2021 (12) TMI 137 - AT - Income Tax

Reopening of assessment u/s 147 - Admission of additional evidence - HELD THAT - Upon going through the comments of the concerning ITO, we find that the Revenue has conceded that the additional evidences so furnished by the appellant are already available on the record and many of these additional evidences were already considered by the AO while passing the assessment orders. Thus, we find no serious objection of the Revenue against furnishing of the additional evidences by the appellant and accordingly, the same are admitted. Issuance of Notice u/s. 148 - Search and Seizure operations u/s. 132 of the Act, were carried out on group of asseessee(s) - AO had categorically established that in the appellant s case, after recording the reasons and after taking due approval from his Range Head, the notices u/s. 148 were issued -income of the appellant had got escaped assessment in the form of receipt made by one of its directors on behalf of the appellant company, which were not so recorded in the books of account of the appellant - HELD THAT - The basis for proposing the addition in the hands of the appellant company on substantive basis was the subject land, against which Shri Nilesh Ajmera made the payments, was owned by the appellant company only and therefore, the same was proposed to be added in the hands of the appellant company on substantive basis. We further find that despite giving a finding by the assessing officer of Shri Mohanlal Chugh in the assessment order for A.Y. 2009-10, the proposed addition in the hands of the appellant company on account of payment received by it from Shri Nilesh Ajmera, through Shri Mohanlal Chugh, could not be made - upon noticing such escapement of income, the AOs in the present case rightly issued the notices u/s. 148 to the appellant after recording the necessary reasons to believe and also after obtaining the necessary approval. The notices for both the assessment years have been issued within the time limit prescribed u/s. 149 of the Act. We also find that after issuing the notices, upon request of the appellant, the copies of the reasons recorded were provided to the appellant and the objections raised by the appellant subsequently against such reasons were also disposed off by the AO by passing speaking orders. Thus, in our considered view, the assessing officer has duly complied with all the conditions as enjoined in the law and has also complied with the ratio laid down by the Apex Court in the case of M/s. G.K.N. Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT Accordingly, we do not find any substance in the ground nos. 2(a) 2(c) raised by the appellant for both the assessment years and the same are hereby Dismissed. Proceedings so initiated u/s. 153C v/s 148 - We find that undisputedly, during the course of the search u/s. 132 in the case of the Satellite Group, certain documents were seized but, there is no finding by any of the authorities that the documents so seized were not belonging to the person who were so searched or from whose possession these were found. In particular, there is no finding that the documents so seized were belonging to the appellant company - in the pre-amended provisions of s. 153C of the Act, the provisions of s. 153C could have been invoked only if certain documents belonging to a person other than the person searched are found and seized u/s. 132 from the premises of the searched person. So, at the relevant time, the belongingness of the document seized to a third person was a sine- qua-non for invoking the provisions of s. 153C of the Act against such person. We find that the amendment in section 153C of the Act dispensing with the requirement of belongingness to any books of accounts or documents with the third person has come into force only by the Finance Act, 2015 w.e.f. 01.06.2015, and therefore, the amendment would not be applicable for the assessment years under consideration. We find that in absense of meeting the mandatory requirement of belongingness of the seized documents with the appellant, the AO was not within his power to invoke the provisions of s. 153C of the Act in the present cases and therefore, in our considered view, the AO rightly dropped the proceedings so initiated u/s. 153C and was statutorily correct in invoking the provisions of s. 148 of the Act. Thus, the Ground No. 2(b) raised by the appellant for both the years is also Dismissed. Addition u/s 69 - cash payments against purchases/proposed purchases of land - HELD THAT - AO could not properly appreciate the facts of the present case in the proper perspective and could not understand the whole deal. The AO went also wrong when claiming that the appellant had purchased the land from Chughs and Ajmeras. However, it is a matter on record that Chughs family were the owners of the appellant company at the relevant time and the appellant company did not purchase any land from Chughs. On the contrary, we find that the case of the Revenue since the day one when search operations took in the case of the Satellite Group was that Shri Mohanlal Chugh on behalf of the appellant company sold the land of the appellant company and received the payment from Shri Nilesh Ajmera or his company. Thus, the findings given by the AO in his assessment orders are patently wrong which has culminated into an absolutely absurd and unwarranted addition in the hands of the appellant company. We find that during the financial year relevant to assessment years under consideration, the appellant had not made any investment either towards the purchases or towards the making of advances for purchases of the land at Pipliyakumar and therefore, the findings given by the AO in the assessment orders to the effect that the appellant had parted with certain sum for making the investments for purchases of land are not factually correct. Also merit in the contention of the ld. CIT(DR) that in the present case, if the addition could not be sustained in the hands of the appellant company, then, this Bench should make a direction for making the corresponding addition in the hands of Shri Mohanlal Chugh who made the actual receipts of the funds. In our view, first of all, there is no maxim known to the law that for the mistakes committed by the AO of an assessee, the untaxed amount should be added in the hands of other assessee. Even otherwise, we find that the subject land in respect of which the payments were made by Shri Nilesh Ajmera are in the ownership of the appellant company and Shri Mohanlal Chugh was only one of the functionaries of the appellant company and therefore, any receipts by Shri Mohanlal Chugh from Shri Nilesh Ajmera has to be regarded only as the receipts of the appellant company and not that of Shri Mohanlal Chugh in his individual capacity. - Decided in favour of assessee. Unexplained cash credit - Reopening of assessment - HELD THAT - In the instant case, the notice u/s. 148 was issued on the basis of escapement of income in the hands of the appellant which was emanating in the form of making of unaccounted receipts in respect of some land at Pipliyakumar, but, eventually, we found that no addition has been made on such ground but, the addition has been made on an altogether different ground of making of the unexplained investment in purchase of the land. Although, the settled position of the law is that an assessee officer is eligible to make the addition on the issues in addition to the issue in respect of which the notice u/s. 148 was issued, but, the essential requirement remains that some addition on the core issue contained in the notice u/s. 148 must be made by the AO before making the addition on other issues, which is. We find in the instant case. Thus, without going into the merits of the addition, we find no substance in the addition on account of unexplained unsecured loans and the same is deleted

