2021 (6) TMI 266 - AT - Income Tax

Reopening of assessment u/s 147 - undisclosed income - assessee argued pendency of an appeal, reference or revision on a particular matter in the case of an assessee - HELD THAT - Restriction provided in the 3rd proviso to Sec. 147 is qua the assessing or reassessing of income of an assessee involving matters which are subject matter of an appeal, reference or revision in its case. We are unable to agree with the claim of the ld. A.R, that pendency of an appeal, reference or revision on a particular matter in the case of an assessee would preclude the revenue from reopening the case of a third party. Though the legislature in all its wisdom had in order to avoid parallel proceedings contemplated a restriction by way of a 3rd proviso to Sec.147, but the same, in our considered view cannot be stretched to the extent of reading restrictions on reopening the case of a third party. In fact, if the 3rd proviso to Sec. 147 is construed in the manner it has been projected by the ld. A.R before us, the same would disentitle the revenue from initiating reassessment proceedings in the hands of a third party, within the prescribed period of limitation, on the basis of information gathered in the case of an assessee. We thus not being able to persuade ourselves to subscribe to the aforesaid contention so advanced by the ld. A.R, reject the same. Whether reasons recorded by the A.O, were insufficient, for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment? - Material before the A.O was sufficient enough for him to arrive at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment for the year under consideration. At this stage, we may herein observe that what is required at the stage of reopening of a concluded assessment is that the formation of belief by the A.O that the income of the assessee chargeable to tax had escaped assessment should have a nexus with the material available with him. We are unable to subscribe to the claim of the ld. A.R, who had tried to impress upon us that the material available before the A.O prompting the reopening of a concluded assessment should conclusively prove that the income of the assessee had escaped assessment. We thus not finding favour with the claim of the ld. A.R that the A.O had reopened the case of the assessee in the absence of sufficient material, reject the same. The additional ground of appeal No. (a) is accordingly dismissed. Satisfaction of mandate of sub-section (1) of Sec.151 - We are unable to agree with the claim of the ld. A.R that the satisfaction of the sanctioning authority is not discernible from the records. In our considered view, the CIT-28, Mumbai had in no way fallen short of words to clearly express that as per the reasons recorded by the A.O, he was satisfied that it was a fit case for issue of notice u/s 148 of the Act. The ld. A.R has failed to point out as to how the approval granted by the sanctioning authority could be stamped as grant of approval in a mechanical manner or without application of mind. Insofar the order of the SMC bench of ITAT, Delhi in the case of Anurag Vs. ITO, Ward-1(1), Ghaziabad ITA No.1023/Del/2019, dated 25.11.2019 relied upon by the ld. A.R before us is concerned, the same in our considered view being distinguishable on facts would not assist the case of the assessee. Accordingly, not finding favour with the claim of the ld. A.R that the appropriate authority had failed to record his satisfaction as per the mandate of sub-section (1) of Sec.151 of the Act, we reject the same. The additional ground of appeal No. (b) is accordingly dismissed. Whether A.O had proceeded with the assessment without providing the assessee a copy of the reasons to believe on the basis of which its concluded assessment was reopened? - Admittedly, in case an assessee applies for a copy of the reasons to believe on the basis of which recourse has been taken to proceedings u/s 147 of the Act, the A.O remains under a statutory obligation to furnish the same before proceeding any further with the assessment. But then, where there is no request by the assessee for supply of the reasons to believe, no obligation in our considered view would be cast upon the A.O to furnish the same. As the assessee in the case before us had at no stage applied for a copy of the reasons to believe on the basis of which its case was reopened, therefore, no fault can be attributed to the A.O in not supplying the same. In the backdrop of the aforesaid facts, finding no substance in the claim of the ld. A.R that the assessment framed u/s 143(3) r.w.s 147 would stand vitiated as the A.O had failed to supply the copy of the reasons to believe to the assessee, we reject the same. Undisclosed income - The notings in the document as seized from the premises of M/s Pathik Construction i.e the buyer of the property in question clearly points out to the undisclosed consideration that had changed hands. It is clear from the records that the assessee had purchased/acquired all the rights, interests and benefits in respect of the property in question from Jai Ganesh Co-operative Housing Society Ltd., vide the Agreement to Transfer and Assign for a consideration thus it would therefore be beyond comprehension as to how any part of consideration received on a subsequent sale of the said property was not to be accounted for in its hands. In fact, now when the assessee had accounted for the part sale consideration received from M/s Pathik Constructions in its books of accounts, there is no justification on its part to distance itself from the unaccounted sale consideration i.e the onmoney received from the said buyer Now when the assessee firm i.e M/s Om Developers vide an agreement, dated 15.10.2006 was vested with the interests, rights and benefits in the property in question, therein de hors any material proving to the contrary it would thus be the rightful owner of any consideration received pursuant to a subsequent sale of the property/rights in the property in question. We thus not being able to persuade ourselves to subscribe to the claim of the ld. A.R that the aforesaid amount was paid by M/s Pathik Constructions to Jai Ganesh Co-operative Housing Society Ltd, decline to accept the same. Accordingly, finding no infirmity in the view taken by the CIT(A) that the cash component of the sale consideration on account of sale of Plot No. 31, Sector 47, Dronagiri, Taluka Uran, Dist Raigad had to be taxed in the hands of the assessee firm, therein uphold the same. Assessee appeal dismissed.

