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TMI Blog2017 (9) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case, the assessment proceedings were already completed before providing the correct reasons to the assessee. In view of this, we do not have any hesitation in holding that reassessment proceedings are invalid. - Decided in favour of assessee. - ITA No. 2833/Del/2016 - - - Dated:- 19-9-2017 - SHRI I.C.SUDHIR, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Ajay Wadhwa, Adv For The Revenue : Shri Anshu Prakash, Sr. DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the assessee against the order of the ld CIT(A)-12, New Delhi dated 28.03.2016 for the Assessment Year 2007-08. 2. The assessee has raised the following grounds of appeal:- 1. The order of assessment under section 148/ 143(3) of the Act dated 28.03.2014 is erroneous both on facts as well as in law. 2. The Ld. Assessing officer has erred in law in making the assessment under section 148 of the Act. 3. The Ld. Assessing officer has erred in law in making the assessment without recording any failure on part of the appellant to disclose fully and truly all material facts necessary for assessment as per the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3), New Delhi that you have booked Unit No. FF-117, Ground Floor, Commercial Indirapuram Habitat Centre Project, Ghaziabd of AEZ Group and made a total payment of ₹ 7858980/- during the Financial Year 2006-07 relevant to Assessment Year 2007-08. Out of this amount of ₹ 1137000/- was paid by cheque and balance amount of ₹ 6721980/- was paid in cash. The same was also accepted by you during the course of post search enquiries conducted by the Investigation Wing. Thereafter, in response to query letter dated 05.02.2013 of the undersigned vide you letter dated 27.02.2013 you have accepted investment of ₹ 11.37 lacks only for the above property. In view of the above fact and circumstances I have reasons to that the income to the extent of ₹ 6721980/- paid by you in cash for booking/ purchase of the above property with AEZ Group in FY 2006-07 is chargeable to tax for the Assessment Year 2007-08 and has escaped assessment. 4. Consequent to that the notice u/s 142(1) was issued on 18.02.2014 stating the same facts. The Assessing Officer also provided the copy of statement of two investors which were recorded on 10.02.2012 who have confirmed having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... geable to tax for the assessment year 2007-08 and has escaped assessment. 5. On 24.03.2014, the assessee raised objection to the revised reasons recorded by the Assessing Officer stating that assessee has not made any cash payment. The assessee also objected to the reopening. On the same day, the objections of the assessee were rejected without adverting on any of the objections. Consequent to that the assessment was framed u/s 143(3) read with section 148 on 28.03.2017 making an addition of ₹ 6721980/- to the total income of the assessee as return on 18.04.2013. Consequently the total income assessed at ₹ 6830236/-. The assessee aggrieved with the order of the ld Assessing Officer preferred appeal before the ld CIT(A) who dismissed the appeal. Now the assessee is before us. 6. The ld AR submitted a written synopsis which are as under:- Brief facts of the case: 1) Ld. A0 on the basis of information from Investigation wing vide letter dated 03.05.2012 issued notice u/s 148 on 22.03.2013 to the assessee. (Refer pg no-1 of PB) 2) In response thereto, assessee filed the return of income of ₹ 1,08,256/- as income from other sources. (Refer pg. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which were subsequently utilized to amend the original reasons to believe and to issue another reasons to believe. 1.3 Your Honour, the Id. AO while issuing the another reasons to believe vide letter dated 20.03.2014 had taken the excuse that some typographically mistakes crept in in the letter of original reasons to believe dated 22.04.2013. (Refer page no- 55 of PB). 1.4 The typographical mistakes relates to misprinting/ typing error whereas in another reasons to believe issued vide letter dated 20.03.2014, Ld. AO made the addition as well as deletion of some facts mentioned in the reasons provided on 22.04.2013 which were the original reasons on the basis of which he had issued notice u/s 148 of Income Tax Act, 1961. 1.5 It is a trite law that for making the assessment u/s 147 of I.T Act, the reasons recorded should be clear and unambiguous and should not suffer from any vagueness. 1.6 Therefore the action of ld. AO is not tenable in law. He is not allowed to make any addition or deletion or substitution in the original reasons to be recorded. 