2025 (2) TMI 651 - AT - Income Tax

Reopening of assessment u/s 147 - reason to believe - addition u/s 56(2)(vii)(b) as assessee purchased immovable property during the year under consideration without adequate consideration - HELD THAT - From the perusal of the records it can clearly be set out that in the original assessment u/s 143(1) issue related to the deed of purchase of land was not looked into as the same is not reported in the assessee s income before the Revenue. Besides that there is no change of opinion but all the aspects should have been taken into consideration by the Assessing Officer under proceedings related to Section 143(1) of the Act and therefore the Department has rightly reopened the assessee s case. Addition u/s 56(2)(vii)(b) - Cancelation has not been done but is under process but no evidence has been filed by the assessee as regards cancellation of sale deed by the assessee. Though the assessee has produced confirmation that no payment has been made through co-purchaser but the same should have been taken from the seller as well and the stamp duty has not been refunded to either of the parties and the assessee failed to demonstrate before us that the agreement does not exist at this juncture. AO has rightly taken a view and it is not a change of opinion. On merit it is further noticed that the assessee since not filed any evidence in respect of cancellation of sale deed nor filed any details of processing the cancellation of sale deed the Assessing Officer and the CIT(A) rightly confirmed the addition. Appeal filed by the assessee is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment include:

1. Whether the Assessing Officer (AO) was justified in assuming jurisdiction under Section 147 of the Income Tax Act for reopening the assessment.

2. The correctness of the addition of Rs. 69,49,250/- under Section 56(2)(vii)(b) of the Income Tax Act as income from undisclosed sources.

3. The imposition of interest under Sections 234A/B/C/D of the Income Tax Act.

4. The initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.

5. The admissibility of additional grounds concerning the addition as income from undisclosed sources.

ISSUE-WISE DETAILED ANALYSIS

1. Jurisdiction under Section 147:

- Relevant Legal Framework and Precedents: Section 147 allows the AO to reassess income if there is reason to believe income has escaped assessment. The Supreme Court in CIT vs. Kelvinator of India Ltd. held that reopening based on mere change of opinion is impermissible.

- Court's Interpretation and Reasoning: The Tribunal found that the original assessment did not consider the deed of purchase of land, thereby justifying the reopening. It was not a mere change of opinion, as the issue was not initially examined.

- Key Evidence and Findings: The AO had valid reasons for reopening, as the purchase of land was not disclosed in the original assessment.

- Application of Law to Facts: The Tribunal held that the reopening was justified due to the omission of material facts in the original assessment.

- Treatment of Competing Arguments: The appellant argued that the reopening was based on a change of opinion, but the Tribunal dismissed this, citing the absence of original examination.

- Conclusions: The Tribunal upheld the AO's jurisdiction under Section 147.

2. Addition under Section 56(2)(vii)(b):

- Relevant Legal Framework and Precedents: Section 56(2)(vii)(b) deals with income from undisclosed sources when an immovable property is received without consideration.

- Court's Interpretation and Reasoning: The Tribunal noted that the appellant had not provided evidence of cancellation of the sale deed, nor was there confirmation from the seller regarding non-payment.

- Key Evidence and Findings: The appellant admitted that the cancellation process was ongoing but failed to provide supporting evidence.

- Application of Law to Facts: The Tribunal found that the AO correctly applied Section 56(2)(vii)(b) as the appellant did not demonstrate the non-existence of the transaction.

- Treatment of Competing Arguments: The appellant's argument that the transaction was void due to lack of consideration was not supported by evidence.

- Conclusions: The Tribunal upheld the addition under Section 56(2)(vii)(b).

3. Imposition of Interest and Penalty:

- Relevant Legal Framework and Precedents: Sections 234A/B/C/D pertain to interest for defaults in furnishing return, payment of advance tax, etc. Section 271(1)(c) deals with penalties for concealment of income.

- Court's Interpretation and Reasoning: The Tribunal did not provide detailed reasoning on these issues, likely due to the focus on the primary issues of jurisdiction and addition.

- Key Evidence and Findings: Not explicitly discussed.

- Application of Law to Facts: The imposition of interest and initiation of penalty proceedings were upheld as consequential to the main findings.

- Treatment of Competing Arguments: Not explicitly discussed.

- Conclusions: The Tribunal implicitly upheld these actions as part of the overall decision.

4. Admissibility of Additional Grounds:

- Relevant Legal Framework and Precedents: Legal grounds can be raised at any stage if they pertain to jurisdiction or are purely legal in nature.

- Court's Interpretation and Reasoning: The Tribunal did not explicitly address the admissibility of additional grounds, focusing instead on the substantive issues.

- Key Evidence and Findings: Not explicitly discussed.

- Application of Law to Facts: The Tribunal's decision suggests that the additional grounds did not alter the outcome.

- Treatment of Competing Arguments: Not explicitly discussed.

- Conclusions: The additional grounds did not impact the Tribunal's decision.

SIGNIFICANT HOLDINGS

- The Tribunal affirmed the AO's jurisdiction under Section 147, emphasizing that the original assessment did not consider the land purchase, thus justifying reopening.

- The Tribunal upheld the addition under Section 56(2)(vii)(b), finding the appellant failed to provide evidence of non-existence or cancellation of the transaction.

- The imposition of interest and initiation of penalty proceedings were upheld as consequential actions.

- The Tribunal's decision reflects a strict adherence to procedural and substantive requirements under the Income Tax Act, emphasizing the importance of comprehensive disclosure in tax returns.

- The appeal filed by the assessee was dismissed, affirming the actions and decisions of the lower authorities.