2019 (11) TMI 1105 - AT - Income Tax

Reopening of assessment u/s 147 - action u/s.147 taken in the hands of the Appellant based on such seized material - HELD THAT - If, one reads the Explanation-2 to section 147 of the Act including the proviso thereto, then it is clear that where the AO reopens assessment within a period of four years, it can do so on the ground of income having escaped assessment. Even, if there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The information of aforesaid modus-operandi has been received by the AO after post search enquiries conducted by the Department in the group cases, hence this information was not available at the time of assessment order. Moreover, there is no reference of modus-operandi or any search in the original assessment record. Therefore, the contention of the ld.Counsel that proviso to section 147 is applicable and there was no failure on the part on the assessee to disclose all material facts necessary for the assessment is without any basis and not applicable as the assessment has been reopened within four years from the end of relevant assessment year. We find that in group cases of the assessee, it has been categorically established the modus-operandi followed by the group companies and the assessee was also found indulging in land purchases. The sufficiency or correctness of the material is not a thing to be considered at such stage. Therefore, considering these facts on record,we are of the considered opinion that AO was justified in reopening assessment. Addition on account of PDC interest - HELD THAT - We find that the modus operandi adopted by the Group has been established from the findings as given in the number of group concern. We find that Ld. CIT (A) has found that wherever the date of post dated cheque was extended, interest was being paid at 15% p.a. in cash out of books of account as was evident from the seized material, therefore, the interest on PDC to the extent of extension period was logical. Ld. CIT (A), therefore, directed the AO to re-compute the interest on PDC either on the sale consideration or additional payment to the extent of extended period of PDCs by the AO and in case the working out of the same is not possible, to re-compute the interest on PDCs after six months from the date of issue of PDCs i.e. date of sale, as six months is taken as reasonable period for giving PDC as per sale deed. The Ld. CIT(A) has above relied on the statement of Shri Chhoturam as mentioned above. - As relying on M/S IAG PROMOTER DEVELOPERS (P) LTD. 2014 (12) TMI 216 - ITAT DELHI we upheld findings of Ld. CIT(A) in sustaining the addition - Decided against assessee.

Summary

Issues Involved
1. Assumption of jurisdiction under Section 147.
2. Addition of interest on Post Dated Cheques (PDCs).

Detailed Analysis

Assumption of Jurisdiction under Section 147
The primary issue was whether the Assessing Officer (AO) correctly assumed jurisdiction under Section 147 of the Income Tax Act, 1961, for reopening the assessment. The Assessee argued that the AO erred in reopening the assessment based on documents seized from the BPTP Group, which did not belong to the Assessee. The Assessee claimed that the correct procedure would have been to invoke Section 153C. The CIT(A) upheld the reopening, stating that the documents indicated a general trend of unaccounted expenditure within the group, which justified reopening under Section 147.

The Tribunal noted that the original assessment was completed under Section 143(3), and the reopening was within four years. The Tribunal found that the AO had reasons to believe that income had escaped assessment based on seized documents indicating unaccounted interest payments on PDCs. The Tribunal cited the Supreme Court's decision in Pooran Mal v. CIT, which allowed using material obtained from searches for assessments, even if the search was conducted improperly. Therefore, the Tribunal upheld the reopening of the assessment.

Addition of Interest on Post Dated Cheques (PDCs)
The second issue involved the addition of interest on PDCs. The AO added ?24,47,405/- as unaccounted interest paid in cash on PDCs. The CIT(A) partially upheld the addition, directing the AO to recompute the interest for the period of PDC extension, and if not possible, to assume interest payment after six months from the sale date.

The Tribunal reviewed the seized documents and found that the modus operandi of paying interest on PDCs was established within the BPTP Group. The Tribunal upheld the CIT(A)'s direction to recompute the interest based on the extension period of PDCs or after six months from the sale date. The Tribunal noted that similar findings were upheld in the case of ACIT v. IAG Promoters & Developers Pvt. Ltd. Therefore, the Tribunal confirmed the addition of ?10,752/- and dismissed the Assessee's appeal.

Conclusion
The Tribunal upheld the reopening of the assessment under Section 147, finding that the AO had valid reasons to believe that income had escaped assessment based on seized documents. The Tribunal also upheld the addition of interest on PDCs, directing the AO to recompute the interest based on the extension period or six months from the sale date, as established by the modus operandi within the BPTP Group. The Assessee's appeal was dismissed.