9911796707
TMI Blog2024 (7) TMI 570X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts. The survey team of the Income Tax department did not find any corroborative evidence or any tangible material that cash appearing in the laptop was belongs to the assessee-company, and assessee-company had actually received the cash, in fact, during the assessment proceedings, the director has denied, having received such cash. Therefore, reasons recorded by the assessing officer fails. Therefore,we note that to initiate reopening of the assessment, the assessing officer must have 'reason to believe that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the AO which may trigger reason to suspect. It must be kept in mind that the reason to believe must have a rational connection with or relevant bearing on the formation of the belief, i.e, there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/ cheque amount, for which the Assessing Officer has reopened the assessment had already been disclosed by the assessee in the books of accounts. AO having not carried out the scrutiny assessment within the prescribed sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year of completion of project i.e. in the year in which normal profit, as per books, is taxed. 4. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer s Addition of Rs. 17,75,000/- on account of unsecured loan received from another company i.e. Jahanvi Home Developers and Finance Ltd, overlooking the fact that the appellant has discharged its onus in terms of section 68 of IT Act. 4. The grounds of appeal raised by the assessee in ITA No. 665/SRT/2023 are as follows: 1. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer s reopening of assessment u/s 147 and issue of notice u/s 148 for AY.2011-12. 2. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer s addition of Rs. 20,00,000/- without appreciating the fact the there was neither any business of Hari Sai Sarnam Project nor any sale of flat-shop made in the year under appeal. 3. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer s addition of Rs. 20,00,000/- without considering the settle position of law that profit on On Money Receipt is to be taxed in the year of completion of project i.e. in the year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inventorised and impounded as A-l containing page Nos. 1 to 189. The details consist the name of party, block, flat No, type, floor, value and below that details of amount received various dates through cheque or cash were written. Smt Parul J. Shah was confronted with the Annexure A-l and was asked to explain whether payment received in cheque and cash has been shown in the books of account or not? She replied and confirmed in answer to question No: 11 of the statement recorded u/s 131 of the Act dated 24.03.2014 that this print out are taken from my Laptop and details are customer- wise ledger account of our project Hari Sai Sarnam . Further, she stated that these papers contained details of cash and cheque received from the customer during the F.Y.2009-10 to 2013-14. Further, she admitted that the amount received through cheque have been accounted for in the regular books of accounts, however cash received have not been accounted for in the regular books of accounts. As such the cash receipt received during the F.Y.2009-10 comes to Rs. 80,00,000/- and the same is admitted as unaccounted income of M/s. Vaibhav Reality Developers Ltd by Smt. Parul J. Shah, Director of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant did not file any document with respect to the aforesaid unsecured loans before assessing officer. Although, income tax return of the lender has been filed by the assessee but the lender does not have credit worthiness to offer such a loan to the appellant. The assessee could not furnish details and evidences to establish genuineness of the unsecured loan relating to the aforesaid party. Therefore, ld CIT(A) confirmed the addition made by the assessing officer to the tune of Rs. 17,75,000/-. 8. Aggrieved by the order of ld.CIT(A), the assessee is in appeal before us. 9. Shri Rajesh Upadhyay, Learned Counsel for the assessee, begins by pointing out that first of all, the impugned assessment years 2010- 11 and 2011-12 were not under survey proceedings. The ld Counsel stated that in assessee s case survey u/s 133A of the Income Tax Act, dated 24.03.2014, was carried out at M/s Vaibhav Reality Developers Ltd, at 13/1, Arunoday Society, Alkapuri, Vadodara and Project site office at Hari Sai Sharnam , Near Kala Darshan Char Rasta, Waghodia Road, Vadodara. The year of survey in the assessee s case is 2013-14, which relates to assessment year 2014-15. Hence, the reopening of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Counsel, argued that no addition should be made in the hands of the assessee, merely based on the statement taken during survey, because, the