1.7 For this proposition, reliance is placed on the following judgments a. Prashant S. Joshi v. IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer s reason to believe that income chargeable to tax has escaped assessment. These reasons cannot be added to, deleted from or supplemented.... e. CIT v. S.R. Construction (2002) 257 ITR 502(M.P) 14. Thus, the attempt of the counsel for the revenue, in the instant case, to justify reassessment on the basis of subsequent material collected by the Valuation Officer cannot justify the reopening of the assessment f. S.Sree Ramchandra Murthy and ORS v. DCIT ORS [2000] 243 ITR 427 (A.P.) 6....It is well settled that the court cannot go beyond the recorded reason, nor can it take into account any supplementary reasons which didn t enter into the mind of the assessing authority at the time of issuing the reassessment notice. g) Kakarla Krishna Murthy v. CIT [1995] 216 ITR 206 15 In Mohender Singh Gill v. Chief Election Comm., AIR 1978 SC 51, 858, it is held that when a statutory functionary makes an order based on certain ground, its validity must be judged by the reasons so mentioned and cannot be supplemented by fresh reasons in the shape of affidavit or otherwise. Otherwise, an order bad in the beginning may, by the time it comes to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee having paid cash for the purchase of the Indirapuram property. 2.7 Therefore information received throws only doubt or suspicion. Suspicion however strong cannot take the place of evidence as laid down by the Hon ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT (1955) AIR 65 (1955 SCR 011941). 2.8 There is catena of judicial pronouncements on this issue which clearly supports the assessee's case on the lack of jurisdiction with the Ld. Assessing Officer who had merely adopted reasons to believe on the basis of the report from the ACIT Investigation and that there is total non application of mind in recording to reasons for assumption of jurisdiction. Reliance is placed on the following judgements: a) Pr. Commissioner Of Income Tax vs. G G Pharma India Ltd- ITA 545/2015 (Delhi HC)-08.10.2015 12 Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not valid. d) Signature Hotels Pvt. Ltd. vs. ITO Anr. [2011] 338ITR 51 (DHC) 15. The aforesaid reasons do not satisfy the requirements of section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except the annexure, which has been quoted above. The annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. The annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not inde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T., Central Circle - 9, New Delhi, which shows cash received which has been coded as 'Incentive to sale As per noting therein, you have paid cash amounting to ₹ 67,21,980/- besides cheque for ₹ 11,37,000/-. This shows that the Ld. Assessing officer relied upon Annexure A-27 while making the impugned addition of ₹ 67,21,980/-. However the same had never been confronted to the assessee. By merely stating anything in the notice, the Ld. Assessing officer had not discharged his duty without furnishing any documentary proof on which he relied and alleged that the cash payment was made by the assessee. The onus is upon Ld. Assessing Officer to substantiate the claim. 3.2 The Ld. Assessing officer in his new reasons to believe dated 20.03.2014 had also talked about the seized material which shows that assessee made the payment in cash. The relevant portion of the new reasons recorded is as under: During the course of search/ survey operation it has been accepted by the investors that they have made cash payment for booking/ purchase of property in the above said project. The amount accepted by them to have been exactly matched with the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 would be redundant. The Ld. Assessing officer issued notice under section 148 to assess such undisclosed income is void ab initio. The ld. AO initiated the assessment proceedings u/s 147 on the basis of material/information found during the course of search and seizure operation carried out on AEZ group (part of Arena Group). However the ld. AO completed the assessment u/s 147 of the Act in spite of sec 153C. Reliance is placed on the following judgements: a) Rajat Shubra Chatterji v. ACIT (ITA No. 2430/Del/2015 dated 20.05.2016) ITAT, Delhi 7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor 140 TTJ 249 (Amritsar) reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch is conducted or requisition is made. The period under consideration falls within the exclusive domain of section 153A. In the instant case, since the assessment is made consequent to search in another case, the Assessing Officer is bound to issue notice u/s 153C and thereafter proceed to assess or reassess total income under section 153A of the Act. The Assessing Officer, instead of complying with the provisions of section 153C, proceeded with the reassessment under section 147/148 which is not applicable to search cases. Therefore, the impugned assessment order passed u/s 143(3), r.w.s. 147 of the Income tax Act, 1961 is illegal, arbitrary and without any jurisdiction. Hence, the assessment order dated 31-12-2010 passed u/s 143(3) r.w.s. 147 is quashed. 