Summary

Issues Involved:
1. Non-consideration of written submissions and lack of opportunity of being heard.
2. Validity of notice under Section 148 of the Income-Tax Act, 1961.
3. Confirmation of additions of ?12,13,37,500/- and ?10,63,37,500/- in the appellant’s income.
4. Addition of ?1,50,00,000/- as unexplained cash credit under Section 68 of the Act.

Detailed Analysis:

1. Non-consideration of Written Submissions and Lack of Opportunity of Being Heard:
The appellant contended that the CIT(A) erred by not considering the written submissions and not providing an effective opportunity of being heard. However, during the hearing, the appellant did not press this ground for both assessment years. Consequently, this ground was dismissed.

2. Validity of Notice under Section 148:
The appellant challenged the issuance of notice under Section 148 on multiple grounds:
- The AO did not independently form a belief of income escapement but relied on findings from another AO in a different case.
- The initial notices under Section 153C were withdrawn, and the subsequent issuance of notices under Section 148 was unjustified.
- The reasons recorded for reopening were based on findings from another case, and the AO did not conduct any independent inquiry.

Tribunal’s Findings:
- The Tribunal noted that the AO issued notices under Section 148 based on documents seized during a search on a different group, which indicated payments to one of the appellant’s directors.
- The Tribunal found that the AO followed due procedure by recording reasons, obtaining necessary approvals, and providing the appellant with the reasons for reopening.
- The Tribunal upheld the validity of the notices under Section 148, dismissing the appellant’s arguments on this ground.

3. Confirmation of Additions of ?12,13,37,500/- and ?10,63,37,500/-:
The appellant argued that the additions were based on incorrect premises:
- The AO initially issued notices under Section 148 for unrecorded receipts but made additions for unexplained investments.
- The Tribunal found that there was no correlation between the reasons for reopening and the findings in the assessment orders.
- The Tribunal noted that the AO’s findings were factually incorrect, as the appellant did not make any investments or purchases of land during the relevant years.
- The Tribunal observed that the AO failed to establish the factum of investment and made unwarranted additions based on incorrect premises.
- Consequently, the Tribunal deleted the additions of ?10,63,37,500/- for both assessment years.

4. Addition of ?1,50,00,000/- as Unexplained Cash Credit:
The appellant contended that the addition of ?1,50,00,000/- as unexplained cash credit was not a subject matter at the time of reopening and was made without any material indicating escapement of income.

Tribunal’s Findings:
- The Tribunal observed that the AO made the addition on an issue not mentioned in the reasons for reopening.
- The Tribunal noted that the appellant provided necessary details and documentary evidence to establish the identity, creditworthiness, and genuineness of the loan creditors.
- The Tribunal found no substance in the addition made by the AO and deleted the addition of ?1,50,00,000/-.

Conclusion:
The Tribunal partly allowed the appeals, deleting the additions of ?10,63,37,500/- for both assessment years and ?1,50,00,000/- for A.Y. 2008-09, while upholding the validity of the notices under Section 148.