2024 (2) TMI 631 - AT - Income Tax

Validity of reopening of assessment - prima facie belief of the AO - assessee had purchased a residential house property - whether there was relevant material on which a reasonable person could have formed a requisite belief? - HELD THAT - We found that the AO has invoked the provisions of Section 148 after coming to know about the agreement to sell dated 12-02-2012. Even the existence of the said agreement to sell dated 12-02-2012 is not disputed and the copy of the same has also been annexed by the ld. AR which means that the same was already in the possession of the assessee. Thus the decision referred by the ld. AR in the case of Micro Marbles (P) Ltd 2023 (1) TMI 282 - RAJASTHAN HIGH COURT is not applicable in the case of the assessee. Even otherwise the case of Nova Promoters and Finlease (P) Ltd. 2012 (2) TMI 194 - DELHI HIGH COURT had laid down the principle that prima facie belief of the AO that income had escaped assessment is enough at the stage of reopening and merits of the matter are not relevant at this stage. In the case of ACIT vs Rajesh Jhaveri Stock Brokers (P) Ltd. 2007 (5) TMI 197 - SUPREME COURT it was held by the Hon ble Court that at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Therefore, whether the materials would conclusively prove that the escapement is not concern at that stage. This is so because the formation of belief by the AO with the realm of subjective satisfaction. Thus keeping in view the above principles, we hold that AO s action in reopening the assessee s assessment for A.Y.2012-13 is found to be in accordance with the provisions of the law. Therefore, these grounds raised by the assessee stands dismissed. Denial of admission of additional evidences under Rule 46A by the ld. CIT(A) - These evidences are in the shape of affidavits of the cash creditors who provided financial help to the assessee and of witnesses to the sale transaction - We find that the AO in response to the confirmations filed by the assessee before him in some cases straight forwardly made the impugned addition without disclosing his mind, which made the assessee to file these affidavits. Even otherwise the evidences go to the root and are necessary for a decision on the controversy in hand. Pertinently, the ld. CIT(A) himself has considered the same and adjudicated the issue on merits based thereon. The denial to admit the evidences is thus, not justified. The assessee thus, succeeds on this ground No. 2. Addition of undisclosed income earned from undisclosed sources - Onus to prove - AO alleged that the assessee had purchased residential plot pursuant to sale agreement dated 12.02.2012, in which the assessee agreed to pay Rs. 34, 71,000/- to purchase a house property, against which Rs. 6 lacs were paid in cash as advance at the time of signing of agreement and rest of Rs. 28,71,000/- was assured to be paid by 15.03.2012 - HELD THAT - It is not disputed that these cheque numbers find place in the registered sale deed hence, the fact of making payment by these persons directly to the seller is established. Although these affidavits were before the AO as sent during the remand proceedings, however, the AO failed to controvert the averments made therein hence as per the law well settled in the case of Mehta Parikh Co. 1956 (5) TMI 4 - SUPREME COURT the averments are binding upon the authorities. It is also settled that the AO cannot ask to prove source of source, once the existence, identity of the Creditor and the affirmation of getting loan from them, are established . We draw support from Labhchand Bohra V/s ITO 2008 (4) TMI 731 - RAJASTHAN HIGH COURT and Aravalli Trading Co. v/s ITO 2007 (1) TMI 567 - RAJASTHAN HIGH COURT . Thus, the appellant having discharged the initial onus and the AO failed to discharge the burden by making enquiries and bringing cogent evidence on record, we do not find any justification behind the addition made. As regards the balance amount which was paid in cash to the seller by the appellant, the facts are not disputed that she has been filing a return of income in the past ranging between Rs. 1.65 to 2.02 Lakh and keeping in mind that being a female she was not supposed to incur expenditure, saving of a small amount of Rs. 2,50,000/- was not something abnormal. Looking to the totality of facts and circumstances she could have saved around Rs. 3.50 lacs to 4 lacs. Hence the source of Rs. 2.50 lacs stand explained. Similarly, the payment towards the stamp duty and registration charge being small amount and could be made out of the past savings of the family. We thus, find no justification behind the addition and the same hereby deleted. This ground of the assessee is allowed. Addition of cash deposit in the bank account - only basis of the addition is ITS details wherein the Assessee was found to have deposited cash of Rs. 5 lacs on 15.12.2012 - HELD THAT - The source of cash deposit was explained out of the past saving of the appellant which could be around Rs. 5 to 6 lakhs from her business and Streedhan; from the past saving of her husband, Navender Kumar, who has been a central government employee and partly from the savings of Shri Umesh Kumar Sharma s/o the appellant. While considering the source of payment of sale consideration of Rs. 2.50 Lakh by the appellant herself, we have held that looking to the totality of facts and circumstances she could have saved that amount. In addition, the fact is not denied that her husband Navender Kumar was a central government employee and retired from the Post and Telegraph department after serving as a postman getting salary more than Rs. 3 Lakh annually as claimed and thus considering the saving for a period of 10 years, only his past savings could be considered around Rs. 2.5 Lakh as reasonable. However, we find that son Umesh Kumar Sharma has already contributed towards the payment of sale consideration of Rs. 1,50,000/- Further contribution from him cannot be expected. Thus, it would be reasonable that source is considered explained up to Rs. 3,00,000/- and the balance Rs. 2,00,000/- is considered as without any source and thus, addition to the extent to Rs. 2,00,000/- is hereby sustained. The appellant thus, get relief of Rs. 3,00,000/-. This ground of the assessee is partly allowed.

