2021 (11) TMI 308 - AT - Income Tax

Reopening of assessment u/s 147 - Assumption of jurisdiction by AO u/s 147 - Eligibility of reasons to believe - reliance on extracts of certain uncorroborated excel sheets found in search - As per assessee reopening has been done solely on the basis of information received from DCIT, Central Circle-03, Jaipur and there is no independent application of mind by the Assessing Officer - Addition of cash loans - HELD THAT - As manifest from the reasons so recorded by the AO that he has basically relied upon the information received from the DCIT Central Circle -3, Jaipur and enquiries conducted by the Investigation wing. Further, given that the original assessment has been completed u/s 143(3) and more than four years have elapsed from the end of the impugned assessment and proviso to section 147 applies, with a view to satisfy the additional condition that there should be failure or omission on the part of the assessee in disclosing full and true material facts, he has considered the assessee s assessment records and thereafter, has concluded that there was no necessity to make further inquiries as the information available on record is self-sufficient. Assessing officer has merely relied upon extracts of certain uncorroborated excel sheets, found during the course of search in case of Ramesh Manihar Group. Such excel-sheets do not point out to the fact of assessee having given loans, in cash, to different persons through Ramesh Manihar Group. Nothing concrete is discernible from these excel sheets. AO has failed to corroborate the excel sheets with independent evidences. Unless such corroborative evidences were brought on record, the present additions are not justified. Nowhere in the excelsheets found during the course of search in case of Ramesh Manihar Group and relied upon by the AO, it could be established that PCK as mentioned in those documents stand for the assessee only. No trail of documents or corroborative evidences could be established in this regard. The extracts of the excel sheets on which reliance had been placed were found from the computers of employees of Shri Ramesh Manihar. Those employees were never examined independently by the AO to find out whether PCK as mentioned in such excel sheets represent assessee only. There is no positive confirmation or concrete evidence available with the AO, in the form of acceptance by the parties alleged to have received loans that they have actually received loans, in cash, which was provided by the assessee through Ramesh Manihar Group. CIT(A) has rightly held that relying upon the statement and not providing cross examination to find out any involvement of the person affected by such statement is a gross violation of principles of natural justice which renders such reliance a nullity and if such statement is discarded, there remain no evidence to hold that the appellant has given any such advance to the tune of ₹ 25 crores. Merely extracts of excel sheet do not provide any evidence of the allegation made by the AO against the assessee. Thus, mere fact that there were certain entries found from record of third party is not sufficient to make addition on the ground that assessee had made unexplained investments. CIT(A) has rightly held that though cognizance may be taken in respect of entries by third-party in the assessment of other person so as to initiate inquiry for assessment, yet when there is no finding that such entries are in fact pertaining to such third person only which should be emanating from the entries itself or from the person who has recorded such entry, no cognizance can be taken so as to fasten tax liability on such third person. There is no basis for making the addition in the hands of the assessee made on account of cash loans and consequent interest charged thereon and for the reasons cited supra, we affirm the findings of the ld CIT(A) deleting the said additions.Appeal of assessee allowed. Carry forward of long term capital loss - HELD THAT - In the order passed u/s 147 read with section 143(3), it is an admitted fact that the issue of capital gains didn t arise for consideration during the course of reassessment proceedings and there is no finding which has been recorded by the Assessing Officer disputing the figures as reported by the assessee in his return of income under the head long term capital gains . We therefore find that it is a clear mistake on the part of the Assessing Officer while computing the total income wherein the Long Term Capital Gains amounting to ₹ 50,05,578/- has been inadvertently brought to tax in the hands of the assessee. The Assessing Officer is hereby directed to delete the said amount of ₹ 50,05,578/- and the ground of appeal taken by the assessee is allowed. In the result, appeal of the assessee is allowed.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income Tax Act, 1961.
2. Legality of the notice issued under Section 148 without proper sanction under Section 151.
3. Appropriateness of reopening the assessment under Section 147 instead of Section 153C.
4. Addition of ?25,00,00,000 on account of alleged cash loans.
5. Addition of ?90,58,625 on account of interest on alleged cash loans.
6. Addition of ?50,05,578 on account of Long Term Capital Gains.

Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:
The assessee argued that the reopening of the assessment was based on borrowed satisfaction and solely on the information received from the DCIT, Central Circle-03, Jaipur, without any independent application of mind by the Assessing Officer. The Tribunal found that the reasons recorded by the Assessing Officer were not based on tangible material and lacked a direct nexus or live link between the material and the formation of belief that income had escaped assessment. The Tribunal held that the reopening of assessment did not satisfy the requirements of law and set aside the assumption of jurisdiction under Section 147.

2. Legality of Notice Issued under Section 148 without Proper Sanction under Section 151:
The assessee contended that the notice under Section 148 was issued without obtaining proper sanction under Section 151. The Tribunal noted that the Assessing Officer had recorded reasons and obtained requisite approval before issuing the notice. However, since the reopening itself was found to be invalid, this issue became redundant.

3. Appropriateness of Reopening the Assessment under Section 147 instead of Section 153C:
The Tribunal observed that the information used for reopening the assessment was collected during a search under Section 132 in the case of Ramesh Manihar Group. The Tribunal held that the Assessing Officer should have taken recourse to Section 153C instead of Section 147, as the conditions for invoking Section 153C were not fulfilled. The Tribunal found that the Assessing Officer had not recorded any satisfaction that the seized documents pertained to the assessee, and hence, the invocation of Section 147 was inappropriate.

4. Addition of ?25,00,00,000 on Account of Alleged Cash Loans:
The Revenue argued that the addition was based on seized documents and statements recorded during the search, which indicated that the assessee had advanced cash loans through Ramesh Manihar Group. The Tribunal found that the evidence relied upon by the Assessing Officer, such as extracts from excel sheets and statements, were not corroborated by independent evidence. The Tribunal noted discrepancies in the statements and the lack of opportunity for cross-examination. The Tribunal held that the addition of ?25,00,00,000 was not justified and upheld the CIT(A)'s decision to delete the addition.

5. Addition of ?90,58,625 on Account of Interest on Alleged Cash Loans:
The Tribunal found that the interest addition was consequential to the main addition of ?25,00,00,000. Since the main addition was deleted, the interest addition also did not survive. The Tribunal upheld the CIT(A)'s decision to delete the interest addition.

6. Addition of ?50,05,578 on Account of Long Term Capital Gains:
The assessee contended that the addition of ?50,05,578 was inadvertently included in the income computation form attached to the assessment order and was not part of the reassessment proceedings. The Tribunal found that the Assessing Officer had not given any finding regarding the capital gains in the reassessment order. The Tribunal held that the addition was a clear mistake and directed the Assessing Officer to delete the amount of ?50,05,578.

Conclusion:
The Tribunal allowed the assessee's appeal on the issues of reopening the assessment, the addition of ?25,00,00,000 on account of cash loans, and the addition of ?90,58,625 on account of interest. The Tribunal also directed the deletion of the addition of ?50,05,578 on account of Long Term Capital Gains. The Revenue's appeal was dismissed.

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