statement so taken was not supported by any corroborative evidences. Besides, Ld. CIT(A), did not appreciate the facts that there was neither any business of Hari Sai Sarnam Project nor any sale of flat-shop made in the year under appeal. The ld CIT(A) also ignored the settled position of law that profit on On Money Receipts is to be taxed in the year of completion of project, that is, in the year in which normal profit, as per books, is taxed. The Ld. CIT(A), has erred in law and on fact to upheld assessing officer s Addition of Rs. 17,75,000/- on account of unsecured loan received from another company i.e. Jahanvi Home Developers and Finance Ltd, overlooking the fact that the appellant has discharged its onus in terms of section 68 of IT Act. The ld Counsel submitted the copy of confirmation and ledger accounts and Contra Ledger of M/s Natraj Construction (vide Pb.79 87). Besides, the quantum addition of Rs. 80,00,000/- and Rs. 20,00,000/- were made by the Assessing Officer in the hands of M/s Vrundavan Restaurant, (other parties), t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded u/s. 131 of the Act dated 24.03.2014 that this print outs are taken from my laptop and details are customer wise ledger account of our project Hari Sai Sarnam . Further she stated that this papers contained details of cash and cheque received from the customers during the F.Y. 2009-10 to 2013-14. Further she admitted that the amount received through cheque have been accounted for in the regular books of account, however cash received have not been accounted for in regular books of accounted. As such the cash receipt received during the F.Y.2009- 10 comes to Rs. 80,00,000/- and the same is admitted as unaccounted income of M/s. Vaibhav Realty Development Ltd by Smt. Parul J. Shah, Director of the company, in her statement dated 24.03.2014 recorded u/s. 131 of I.T. Act. In view of the above facts, I have reasons to believe that the income of the assessee to the extent of Rs. 80,00,000/- has escaped within the meaning of section 147 of the Act. Thus, it is a fit case for issue of notice u/s. 148 of the I.T. Act. 17. The reasons recorded by the Assessing Officer for assessment year 2011-12, are reproduced below: Reasons for Re-opening of assessment in the case of above mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for AYs.2010-11 and AY.2011-12. During the survey proceedings, Director, Smt Parul J. Shah replied to question no.11 of the statement recorded under section 131 of the Act dated 24.03.2014 that print out taken from her laptop where the details of customers in respect of Hari Sai Sharnam . Smt Parul J. Shah stated that the print out from her laptop where the details of cheque receipt from the customers as well as cash receipts from the customers for Financial Year 2009-10 to 2013-14. She also admitted that the amount received through cheques have been accounted for in the regular books of accounts, however cash received have not been accounted for in regular books of accounts. Therefore, based on the statement of Smt Parul J. Shah, during the survey proceedings, under section 133A of the Act, the assessee s assessments were reopened for assessment years (AY) 2010-11 and 2011-12. We note that the statement taken by the Director of the assessee-company has not been corroborated by any other tangible material. Therefore, reasons recorded by the Assessing Officer, in both the assessment years, are merely on the statement taken in the survey proceedings and not on the basis of any co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey, no addition should be made. Therefore, addition, if any, may be made, based on the evidence or tangible material. 22. We also note that reasons recorded by the assessing officer, on the basis of statement taken during the survey, is not sustainable in law, as the statement on oath taken during the survey is not supported by any tangible material. For that reliance can be placed on the judgment of Hon`ble, Madras High Court in the case of M/s. A. Thangavel Nadar Stores vs. The Income Tax Officer, vide W.P.No.21919 to 21921 of 2018 and W.M.P.Nos.25719 , 25720, 25721 34931 of 2018, dated 25.02.2020, wherein the Hon`ble Court held as follows: 6. In the course of the survey, three cheques, post-dated to 25.01.2018, 25.02.2018 and 25.03.2018, for amounts of Rs. 15,00,000/- had been taken under duress from the petitioner by the surveying officials towards advance tax liability. By letter dated 05.02.2018, the petitioner sought return of the cheques since, according to it, the computation of taxes as effected by the petitioner was perfectly in order and the petitioner had been regular in defraying its tax liability. There was thus no necessity for the Department to have taken the chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partment in the matter of re- assessments and in line with the same, preliminary objections to the notices under Section 148 were filed by the petitioner on 09.07.2018. The broad basis on which the notice was objected to was that (i) it was bereft of jurisdiction insofar as no approval had been obtained from the Joint Commissioner of Income Tax as required in terms of Section 151(2) and (ii) that the sworn statements recorded from the partner could not form the sole basis of the re-assessments. The petitioner also documented the fact that the post-dated cheques taken in the course of survey proceedings on 12.01.2018 had been returned by the Department to the petitioner only on 07.02.2018. 