2023 (9) TMI 979 - AT - Income Tax

Reopening of assessment u/s 147 - Undisclosed income - receipt of cash unexplained - HELD THAT -There is no mention of name of the assessee or any of the partners in the seized documents for receipt of impugned sum. Even otherwise, intimation from ITO ward 3 New Panvel categorically stated that addition is made in the hands of society, but tax could not be recovered. For this reason, the sum cannot be taxed in the hands of the assessee, without any material against the assessee. As applying the principles laid down by the honourable Bombay High Court Godrej Boyce Mfg. Co. Ltd. 2022 (4) TMI 639 - BOMBAY HIGH COURT we find that the reasons recorded for reopening of the assessment, in absence of any allegation on the part of the assessee to fully and truly disclosed material facts in the reasons recorded, are not sustainable. Statement u/s 131 of Mr. Manohar Desai also do not state that cash is received by assessee. Letter of ITO ward 3 panvel says that he has only stated PAN and Jurisdictional AO of the Assessee. This is evident in last para of the letter dated 23/02/2015. Even otherwise on the merits the coordinate bench in case of the cooperative society has categorically held that income is chargeable to tax in the hands of the members of the society, therefore, we are not in a position to give any other finding with respect to the receipt of above sum and its addition in the hands of the assessee on the merits also. Accordingly, reopening of the assessment in case of the assessee is quashed.

Summary

Issues Involved:
1. Receipt of undisclosed income of Rs. 5,94,96,000.
2. Violation of the principle of natural justice by not granting the opportunity of cross-examination.
3. Validity of the reopening of assessment under section 147 of the Income-tax Act, 1961.

Summary:

1. Receipt of Undisclosed Income:
The assessee, Om Developers, was alleged to have received Rs. 5,94,96,000 in cash from M/s Pathik Constructions, which was not disclosed in their income. The CIT(A) confirmed the addition made by the AO, stating that the appellant was the effective owner of the property sold to M/s Pathik Constructions and thus liable for the cash component of the sales consideration. The seized document from Pathik Constructions indicated a cash payment of Rs. 5,94,96,000, which was construed as part of the sale consideration received by the assessee.

2. Violation of Natural Justice:
The assessee contended that the AO did not follow the principle of natural justice by not granting the opportunity for cross-examination. However, this issue was not elaborated upon in the judgment, implying that the primary focus was on the merits of the addition and the validity of the reopening of the assessment.

3. Validity of Reopening of Assessment:
The reopening of the assessment was challenged on several grounds:
- The reasons recorded for reopening did not indicate any failure on the part of the assessee to fully and truly disclose material facts.
- The information received from the ITO, Ward-3, New Panvel, suggested that the income was taxable in the hands of Jai Ganesh Cooperative Housing Society, not Om Developers.
- The approval for reopening given by the CIT(A)-28, Mumbai, was deemed insufficient as it merely stated satisfaction without detailed reasoning.

The Tribunal found that the reasons for reopening did not meet the requirements under section 147, as there was no allegation of failure to disclose material facts by the assessee. Additionally, the coordinate bench had already held that the cash component of Rs. 5,94,96,000 was taxable in the hands of the members of Jai Ganesh Cooperative Housing Society, not Om Developers. Therefore, the reopening of the assessment was quashed.

Conclusion:
The appeal of the assessee was allowed, quashing the reopening of the assessment and setting aside the addition of Rs. 5,94,96,000 as undisclosed income. The judgment emphasized the lack of proper grounds for reopening the assessment and the absence of any material linking the cash receipt to the assessee.