2022 (11) TMI 769 - AT - Income Tax

Reopening of assessment u/s 147 - Reasons to believe - HELD THAT - We heard the rival submission and relied on the documents available in the record. In fact, the reasons recorded of the assessee that there are lacuna in the factual findings and in the PAN No. The issue was already agitated before the ld. CIT(A) but the matter was not taken proper care in relation to the legal ground. We find that the recorded reasons itself is erroneous and erred in fact. So the assessment order issued by the ld. AO is itself erroneous and non est . So the ground no. 1 and 2 of the assessee is allowed. Addition was made on basis of the entries were found in the books of accounts of the party under searched - HELD THAT - As heard the rival submission relied on the documents available in the record. The entire addition was made on basis of the documents available in the record of the third party. Fact that the assessee has produced the deed documents to substantiate his claim related to transaction cash with the party. In remand report the issue was not properly controverted and taken care with relation to the search person and the parties related to sale and purchase of land. But the seller of the land confirmed the fact of the assessee and submitted the affidavit before the authority. The ld. Counsel has submitted the catena of judgment in favour of the assessee, considering the ratio decidendi of the judgment. The addition made by the ld. AO is duly set aside the addition amount addition is quashed. Ground No. 3 and 4 of the assessee are allowed.

Issues Involved:
1. Reopening of the case under Section 147 of the Income Tax Act, 1961.
2. Validity of reasons to believe for reopening under Section 148.
3. Addition of Rs. 16,03,000 based on third-party ledger accounts.
4. Consideration of additional evidence provided by the assessee.
5. Confirmation of the addition against the facts and circumstances of the case.

Issue-Wise Detailed Analysis:

1. Reopening of the case under Section 147 of the Income Tax Act, 1961:
The assessee contested the reopening of the case under Section 147, arguing that it was based on erroneous facts. The reopening was initiated following a search at M/s J.P. Industries, where a ledger account indicated a credit of Rs. 16,03,000 to the assessee. The Tribunal found discrepancies in the PAN number and the fact that the assessee had already filed a return, which the Assessing Officer (AO) failed to acknowledge. The Tribunal concluded that the reopening was based on incorrect facts and hence, was invalid.

2. Validity of reasons to believe for reopening under Section 148:
The assessee argued that the reasons recorded for reopening the case were erroneous. The Tribunal reviewed the recorded reasons and found factual inaccuracies, including incorrect PAN details and the false assertion that the assessee had not filed a return. Citing precedents, the Tribunal held that the reopening was based on non-existent facts and thus, the assessment order was erroneous and non est. Consequently, grounds 1 and 2 were allowed.

3. Addition of Rs. 16,03,000 based on third-party ledger accounts:
The AO made an addition of Rs. 16,03,000 based on entries found in the books of a third party during a search. The assessee provided registered sale deeds and an affidavit from Mr. Kaku Singh, confirming that the amount was related to a property transaction facilitated by the assessee as a broker. The Tribunal noted that the addition was solely based on third-party documents without corroborative evidence. It cited several judgments to support that additions cannot be made based on documents found in third-party premises without corroborative evidence. Thus, the Tribunal quashed the addition.

4. Consideration of additional evidence provided by the assessee:
The assessee submitted additional evidence, including sale deeds and an affidavit from Mr. Kaku Singh, during the appeal. The CIT(A) accepted the evidence but did not properly address the issues in the remand report. The Tribunal found that the additional evidence substantiated the assessee's claim and that the AO failed to conduct a proper inquiry. Therefore, the Tribunal accepted the additional evidence and ruled in favor of the assessee.

5. Confirmation of the addition against the facts and circumstances of the case:
The Tribunal observed that the AO did not conduct an independent inquiry into the third-party documents and relied solely on them for the addition. The Tribunal emphasized that the assessee was merely a broker in the property transaction and had no connection with the cash payments. It concluded that the addition was unjustified and allowed grounds 3 and 4 in favor of the assessee. Grounds 5 and 6 were deemed general and not requiring adjudication.

Conclusion:
The Tribunal allowed the appeal, quashing the reopening of the case and the addition of Rs. 16,03,000, and ruled in favor of the assessee. The order was pronounced on 11.11.2022.

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