Summary

Issues Involved:

1. Receipt of undisclosed income of ?5,94,96,000/-
2. Violation of natural justice and denial of cross-examination
3. Validity of reassessment proceedings under Section 147
4. Jurisdictional error and validity of notice under Section 148
5. Ownership and title of property
6. Double taxation of the same amount
7. Reliance on seized handwritten note
8. Alleged mechanical approval for reassessment
9. Failure to provide reasons for reopening to the assessee

Issue-wise Detailed Analysis:

1. Receipt of Undisclosed Income of ?5,94,96,000/-:
The assessee firm, engaged in the business of a builder and developer, declared an income of ?63,16,295/- for A.Y 2008-09. Information from the Assessing Officer (A.O) indicated that during a search on Pathik Construction, documents revealed a land deal with Jai Ganesh Cooperative Housing Society Ltd. (CHS) where the assessee allegedly received ?5,94,96,000/- in cash. The A.O, after reopening the case under Sec. 147, added this amount as undisclosed income. The CIT(A) upheld this, noting that the assessee was the effective owner of the property and had received the total sale consideration, including the cash component.

2. Violation of Natural Justice and Denial of Cross-examination:
The assessee claimed that the A.O did not follow the principle of natural justice by denying the opportunity for cross-examination. The CIT(A) observed that the assessee did not request cross-examination during the proceedings, and thus, there was no violation of natural justice.

3. Validity of Reassessment Proceedings under Section 147:
The assessee challenged the reassessment on the grounds that the reasons recorded by the A.O were insufficient. The Tribunal found that the A.O had sufficient material to form a belief that income had escaped assessment based on the information received about the land deal and the cash component involved.

4. Jurisdictional Error and Validity of Notice under Section 148:
The assessee argued that the notice under Sec. 148 was void ab-initio as it was issued without valid jurisdiction and authority. The Tribunal dismissed this, stating that the CIT-28, Mumbai, had duly recorded satisfaction and granted approval for the issuance of the notice, which was not mechanical but based on the reasons recorded by the A.O.

5. Ownership and Title of Property:
The CIT(A) concluded that the assessee was the effective owner of the property on the date of sale to Pathik Constructions, as per the "Agreement to Transfer and Assign" dated 15.10.2006. The property was part of the assessee's opening stock, and thus, the total sale consideration, including the cash component, was taxable in the hands of the assessee.

6. Double Taxation of the Same Amount:
The assessee contended that the cash component was already taxed in the hands of Jai Ganesh CHS. The CIT(A) rejected this, stating that the assessee was the rightful owner of the property and liable for the tax on the total sale consideration.

7. Reliance on Seized Handwritten Note:
The A.O relied on a seized handwritten note from Pathik Construction's premises, indicating payments of ?2,22,00,000/- by cheque and ?5,94,96,000/- in cash. The Tribunal upheld this, noting that the document was not a dumb document and corroborated the actual transaction.

8. Alleged Mechanical Approval for Reassessment:
The assessee claimed that the approval for reassessment was granted mechanically. The Tribunal found that the CIT-28, Mumbai, had duly applied his mind and recorded satisfaction based on the reasons provided by the A.O, thus rejecting the claim of mechanical approval.

9. Failure to Provide Reasons for Reopening to the Assessee:
The assessee argued that the A.O did not provide the reasons for reopening the assessment. The Tribunal noted that the assessee did not request the reasons, and thus, there was no obligation on the A.O to provide them. The assessment was valid as the assessee had not applied for the reasons.

Conclusion:
The Tribunal dismissed the appeal, upholding the addition of ?5,94,96,000/- as undisclosed income, and found no merit in the assessee's claims regarding natural justice, validity of reassessment, jurisdictional errors, and other grounds. The assessment framed under Sec. 143(3) r.w.s 147 was deemed valid.