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TMI Blog2018 (8) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... ealed any income, and therefore, on this ground itself, the reopening of the assessment as well as re-assessment made, requires to be considered as illegal and bad at law. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in confirming the addition of Rs. 1,22,24,800/- made by the learned Assessing Officer in the total income of the Appellant on ground that the Appellant has concealed the income by not furnishing the source of investment in the land though in fact the Appellant has not purchased any such land and not made any investment in land." 3. The assessee also filed additional ground of appeal vide application dated 03.04.2018 which is reproduced as under: "1. The learned Commissioner of Income Tax, (Appeals)-4, has erred in confirming the addition u/s. 68 of Rs. 1,22,24,800/- in respect of cash paid of Rs. 10,00,000/- on 30.09.2010 and Rs. 1,40,00,000/- on 03.11.2010 in Asst. Year 2012-13 towards Banakhat money though the said dates fall in Asst. Year 2011-12. Therefore, the addition made in Asst. Year 2012-13 is patently wrong." 4. The assessee thereafter filed another additional ground of appeal vide application dated 05.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Navalpark, Ramji Nagar Road, Laxmipura, Palanpur, District: Banaskantha had purchased some pieces of land at Sujanpur, Patan with five co-partners. The total consideration agreed between the parties was Rs. 6,11,24,000/-. As per Banakhat dated 06.11.2010, the amount of Rs. 1.50 crore was paid by the purchasers to the seller. The Sale Deeds of these lands were executed in F.Y. 2011-12. On inquiry, the information found to be true. Undisclosed investment is assessable to tax under Chapter VI of I.T. Act (Sections 68 to 69D). 2. I have therefore, reason to believe that income chargeable to tax exceeding Rs. 1,22,24,800/- has escaped assessment for A.Y. 2012-13 and intend to reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to the notice subsequently in the course of proceedings under this section." 6. The objections raised thereupon by the assessee were found to be without any merit by the AO. 7. The AO was of the view that the assessee has failed to discharge onus to negate cogent evidence found in the form of Banakhat/agreement to sale (executed by the assessee along with other co-owners) as a futile and hollow document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., therefore, re-opening of the assessment is not valid. The appellant cited various case-laws in support of this contention. On going through the facts of the case and the submission of the appellant, it is found that the transaction under consideration was not shown by the appellant in the return filed by him. Even during the assessment proceedings, the appellant did not disclose this transaction to the A.O. As the A.O. was not aware about this transaction, no question was asked about this transaction from the appellant. These fact show that this transaction was not investigated by the A.O. during the assessment proceedings. After passing the assessment order u/s. 143(3), the A.O. received information from the DCIT Central Circle-2(4), thus, the A.O. had additional information with him, hence, he is justified in re-opening of assessment u/s. 147 issuing notice u/s. 148 of the Act. The case laws upon which appellant relied are not relevant to this case, as the facts of the appellants case are not identical to the facts of these cases. Therefore, the case laws relied upon by the appellant are not applicable to the appellant case, keeping in view the above discussion, this ground of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions of the appellant has been carefully considered. There is no dispute about the facts mentioned above about the land consideration and other facts as mentioned in "Banakhat". The appellant's contentions is that the vendor Shri Chandankumar Ramandas Pohani has only "Banakhat" rights from on Shri Arvindbhai Modi and seller has not acquired ownership rights. This contention of the appellant is not relevant to this transaction because it is common practice in land transactions that "Banakhats" are made by the middlemen/investors. After "Banakhat" is made, the buyer shown in "Banakhat" search for further buyer of the land. On actual sale, such lands are transferred directly from owner of the land to actual buyer of the land and sale deed is made in the names of only these two parties. The persons who are investors/middlemen, entered into transactions by way of making "Banakhat" documents take away the profit but their name nowhere appears in sale deed. Such "Banakhat" are normally found during the course of surprise action like surveys/searches by the department. The same happened in this case also. The land was directly transferred from land owner to the actual buyer Shri Ramesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce, rejected. 