2022 (9) TMI 574 - AT - Income Tax

Reopening of assessment u/s 147 - Notice beyond period of four years - undisclosed investment u/s.69 - reliance on statement recorded u/s. 132 - payments in form of on money were made by various purchasers/buyers - Directors and promotors of the group have agreed to receive on-money from the purchasers of the flat - assessee submitted the details of flat purchased from M/s. Crescendo Associates a concern of Hiranandani Group - HELD THAT - As reasons recorded and supplied by the Assessing Officer exactly similar and the reasons recorded are that in the case of Hiranandani Group search case, the Directors and promotors of the group have agreed to receive on-money from the purchasers of the flat. Therefore, the additions were made merely relying on the finding in the case and Assessing Officer completed the assessment without giving opportunity to the assessee for cross examination and not shared with the informations relied upon to make additions. We observe from the submissions of the parties that the case of the assessee was reopened mainly on the basis of information acquired in the case of Hiranandani group case wherein the director and promotor of the company had agreed that they have received on-money from the purchasers of the flat. In the case of assessee it is fact on record that the assessment was reopened after the expiry of four years and completed assessment u/s. 143(3) r.w.s. 153A. Considered the facts on record and facts in the said case Anil Jaggi 2018 (2) TMI 51 - ITAT MUMBAI are exactly similar and the conclusion reached therein by the Coordinate Bench are respectfully followed and accordingly, the assessment made u/s. 147 r.w.s. 143(3) of the Act is bad in law. Following the above facts on record we allow the appeal filed by the assessee.

Issues Involved:
1. Validity of reopening the assessment under Section 147 of the Income-tax Act, 1961.
2. Addition of undisclosed income as "on-money" paid for the purchase of flats.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment under Section 147:

The appeals concern the reopening of assessments under Section 147 of the Income-tax Act, 1961, for the Assessment Year 2007-08. The reopening was based on information obtained during a search on the Hiranandani Group, which indicated that the assessee had paid "on-money" for purchasing flats. The initial assessment was completed under Section 143(3) read with Section 153A. The case was reopened with the reason that income chargeable to tax had escaped assessment due to the assessee's failure to furnish correct particulars. The assessee challenged the reopening on several grounds, including the lack of evidence and proper approval for the notice under Section 148.

The Tribunal observed that the reopening was primarily based on information from the Hiranandani Group's search, where directors admitted to receiving "on-money." The reopening occurred after four years from the end of the relevant assessment year. The Tribunal referred to the case of Anil Jaggi v. ACIT, where it was held that reopening after four years requires a clear mention of the assessee's failure to fully and truly disclose all material facts necessary for assessment. The Tribunal noted that the "reasons to believe" recorded by the Assessing Officer did not mention such failure by the assessee. Following the precedent set by the Bombay High Court in Nirmal Bang Securities (P) Ltd. v. ACIT, the Tribunal concluded that the reopening was invalid due to the absence of this crucial allegation.

2. Addition of Undisclosed Income as "On-Money":

The second issue involved the addition of Rs. 37.5 lakhs as undisclosed income under Section 69, based on the alleged payment of "on-money" for purchasing flats. The Assessing Officer relied on a pen drive seized during the Hiranandani Group's search, which contained details of "on-money" transactions. The assessee denied paying any "on-money" and provided bank statements and affidavits to support this claim.

The Tribunal noted that the Assessing Officer's addition was based on uncorroborated entries in the pen drive, which lacked details such as the date, mode of receipt, and the person who made the entry. The Tribunal referred to the case of Anil Jaggi v. ACIT, where it was held that mere entries in a pen drive, without corroborative evidence, are insufficient to justify the addition of undisclosed income. The Tribunal emphasized that the material relied upon must conclusively prove the suppression of investment and payment of "on-money."

The Tribunal observed that the consideration paid by the assessee for the flats was higher than the market value fixed by the stamp valuation authority, further supporting the assessee's claim. The Tribunal concluded that the adverse inferences drawn by the Assessing Officer were based on premature observations and lacked clinching evidence. Therefore, the addition of Rs. 37.5 lakhs as undisclosed income was not sustainable.

Conclusion:

The Tribunal allowed the appeals, holding that the reopening of the assessment under Section 147 was invalid due to the absence of a clear mention of the assessee's failure to disclose material facts. Additionally, the addition of Rs. 37.5 lakhs as undisclosed income was not justified due to the lack of corroborative evidence. The decision in Dr. Shailendra I. Singh's case was applied mutatis mutandis to Dr. Pushpa Singh's appeal, leading to the allowance of both appeals.

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