2021 (9) TMI 699 - AT - Income Tax

Reopening of assessment - assumption of jurisdiction u/s 147 - reliance on document seized during search - As per AO seized documents belonging to group companies were found during the course of search which indicated payment of interest in cash outside the books of accounts in respect of purchase of land as well indicated additional payment made in cash for the purchase of land - HELD THAT - As it is the assessee contention that there was no seized documents which were referred to in the assessment order which could the said to be belonging to the assessee. DR has also failed to bring to anything on record to establish that any seized documents were found during the course of search belonging to the assessee. There is a clear finding recorded by the Ld. CIT(A) in the impugned order that none of the seized documents belonged to the assessee. DR was unable to controvert this categorical finding recorded by the Ld. CIT(A). Thus, undisputedly, in the present case, no documents belonging to the assessee were found during the course of search. In the case of group companies 2021 (1) TMI 737 - ITAT DELHI on identical reasons recorded and on identical facts and after duly considering the Rules of consistency and in absence of any material, documents, evidence or statement which could implicate the assessee, it is our considered view that the impugned assessment could not have been reopened. Therefore, we hold that the action taken by the Assessing Officer for reopening of the assessment u/s 147 of the Act is not sustainable and the same is hereby quashed as being based on seized documents of other assessees and being entirely based on presumption and assumptions and incorrect interpretation of law. Accordingly, we set aside the re-assessment. - Decided in favour of assessee.

Issues Involved:
1. Validity of reassessment proceedings under Section 147/148 of the Income Tax Act.
2. Addition on account of interest on Post Dated Cheques (PDCs).
3. Disallowance under Section 37(1) of the Income Tax Act for additional payment towards the purchase of land.
4. Addition on account of deemed dividend under Section 2(22)(e).

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings under Section 147/148:
The primary issue was whether the reopening of assessment under Section 147/148 was justified. The Tribunal noted that the reasons for reopening were based on documents seized during a search on BPTP Ltd. and its group companies, which indicated unaccounted interest payments on PDCs and additional payments for land purchases. The assessee argued that no seized documents belonged to them, and similar reassessment proceedings in the cases of group companies (M/s Green Valley Tower Pvt. Ltd. and M/s Westland Developers Pvt. Ltd.) had been quashed by the Tribunal. The Tribunal found that the reasons recorded for reopening were identical to those in the group companies' cases and that no specific nexus with the assessee was established. Consequently, the reassessment proceedings were quashed as void ab-initio, being based on presumptions, assumptions, and incorrect interpretation of law.

2. Addition on Account of Interest on Post Dated Cheques (PDCs):
The Assessing Officer (AO) had made an addition for interest on PDCs based on seized documents indicating that interest was paid in cash outside the books. The CIT(A) had partly deleted this addition but upheld a portion of it. The Tribunal observed that no seized documents belonging to the assessee were found, and there was no independent evidence to corroborate the AO's findings. The Tribunal, following the precedent in the group companies' cases, held that the addition based on such presumptions was not sustainable.

3. Disallowance under Section 37(1) for Additional Payment towards Purchase of Land:
The AO disallowed additional payments made for land purchases, citing that these were not genuine and violated the Stamp Duty Act. The CIT(A) had partly deleted the disallowance but upheld a minor portion. The Tribunal noted that no specific documents or evidence linked the additional payments to the assessee. Following the findings in the group companies' cases, the Tribunal concluded that the disallowance was based on vague inferences and not on concrete evidence, thus not sustainable.

4. Addition on Account of Deemed Dividend under Section 2(22)(e):
The AO had made an addition under Section 2(22)(e) for deemed dividend. The CIT(A) had deleted this addition, providing relief to the assessee. The Tribunal did not specifically address this issue in the detailed analysis, as the primary focus was on the validity of the reassessment proceedings and the major additions related to interest on PDCs and additional payments for land purchases.

Conclusion:
The Tribunal quashed the reassessment proceedings under Section 147/148 as void ab-initio, based on the lack of specific nexus and evidence linking the seized documents to the assessee. Consequently, the additions and disallowances made by the AO were not sustained. The appeal of the assessee was allowed, and the reassessment was set aside. The Tribunal's decision was pronounced on 13th September 2021.

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