8. Keeping in view the discussion above, the additions made by the A.O. are found justified, hence confirmed. This ground of appeal dismissed.' The CIT(A) accordingly dismissed the appeal of the assessee. 9. Further aggrieved, the assessee preferred appeal before the Tribunal. 10. The learned AR for the assessee at the outset adverted our attention to the additional grounds of appeal filed on two occasions before the Tribunal and submitted that the additional grounds so raised seeks to challenge the very jurisdiction of the AO to initiate proceedings under s.147 of the Act and consequent assessment order framed under s.147 of the Act is under challenge for which relevant facts are available on record. The learned AR accordingly urged for admission as well for granting primacy to additional grounds in the matter of hearing. 10.1 The learned AR firstly adverted our attention to the additional grounds of appeal vide application dated 03.04.2018 and contended that the whole basis of addition of Rs. 1,22,24,800/- is Banakhat dated 30.09.2010 and the payment of Rs. 1,50,00,000/- made to the purported seller by the assessee along with other co-owners. The alleged paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentioned in the Banakhat not being the owner of the land was not capable of selling the land and thus the Banakhat was intended only to earn possibly more commission or dalali. The learned AR further contended that while as per Banakhat, Shri Chandankumar Ramandas Pohani was the intending seller who acquired only Banakhat rights from one Shri Arvindbhai Modi, the actual sale carried out subsequently do not make any reference to the aforesaid seller or the assessee as purchaser. The final sale deed is between the real owners and Rameshbhai B. Agrawal group. This also suggests that the Banakhat has not been acted upon in any manner. The learned AR next pointed out that the cash transactions aggregating to Rs. 1.5 Crore as mentioned in Banakhat did not really occur at all and without prejudice relates to FY 2010-11 and thus to AY 2011-12. The addition made in the hands of assessee in AY 2012-13 is thus not within the authority of law. 10.4 The learned AR in conclusion submitted that the addition requires to be deleted both on account of incurable defect in assuming jurisdiction as well as on merits and accordingly urged for suitable relief as prayed. 11. The learned DR, on the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of belief on merits in the course of the re-assessment proceedings. It was submitted that the factum of escapement of income is not required to be conclusively proved at the time of issuance of notice under s.148 of the Act. It was submitted that there is no provision for making any inquiry on the facts available before the AO prior to initiation of action under s.148 of the Act. The learned DR thus submitted that the additional ground filed by the assessee vide application dated 03.04.2018 is bereft of any merit and thus urged for its dismissal. 11.4 Adverting to another additional ground of appeal seeking to challenge initiation of action under s.147 r.w.s. 148 in the case of search assessment, the learned DR emphasized on the fact that the Banakhat and sale deeds discovered at the time of search clearly indicated involvement of the assessee in unreported cash transactions but however such documents merely 'pertained to' the assessee in distinction to the expression 'belonging to' the assessee in the light of the decision of the Hon'ble Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2015] 370 ITR 295 and the decision of the co-ordinate bench in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese legal issues. 13. First and foremost, the assessee seeks to challenge the issuance of notice under s.148 of the Act concerning AY 2012-13 in question on the ground that the cash payments purportedly made up to the date of execution of Banakhat pertains to preceding assessment year i.e. 2011-12. It is thus the case of the assessee that action under s.147 of the Act concerning assessment year in question is prima facie wrongful and vitiated by non-application of mind and consequently deserves to be struck down. 13.1 To begin with, on a reading of reasons recorded under s.148(2) of the Act, we notice that the AO found the total consideration of land as mentioned in Banakhat to be Rs. 6,11,24,000/-. The AO formed belief towards escapement of chargeable income to the extent of 1/5th of the aforesaid amount which worked out to Rs. 1,22,24,800/-. Thus, the plea towards escapement of chargeable income was made by the AO with reference to the total sale consideration and was not restricted to only advance allegedly paid of Rs. 1,50,00,000/- up to the date of execution of agreement to sale (Banakhat). Therefore, simply because a part of the transaction has been executed in the precedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Before we proceed for determination of issue, it would be pertinent to refer to the provisions of s. 153C and also s. 147 of the Act, as appearing in the statue at the relevant time, to the extent as may be relevant in the context. "Assessment of income of any other person. - 153C. [(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A :] [Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maheshwari v. Asstt. CIT [2007] 289 ITR 341 would also apply where assessment is to be made u/s. 153C. As per the aforesaid decision, the precondition for invoking jurisdiction for issue of notice u/s. 153C is that the AO must "record satisfaction" as to the seized material 'belongs to' the third person i.e. assessee. 