2014 (3) TMI 400 - AT - Income Tax

Re-opening of assessment u/s 147 of the Act Addition made u/s 69 of the Act Held that - The AO issued notice under section 148 of the Act instead of invoking provisions of section 153C, the proceedings stand vitiated - When it was pointed out that section 153C is not applicable in the instant case because the documents/books of account seized do not belong to the assessee, the learned counsel for the assessee did not seriously press his contention but raised an alternative plea that even for initiation of proceedings under section 148 of the Act. Revenue could not furnish the contents of the assessment made in the case of D.Y. Patil group or the reasons recorded in the Settlement Commission s order - It is not known as to whether the D.Y. Patil group has accepted the cash entries as unexplained income in their hands or claimed it as donations received from students - No material could be placed to indicate that in the case of educational institutions it is a standard practice to collect donations and in fact donations were collected from several parties and some of them have accepted that they have made the payment and in respect of others proceedings were initiated by the Assessing Officer s concerned. The explanation of the assessee with regard to would not be of any help to justify the reduction of addition - This also shows the lacklustre attitude of the AO and the routine manner in which addition was made by the AO, which was routinely approved by the CIT(A) - The assessee consistently pleaded before the Tax Authorities that no material was placed before him and no opportunity was given to him to controvert the material collected by the AO, which was the basis for making the addition - In the absence of any material placed by the revenue, there is no basis for making the addition also, in the absence of any efforts made by the Revenue it may not be proper after long lapse of time to send back the matter for further investigation as it would amount to paying premium by the assessee for lethargy of the Revenue thus, the additions made by the AO set aside Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Validity of reopening of assessment under section 147 of the Act.
2. Legality of the addition of Rs. 3,91,000/- under section 69 of the Act.

Issue-wise Detailed Analysis:

1. Validity of Reopening of Assessment under Section 147 of the Act:

The assessee challenged the reopening of the assessment under section 147, arguing that specific provisions under section 153C, introduced by the Finance Act, 2005 with retrospective effect from 01.06.2003, should apply instead. The argument was based on the fact that the search was conducted in July 2005, and the procedures of section 153C should have been invoked. However, it was contended that section 153C is not applicable as the documents/books of account seized did not belong to the assessee. The Tribunal noted that the Assessing Officer (AO) had independently recorded reasons for reopening the assessment, based on information gathered during a search in the D.Y. Patil Group cases, and obtained necessary sanction from the Addl. CIT, Range 26(1). The Tribunal found that the AO had independently arrived at a prima facie conclusion that income chargeable to tax had escaped assessment, thereby justifying the reopening under section 147. Consequently, the Tribunal upheld the validity of the reopening of the assessment.

2. Legality of the Addition of Rs. 3,91,000/- under Section 69 of the Act:

The addition of Rs. 3,91,000/- was made based on diary entries found during a search in the D.Y. Patil Group, which suggested that the assessee paid Rs. 5,83,000/- in cash for his son's admission, in addition to Rs. 1,92,000/- paid by cheque. The assessee contended that these diary entries were "dumb" documents that did not bear his signature and that he was not given an opportunity to rebut the evidence or cross-examine the persons who made the statements. The Tribunal observed that the AO had made the addition without providing the assessee with the material on which the addition was based or an opportunity to examine the concerned persons. The Tribunal also noted that the Revenue failed to provide any corroborative evidence or details from the D.Y. Patil Group's assessment or the Settlement Commission's order to substantiate the addition. The Tribunal emphasized that the assessee consistently denied making any cash payment and that the AO did not furnish any material to prove otherwise. The Tribunal cited the Supreme Court decision in Kishinchand Chellaram vs. CIT, which held that additions cannot be made without giving the assessee an opportunity to controvert the material. In the absence of concrete evidence and proper procedure, the Tribunal concluded that the addition of Rs. 3,91,000/- had no basis and was unsustainable.

Conclusion:

The Tribunal upheld the validity of the reopening of the assessment under section 147 but found the addition of Rs. 3,91,000/- under section 69 to be baseless and unsustainable. The appeal was partly allowed in favor of the assessee.