10. In response to the objections the Assessing Authority passed the impugned orders dated 30.07.2018 rejecting the objections. The orders are identical for all the three yea Rs. A reading of the same makes it amply clear that the re-assessment is based solely and wholly on the statement recorded from Mr.Janakiraman. Paragraph no.4 of the impugned order makes this more than clear, as extracted below: 'During the course of survey it is found that the assessee Firm has not maintained any proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the gross profit on the undisclosed income and undertaken to pay advance on the same. This, according to the revenue, is sufficient to establish the necessity as well as validity of the proceedings for re-opening of the assessments. 14. The issue that I am called upon to decide is whether a notice/ proceedings for re-assessment can be sustained wholly on the basis of a sworn statement recorded in the course of survey in the absence of any other tangible evidence available with the Assessing Officer. 15. The petitioner relies on the decision of the Karnataka High Court in the case of Commissioner of Income Tax and Another Vs. Dr.N.Thippa Setty (322 ITR 525) where an order of re-assessment based entirely on statements recorded under Section 132(4) of the Act and subsequently retracted, was set aside by the court. 16. The Central Board of Direct Taxes has also issued a circular in F.No.286/2/2003 dated 10.03.2003 to the following effect: 'F.No.286/2/2003-IT(Inv) http://www.judis.nic.in Govt. of India, Ministry of Finance Company Affairs, Department of Revenue, Central Board of Direct Taxes, No.254/North Block, New Delhi 10th March 2003 To All Chief Commissioner of Income Tax (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained, viz., that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post April 1, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of 'change of opinion' is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the assessing officer. Hence, after April 1, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or, as the case may be,]] (ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him, (iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act. 20. Contradistinguish this with a statement recorded by the Assessing Officer under Section 132(4) as follows: 132(4): The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. [Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purpose of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 263 ITR 101 (Ker); (iii) The expression such other materials or information as are available with the Assessing Officer contained in Section 158BB of the Income Tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income Tax v. G.K. Senniappan [2006]284ITR220(Mad) ]; (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C. (A) No. 2620 of 2006 between Commissioner of Income Tax v. S. Ajit Kumar; (v) Finally, the word may used in Section 133A(3)(iii) of the Act, viz., record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. 8. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e, there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/ cheque amount, for which the Assessing Officer has reopened the assessment had already been disclosed by the assessee in the books of accounts. The Assessing Officer having not carried out the scrutiny assessment within the prescribed statutory limit, cannot be given another innings, for no fault of the assessee, and therefore in the facts and circumstances of the case, we are of the considered opinion that reason to believe which is the jurisdictional precondition to reopen the assessment as required by the law has not met in the reasons recorded in the instant case and therefore the action of the Assessing Officer to reopen the assessment is null in the eyes of law and hence we are inclined to quash the initiation of reassessment proceedings being ab-initio void. In view of the reasons set out above, as also bearing in mind entirety of the case, we are of the considered view that the reasons recorded by the Assessing Officer, as set out earlier, were not sufficient reasons for reopening the assessment proceedings. We, therefore, quash the reass ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
