2023 (7) TMI 492 - AT - Income Tax

Reopening of assessment u/s 147 - information received from Investigation Wing - On-money payment in cash - HELD THAT - As there was a categorical information found during the course of search proceedings that payment of On-money was made by cash by various persons and this information was based on incriminating material in the form of pen drive found from the search in Hiranandani group; and that pen drive also contained the details of the assessee wherein during the F.Y. 2006-07, it was shown that assessee had paid cash for purchase of certain flats from Crescendo Associates. Once there is tangible material like this, then prima facie any prudent mind will entertain reasons to believe that this amount of On-money which is shown by the assessee for the purchase of flats in the return of income amounts to escapement of assessment when same has not been declared in the return of income. Therefore, to this extent, it cannot be held that reasons recorded are vague or there is no application of mind by the ld. AO. Jurisdiction should have been acquired u/s. 153C - At a threshold such a plea cannot be entertained for the reason that here the search has taken place and the clause previous six assessment years start from A.Y. 2008-09 and this assessment year 2007-08 falls beyond the period of six years and as mentioned in Section 153A. Moreover, the amendment brought by way of fourth proviso in Section 153A extending the abatement till 10 years, has come w.e.f. 01/04/2017 which is applicable on searches conducted after 01/04/2017. Therefore, the ld. AO could not have acquired the jurisdiction u/s. 153C. Thus, this plea taken by the ld. Counsel is rejected. Addition u/s 69B - If any entry by a third party of cash received has been recorded then presumption is it his unaccounted money and burden is upon that person to explain that this money has come from the other person and has to substantiate that. It is then the burden shifts upon the other person, i.e., assessee here to prove that he has not given any money. Thus, uncorroborated information cannot lead to addition in the hands of the assessee, specifically when nothing has been brought on record as to what was the fate of that information or material found and what inference in the case of the searched person has been made; and whether that person has accepted as his own undisclosed income or as stated that all these on-money have come from respective persons specifying the details. Unless something is brought on record or AO conducts inquiry that the said person in whose possession it was found has given the details or has confirmed or AO founds some other information or material, addition cannot be made simply relying on uncorroborated data or entry in third party books. Thus, on merits, we do not find any justification for making an addition u/s. 69B for alleged payment of On-money in cash without any material evidence brought on record by the ld. AO during the course of assessment proceedings. Accordingly, on merits additions are deleted. Appeal of the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of notice issued under Section 148.
2. Application of Section 153C instead of Section 148.
3. Merits of the addition made under Section 69B for alleged payment of On-money.

Summary:

1. Validity of Notice Issued Under Section 148:
The assessee challenged the validity of the notice issued under Section 148. The Tribunal found that the reasons recorded for reopening the assessment were based on tangible material obtained during a search operation on the Hiranandani Group, which indicated that the assessee paid On-money in cash for purchasing flats. The Tribunal held that this information provided prima facie reasons to believe that income had escaped assessment, thereby justifying the issuance of notice under Section 148.

2. Application of Section 153C Instead of Section 148:
The assessee argued that the assessment should have been made under Section 153C, not Section 148, as the documents were found during a search on a third party (Hiranandani Group). The Tribunal rejected this plea, noting that the search took place on 11/03/2014, and the relevant assessment year (2007-08) fell beyond the six-year period stipulated in Section 153A. The amendment extending the abatement period to ten years came into effect on 01/04/2017 and was not applicable to this case.

3. Merits of the Addition Made Under Section 69B:
The Tribunal examined the merits of the addition made under Section 69B for the alleged payment of On-money. The Assessing Officer (AO) relied on a pen drive seized from the Hiranandani Group, which contained entries of On-money receipts. The AO also referred to a statement by Shri Ranjan Hiranandani admitting receipt of On-money. However, the assessee denied making any cash payments and provided evidence of payments made through a home loan from ICICI Bank.

The Tribunal noted that the AO did not conduct further inquiries to substantiate the claim of On-money payment by the assessee. The AO failed to corroborate the information from the pen drive with independent evidence or cross-examine Shri Ranjan Hiranandani. The Tribunal emphasized that uncorroborated information from a third party cannot lead to an addition in the assessee's hands without material evidence. Consequently, the Tribunal found no justification for the addition under Section 69B and deleted it.

Conclusion:
The appeal of the assessee was partly allowed, with the Tribunal deleting the additions made under Section 69B due to the lack of corroborative evidence. The notice issued under Section 148 was upheld as valid, and the argument for applying Section 153C was rejected.