiated by the AO under section 147, which is not permissible unless the first reassessment proceedings are concluded. - The Tribunal observed that the AO did not dispose of the objections raised by the assessee, violating the principles laid down in GKN Driveshafts (India) Ltd. Vs. ITO. - The Tribunal held that the reassessment proceedings initiated by the notice dated 28.03.2014 are vitiated and deserve to be set aside. 2. Addition of ?50,00,000 on Account of Alleged Unexplained Cash Payment: Assessee's Arguments: - The assessee's father executed an agreement for purchasing land and handed over ?50,00,000 to the assessee for the transaction. - The payment was made from the agricultural income and past savings of the assessee's father. - The assessee argued that the addition under section 69 for unexplained investment should not be made, as the source of funds was explained. Revenue's Arguments: - The AO made the addition of ?50,00,000, treating it as unexplained income, as the assessee failed to provide satisfactory evidence of the source of funds. - The CIT(A) upheld the addition, stating that mere possession of agricultural land does not prove agricultural income. Tribunal's Findings: - The Tribunal noted that the capital gains from the land transaction were declared and assessed in the hands of the assessee's HUF, and the ?50,00,000 was considered as part of the cost of the land. - The Tribunal found that the source of the ?50,00,000 was reasonably explained by the will executed by the assessee's father and the agricultural income from substantial land holdings. - The Tribunal directed the deletion of the addition of ?50,00,000, as the investment was already accounted for in the HUF's assessment. Conclusion: The Tribunal allowed the appeal of the assessee, setting aside the reassessment proceedings initiated under section 147 and deleting the addition of ?50,00,000 on account of unexplained cash payment. The Tribunal emphasized the importance of following proper procedures and providing adequate opportunities for the assessee to respond to the reassessment proceedings.
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