6. Addition cannot be made on the basis of admission/statement of third party. The assessee since inception of the assessment had been denying the payment in cash for the investment in Indirapuram property and notwithstanding that other parties statements had been recorded who had admitted to have paid cash, the same cannot be presumed to have taken place in the case of the assessee. The Ld. Assessing Officer made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee. 8.1 The alleged property in question was taken bv M/s. AEZ Group and leased out to M/s. Presidium Educational Institute (P) Ltd. In the terms of agreement M/s. Presidium Educational Institute Pvt. Ltd. was to pay monthly rent of ₹ 88 /- per sq. ft. for the total area allotted to the assessee measuring 1027 sq. ft. However, the said arrangement did not work amicable and the matter was referred to the sole arbitrator with the consent of the parties, an arbitration award was given in favour of the assessee. (Refer pg. no. 38-49 of PB) 8.2 M/s. AEZ Group refunded the entire amount i.e. ₹ 32.00.000/- to the assessee and also refunded ₹ 6.40.314 on which an amount of ₹ 64.031/- has been deducted as TPS by M/s Indirapuram Habitate Centre (Pvt.) Limited proving thereby the fact that the assessee had made no payment in cash and assessee had also come out of the terms of the agreement bv a legal arbitration and the result was that the agreement was terminated. 8.3 In view of the above fact, it is proven that the assessee did not pay any cash towards the investment in the property. 9. The contention of the ld. AO on non recording of her s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apparently, assessee was not examined. The Revenue also could not produce any such communication which are also referred to in letter dated 22.04.2013. 10. Further suddenly on 20/03/2014 the Ld. assessing officer wrote a letter to the assessee stating that by sending the letter dated 22/04/2013 wherein the original reasons recorded were communicated, some typographical mistake have crept in. Therefore, the said letter dated 22/04/2013 is withdrawn. It was further stated that 22/03/2013 under section 147 of even date is enclosed. Suddenly the new reasons, which are placed at page No. 56 of the paper book, were supplied to the assessee. As per the new reasons the total payment of ₹ 7 858980/-, the sum paid by cheque of ₹ 11.37 Lacs, and the balance amount of ₹ 6721980/-paid in cash also remains unchanged. This was provided to the assessee when only 10 days time was left with the assessing officer for completion of the assessment. The assessee filed objection to this new reasons on 24/03/2014, which was disposed of on the same date without adverting to the any of the objection of the assessee. In the present case the figure stated by the Ld. assessing officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe that (a) the income of the assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the amendment, only one singular requirement is to be fulfilled under section 147(a) and that is, that the Assessing Officer has reason to believe that income of an assessee has escaped assessment. However, the proviso to section 147 of the Act provides a complete bar for reopening an assessment, which has been made under section 143(3) of the Act, after the expiry of four years. However, this proscription is not applicable where the income of an assessee has escaped assessment on account of failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Thus, in order to reopen an assess ment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the assessee to truly and fully disclose all material facts must be concluded with certain level ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... serve that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the Commissioner of Income-tax may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the Assessing Officer has to, applying his mind to the materials, conclude that he has reason to believe that income of the assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 14. In the circumstances, the conclusion reached by the Income-tax Appellate Tribunal cannot be said to be erroneous. No substantial question of law arises. 11. In the present case, it is apparent that Ld. assessing officer has not applied his mind to the information provided by the investigation wing to the extent that even the amount of payment made by the assessee to the builder was not even verified. Furthermore it was also not verified that were the investors purchasing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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