14.2.2 Under s. 153C as applicable to the relevant assessment year in appeal, where the Assessing Officer of the searched person is satisfied that any books of account, or documents seized or requisitioned 'belong to' or belongs to any person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person for such jurisdictional Assessing Officer to complete the assessment. This position has been confirmed by the Hon'ble Supreme Court in the case of CIT v. Calcutta Knitwears [2011] 338 ITR 239. 14.2.3 Therefore, question posed whether, in view of the phraseology employed in the section, if the books of account belong to the person searched but entry in such books reflect the undisclosed income of the third party then, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dress the point, section 153C has been amended to widen the powers of the Assessing Officer of the searched person to hand over the books of account or documents to the jurisdictional Assessing Officer even if these merely 'pertains or pertain to', or any information contained therein merely relates to the other person. Thus, after the legislative amendment, now the deppt. is well equipped to exercise jurisdiction under s. 153C even if the document seized merely pertains or pertain to or any information contained therein relates to the other person without the necessity of these documents etc. to be belonging to such other persons. Thus, in the light of the judicial precedent of the Hon'ble Delhi High Court and further in view of the subsequent legislative amendment, the difference between the expression 'belong to' and 'pertain to'/'relate to' are visibly clear. Similar legal position has been enunciated by the Hon'ble Gujarat High Court in the case of Kamleshbhai Dharamshibhai Patel vs. CIT 263 ITR 362 (Guj). Hence, in the light of above discussion, we are of the view that the loose paper and other documents and diaries etc. found from the possession of the searched person cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons definitely stand on different footings. Section 158BC and S. 153C are analogous. The key variances are firstly, non-obstante clause in S. 153C grants nearly sweeping powers to revenue with a liberty to summarily reopen the assessment of 6 years without observing stringent and valuable safeguard of 'reason to believe' set out in S. 147 of the Act. Provisions of S. 153C thus somewhat tones down the rigors of S. 147 in favour of the Revenue. Secondly, for usurping jurisdiction under S. 147, the documents/papers found in the course of search need not 'belong to' the person other than person searched. Mere-demonstrable connection or live link to such third person revealing escapement of income is adequate to invoke remedy under S. 147. Thirdly and significantly, operation of Section 153C is dependent on the 'satisfaction' arrived by the AO of the searched person at the first instance and not that of AO of the person whose income is found to have escaped assessment. In the absence of such 'satisfaction' arrived by the AO of the searched person, the AO of the third party/Assessee herein would be rendered powerless to assess true income under S. 153C. In contrast, Section 147 can be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under old scheme) and Section 147/148 of the Act under normal provisions, provisions of erstwhile Section 158BC will prevail. The Hon'ble Gujarat High Court has also opined that proceedings under s.147/148 of the Act will not lie where it is repugnant to the procedure laid down under erstwhile Chapter XIV-B relating to search cases. In the instant case, where the onerous proceedings under s. 153C of the Act has not been invoked and could not possibly be invoked, there was no impediment for initiating proceedings under s.147 of the Act by the AO as discussed in elaboration above. Therefore, in Cargo Clearing Agency and other decisions of the co-ordinate bench cited on behalf of the assessee rendered on similar lines do not give rise to any conflict and are of no assistance to the assessee. 14.6 Consequently, the second additional ground is also dismissed. 15. We shall now address the issue on merits. We observe from the appellate order of the CIT(A) that the assessee did not disclose the transactions found to be recorded in Banakhat to the AO at all. While the assessee has not advanced its arguments on merits in any detail except for the submission that (i) Banakhat was executed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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