2022 (11) TMI 1048 - AT - Income Tax

Unexplained investment u/s.69 - Addition on substantive basis and protective basis - HELD THAT - Counsel could hardly rebut the clinching nexus amongst the assessee and his two sons namely Shri Ramesh and Ashish Shamjibhai Shah as not only having acquired the two shops but also they put on their signatures on the agreement concerned. We, accordingly affirm the impugned addition in assessee s hands as his unexplained investment u/s.69 in principle. Quantification of the impugned addition - Revenue could hardly rebut that it is not this former assessee Shri Shyamjibhai Shivjibhai Shah only who has acquired the twin shops in his name but also his two sons namely Shri Ramesh and Ashish Shamjibhai Shah (supra). We thus see no reason to make the entire addition in this former assessee s hands. We are next informed that the department has already added 1/3rd each of the foregoing sum in his two sons cases as well. And that Shri Ramesh Shamjibhai Shah is already in appea herein. Faced with this situation, we direct the learned assessing authority to assess this first assessee Shri Shyamjibhai Shivjibhai Shah only to the extent of 1/3rd amount in the impugned sum of Rs.2,12,00,000/- followed by the remaining 1/3rd each in the hands of Shri Ramesh Shamjibhai Shah and Shri Ashish Shamjibhai Shah (sons).

Issues Involved:
1. Validity of the addition of Rs. 2,12,00,000/- as unexplained investment.
2. Jurisdiction of the Assessing Officer (A.O.) under Section 147 r.w.s 143(3) of the Income Tax Act.
3. Recording and furnishing of reasons for reopening the assessment under Section 147/148.
4. Division of the added amount among the assessee and his sons.
5. Condonation of delay in filing the appeal.

Issue-wise Detailed Analysis:

1. Validity of the Addition of Rs. 2,12,00,000/- as Unexplained Investment:
The assessee challenged the addition of Rs. 2,12,00,000/- made by the A.O. as unexplained investment under Section 69 of the Income Tax Act, 1961. The A.O. had received a complaint along with "authentic documents" indicating that the taxpayer had acquired two shops after paying the said amount in cash. The A.O. recorded the statements of the assessee and his son, who denied their signatures on the documents. Despite this, the A.O. treated the entire sum as unexplained investment, adding Rs. 70,66,666/- on a substantive basis and Rs. 1,41,33,334/- on a protective basis. The CIT(A) affirmed the assessment findings, concluding that the A.O. had rightly initiated proceedings under Section 147/148 and made the additions based on the incriminating documents and statements.

2. Jurisdiction of the Assessing Officer (A.O.) under Section 147 r.w.s 143(3) of the Income Tax Act:
The assessee raised objections regarding the A.O.'s jurisdiction to frame the assessment under Section 147 r.w.s 143(3). The assessee argued that no reasons for reopening the assessment were recorded before issuing the notice under Section 148 and that the A.O. did not obtain proper approval from the prescribed authority. However, the CIT(A) found that the A.O. had followed all procedural formalities and obtained the necessary approval from the Additional CIT. The tribunal upheld this finding, rejecting the assessee's objections and affirming the validity of the A.O.'s jurisdiction.

3. Recording and Furnishing of Reasons for Reopening the Assessment under Section 147/148:
The assessee contended that the reasons for reopening the assessment were not recorded or furnished to him. The CIT(A) found that the A.O. had recorded the reasons and provided them to the assessee, who had raised objections that were duly considered and rejected by the A.O. The tribunal agreed with the CIT(A) and concluded that all procedural requirements for issuing the notice under Section 148 were fulfilled, and the reasons for reopening were properly recorded and communicated.

4. Division of the Added Amount among the Assessee and His Sons:
The tribunal addressed the issue of quantifying the addition among the assessee and his two sons. It was found that the two sons were also signatories to the agreement and involved in the transaction. The tribunal directed that the addition be divided equally among the assessee and his two sons, with each being assessed for 1/3rd of the total amount of Rs. 2,12,00,000/-. This decision was based on the acknowledgment that the transaction involved all three individuals, and the department had already made similar additions in the sons' cases.

5. Condonation of Delay in Filing the Appeal:
The assessee requested the condonation of a 23-day delay in filing the appeal, which was supposed to be filed by 23rd July 2017. The tribunal did not specifically address this issue in detail but proceeded to hear and decide the appeal, implying that the delay was condoned.

Conclusion:
The tribunal partly allowed the appeal of the former assessee, directing that the addition be divided equally among the assessee and his two sons. The appeal of the son was dismissed, affirming the 1/3rd addition on a substantive basis. The procedural and jurisdictional objections raised by the assessee were rejected, and the validity of the A.O.'s actions under Section 147/148 was upheld. The order was pronounced in the open court on 23rd September 2022.

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