2017 (11) TMI 1596 - AT - Income Tax

Reopening of assessment - reopening of relying on the information sent by the search wing and without receipt of any seized material relevant to the assessee - Held that - We hold that at the stage of issue of notice for reopening, the only question which is to be considered is whether there was relevant material on which a reasonable person could, have formed a requisite belief. However, whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction. Since in the present case, the AO had the tangible material from the Investigation Wing in which it was categorically mentioned that the assessee had paid on money of ₹ 1 crore to Hiranandani Group and moreover no scrutiny assessment was carried out prior to reopening inititated by the AO. Therefore, while relying upon the proposition laid down by the Hon ble Supreme Court in the case of ACIT vrs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007 (5) TMI 197 - SUPREME Court), we dismiss this ground raised by the assessee and uphold the order of Ld. CIT(A). Additions made as relied upon the statement of the directors of Hiranandani Group admitting the receipt of cash money from the assessee - denial of natural justice - Held that - Not providing copies of the statement of the Director of the Hiranandani Group to the assessee before making additions and not providing opportunity of cross examination to the assessee itself amounts to infringement of legal rights of the assessee which caused prejudice to the rights in this context. In view the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to provide copies of statement of directors/promoters of Hiranandani Group and to provide opportunity of cross examination to the assessee and thereafter pass afresh order assessment. Appeal filed by the assessee are allowed for statistical purposes.

Issues Involved:
1. Reopening of the assessment based on information from the search wing.
2. Confirmation of the assessment of income at ?1,83,19,830/- against the returned income of ?83,19,830/-.
3. Addition of ?1 crore as 'on money' without providing the seized materials and without allowing cross-examination.
4. Allegation that the appellant paid 'on money' for the purchase of a flat.
5. General grounds for appeal.

Issue-wise Detailed Analysis:

1. Reopening of the Assessment Based on Information from the Search Wing:
The appellant challenged the reopening of the assessment, arguing that it was based solely on information from the search wing without any seized material relevant to the appellant. The Tribunal noted that the return of income was initially processed under section 143(1) of the I.T. Act. The AO reopened the assessment based on information from the search wing indicating that the appellant had paid ?1 crore in 'on money' to M/s Classique Associates for the purchase of a flat. The AO recorded reasons for reopening and served them upon the appellant. The Tribunal referenced the Supreme Court's judgment in ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., which stated that the AO needs 'reason to believe' rather than 'reason to suspect' for reopening an assessment. The Tribunal concluded that the AO had tangible material from the Investigation Wing and upheld the reopening of the assessment.

2. Confirmation of the Assessment of Income at ?1,83,19,830/- Against the Returned Income of ?83,19,830/-:
This issue was not separately addressed in detail as it was interrelated with the third and fourth grounds concerning the addition of ?1 crore as 'on money'.

3. Addition of ?1 Crore as 'On Money' Without Providing Seized Materials and Without Allowing Cross-Examination:
The appellant contested the addition of ?1 crore as 'on money', arguing that the AO did not provide the seized materials or allow cross-examination of the evidence. The Tribunal noted that the CIT(A) had relied on the statement of the Hiranandani Group's directors, who admitted to receiving 'on money' from the appellant. However, the appellant consistently requested copies of these statements and the opportunity for cross-examination, which were not provided. The Tribunal found that this failure amounted to an infringement of the appellant's legal rights. Citing the Supreme Court's judgment in Kapurchand Shrimal v. CIT, the Tribunal held that it was necessary to correct errors and issue appropriate directions. Consequently, the Tribunal set aside the CIT(A)'s order and remitted the matter back to the AO, directing the provision of the necessary documents and the opportunity for cross-examination before passing a fresh assessment order.

4. Allegation that the Appellant Paid 'On Money' for the Purchase of a Flat:
This issue was addressed along with the third ground. The Tribunal emphasized the need for the AO to provide the appellant with the statements of the Hiranandani Group's directors and the opportunity for cross-examination to ensure a fair assessment process.

5. General Grounds for Appeal:
The Tribunal found this ground to be general in nature and did not require specific adjudication.

Conclusion:
The Tribunal upheld the reopening of the assessment but set aside the CIT(A)'s order regarding the addition of ?1 crore as 'on money'. The matter was remitted back to the AO with directions to provide the appellant with the necessary documents and the opportunity for cross-examination. The appeal was allowed for statistical purposes.

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