Summary

Issues Involved:
1. Validity of action under Section 147 read with Section 148.
2. Admission of additional evidence under Rule 46A.
3. Addition of Rs. 35,36,100/- as undisclosed income.
4. Addition of Rs. 5,00,000/- as unexplained cash deposits.
5. Charging of interest under Sections 234A and 234B.

Summary:

1. Validity of Action under Section 147 read with Section 148:
The assessee challenged the reopening of the assessment under Section 147/148, arguing that the Assessing Officer (AO) lacked "reason to believe" and acted on mere suspicion. The Tribunal found that the AO had sufficient information and documents to form a "reason to believe" that income had escaped assessment, based on the purchase of a property registered for Rs. 12 lakhs. The AO's action in reopening the assessment was thus upheld as valid.

2. Admission of Additional Evidence under Rule 46A:
The assessee contended that the CIT(A) erred in refusing to admit additional evidence. The Tribunal noted that the CIT(A) considered the additional evidence while adjudicating the case on merits, despite formally denying its admission. The Tribunal found this contradictory and held that the additional evidence should be considered. The assessee succeeded on this ground.

3. Addition of Rs. 35,36,100/- as Undisclosed Income:
The AO added Rs. 35,36,100/- as undisclosed income based on an agreement to sell showing a higher sale consideration than declared. The Tribunal found that the AO's reliance on a photocopy of the agreement and the broker's conduct was not sufficient to prove the understatement of sale consideration. The Tribunal also noted that the actual sale consideration was supported by a registered sale deed for Rs. 12 lakhs, and the DLC rate supported this amount. The Tribunal deleted the entire addition of Rs. 35,36,100/-.

4. Addition of Rs. 5,00,000/- as Unexplained Cash Deposits:
The AO added Rs. 5,00,000/- as unexplained cash deposits in the assessee's bank account. The Tribunal found that the assessee explained the source of cash deposits from past savings and contributions from family members. The Tribunal allowed a relief of Rs. 3,00,000/-, sustaining an addition of Rs. 2,00,000/- as unexplained.

5. Charging of Interest under Sections 234A and 234B:
The issue of charging interest under Sections 234A and 234B was not separately addressed in the Tribunal's order, implying no specific relief or change in the AO's decision on this matter.

Conclusion:
The appeal was partly allowed, with significant relief granted on the issues of additional evidence and undisclosed income, while a partial addition was sustained for unexplained cash deposits.