2021 (8) TMI 205 - AT - Income Tax

Addition u/s.69 or 68 - assessee has paid on-money towards purchase of property to the seller - HELD THAT - As per the statement given by the assessee before the ld. AO during the course of assessment proceedings, Shri Jignesh Jayantilal Doshi is running his business in the premises which is opposite to the shop of the assessee. Hence, there may be a reasonable belief that assessee or his relatives could have influenced Shri Jignesh Jayantilal Doshi (seller) for not responding to the summons issued by the ld. AO. Preponderance of Probability Theory would come into play in the instant case. Though this observation is made only as a passing remark, we would like to address the entire issue in dispute on merits of the addition in the peculiar facts and circumstances of the instant case instead of addressing on the legal arguments advanced by the ld. AR before us. We would like to make it clear that the decision rendered in this case shall not be considered as a binding precedent for other cases as the same is peculiar to the facts of the instant case alone - DR pointed before us that the seller has conceded the cash portion of ₹ 23,00,000/- as part of sale consideration of property and had paid capital gains tax in his returns. Hence, it could be reasonably inferred that the said cash of ₹ 23,00,000/- represents on money payments made by the assessee to the seller for purchase of property. Addition towards unexplained cash payments should be made in the hands of the assessee. Admittedly, the assessee Shri Navin C Punjani is only owner of 1/3rd share in the property purchased. This fact is not disputed at all. Hence, any addition that could be made in the hands of the assessee on account of unexplained investment made on purchase of property could only be to the extent of 1/3rd share and not 1/2 share as made by the Revenue in the instant case. We direct the ld. AO accordingly. Accordingly, the grounds raised by the assessee in the case of Shri Navin C Punjani are partly allowed. Reopening of assessment u/s 147 - Unexplained investment u/s.69 - Recorded by the ld. AO in the case of Ms. Nisha N Punjani nowhere mentions that the ld. AO while recording reasons had a reasonable belief that her income had escaped assessment. Hence no addition per se could be made in the hands of Ms. Nisha N Punjani - we hold that the reasons recorded by the ld. AO for reopening the assessment itself does not contemplate any formation of belief to conclude that income of Ms. Nisha N Punjani had escaped assessment. Accordingly, re-assessment made herein in the hands of Ms. Nisha N Punjani is hereby quashed. In the result, appeal of the assessee is allowed.

Summary

Issues Involved:
1. Justification of addition of ?11,50,000/- on account of unexplained investment under Section 69 of the Income Tax Act.
2. Validity of reopening the assessment under Section 148 of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Justification of Addition of ?11,50,000/- on Account of Unexplained Investment under Section 69 of the Income Tax Act:

The Tribunal examined whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in confirming the addition of ?11,50,000/- as unexplained investment under Section 69 of the Income Tax Act in the case of the assessee. The assessee had originally filed a return declaring a total income of ?2,25,880/- for the assessment year 2013-14. The assessment was reopened based on information from the Deputy Director of Income Tax (Investigation) [DDIT(Inv.)], stating that during the recording of a statement under Section 131, it was confirmed that the assessee had paid ?23,00,000/- in cash over and above the cheque amount of ?19,75,000/- for the purchase of a shop. The assessee denied making any cash payments and sought cross-examination of the individual who made the statement, which was not provided.

The Tribunal noted that the cash of ?23,00,000/- was seized from the seller, Shri Jignesh Jayantilal Doshi, and the statement from the seller was used to make the addition without corroborative evidence linking the assessee to the cash payment. The Tribunal emphasized that the opportunity for cross-examination was not provided to the assessee, and the statement from the seller was not furnished to the assessee. The Tribunal held that any addition should be limited to the assessee's 1/3rd share in the property, not 1/2 share as made by the Revenue. Therefore, the addition was partly allowed.

2. Validity of Reopening the Assessment under Section 148 of the Income Tax Act:

In the case of Ms. Nisha Navin Punjani, the Tribunal examined the validity of reopening the assessment under Section 148. The reasons recorded for reopening mentioned that the income of ?23,00,000/- had escaped assessment in the hands of Shri Navin C. Punjani, not Ms. Nisha Navin Punjani. The Tribunal found that the reasons recorded did not indicate a reasonable belief that Ms. Nisha Navin Punjani's income had escaped assessment. The Tribunal relied on the decision of the Hon'ble Jurisdictional High Court in the case of Hindustan Lever Ltd. vs. ITO, which emphasized that the reasons recorded by the Assessing Officer must be clear, unambiguous, and disclose the mind of the Assessing Officer.

The Tribunal concluded that the reasons recorded for reopening the assessment did not contemplate any formation of belief that Ms. Nisha Navin Punjani's income had escaped assessment. Therefore, the reassessment made in her case was quashed, and the appeal was allowed.

Conclusion:

The appeal of Shri Navin C. Punjani was partly allowed, limiting the addition to his 1/3rd share in the property. The appeal of Ms. Nisha Navin Punjani was allowed, and the reassessment was quashed due to the invalidity of the reasons recorded for reopening the assessment. The Tribunal's decision was pronounced on 20/07/2021.