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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI B R BASKARAN, AM & SHRI N. K. CHOUDHRY, JM
The Assessee/Appellant herein has preferred this appeal against the order dated 16.11.2022 impugned herein passed by Ld. Commissioner of Income Tax (Appeals)-48 Mumbai {in short ‘Ld. Commissioner)’} u/s 250 of the Income Tax Act 1961 (in short ‘the Act’).
M/s Atul Projects India Pvt. Ltd. 2. The case of the Assessee was re-opened under section 147 of the Act by recording reasons for re-opening and consequently notice under section 148 of the Act was issued on 07.12.2016, by which the Assessee was asked to furnish the return of income for the year under consideration, within 30 days from service thereof.
2.1 In response to the notice under section 148 of the Act, the Assessee has claimed as under:
“That it had already filed its return of income on dated 27.09.2011 which was processed and assessed under section 143(3) of the Act on dated 06.02.2014 and therefore there is no income chargeable to tax has escaped assessment for the AY under consideration, as the Assessee had disclosed fully and truly all material facts necessary for his assessment. Without prejudice to the above, we request your goodself to treat the return of income filed on 15.01.2017 as return filed in response to the notice under section 148 of the Act.”
2.2 The Assessee also requested the AO to furnish the reasons recorded for the re-opening of the case.
2.3 The AO supplied the copy of the reasons to the Assessee, in response to which the Assessee vide letter dated 22.02.2014 filed its objection which were disposed of by the AO vide order dated 11.08.2017. Thereafter statutory notices have been issued to the Assessee, in response to which, the Assessee filed its response.
The AO during the assessment proceedings also recorded the statements of Shri Sumit Gupta and Shri Atul Patel, Directors of M/s Atul Projects India Pvt. Ltd. Assessee-company and by considering the same vide Assessment Order dated 13-12-2017 u/s 143(3)/147 of the Act ultimately, made the addition of Rs. 6 Crores in terms of section 68 of the Act and added the same in the total income of the Assessee, by observing as under: “ That the Assessee-company was in the practice of entering into undated and unsigned MOU’s like this additional MOU and the use to follow the terms of those in later and spirit. Hence, it can be definitely concluded that the supplementary MOU by virtue of which the assessee-company has given Rs. 6 Crores to Asha Devi Gupta have been executed between the two parties. The above said supplementary MOU, which is the most important documentary proof for this cash transaction and which is seized during the course of the survey in both handwritten Form and print Form can be held as non-genuine just because it is undated and unsigned.
It is likely that thinking of the test implications, both the parties entering into supplementary MOU may not accept the above transaction, but from the above paragraph, it can be conclusively established that Rs. 6 Crores cash was handed over by the Assessee-company to Smt. Asha Devi.”
The Assessee being aggrieved challenged the re-opening of the assessment as well as addition on merit, but failed to get any relief, as the ld. Commissioner dismissed the appeal of the Assessee and affirmed the said addition by concluding as under:
8.7 From the above, it is clear that Shri Atul Patel, director of the assessee company has himself confirmed that the appellant was in practice of entering into undated and unsigned MOUs like the impounded
M/s Atul Projects India Pvt. Ltd. supplementary MOU. Hence, these impounded documents cannot be considered as dump documents as claimed by the appellant. The terms and conditions of these documents are fully complied with. Also, the contention of appellant that they have filed arbitration application before Hon’ble the Bombay High Court wherein they did not mention any payment made over and above the cheque amount to Smt. Ashadevi R. Gupta, has got not relevance in my humble opinion, not mentioning the cash figure before Hon'ble High Court, will not change the fact situation In any case, cash payments are generally not recorded in the regular books of accounts as these remain outside the books,
8.8 Hence, the argument of the appellant that supplementary MOU dated 15.11.2010 cheque is a dumb document is baseless. Also, the argument that before Hon'ble High Court they had mentioned only payment made to the seller of Rs. 17 Crores, is irrelevant and will not alter the situation considering the statements recorded and documents impounded. It cannot be denied that cash paid to seller, as mentioned in the supplementary MOU dated 15.11.2010, do not form part of the relevant books of accounts and official papers filed before Hon'ble High Court. Considering totality of the facts and circumstances, the impugned addition of Rs 6,00,00,000/- deserved to be confirmed. Thus, the ground no. 2 and 3 of appellant are hereby Dismissed.
The Assessee being aggrieved with the impugned order preferred this appeal.
We have heard the parties and perused the material available on record. At the outset, we observe that the Assessee by filing additional grounds of appeal challenged the re-opening of the proceedings under section 147 of the Act as well, which according to our considered view do not require any determination of the fresh facts and in-fact the question raised by the Assessee is legal in nature and goes to the root of the case, hence we are inclined to admit the same and before adverting to the merits of the case, proceeding to adjudicate the legality of the initiation/re-opening of M/s Atul Projects India Pvt. Ltd. the case under section 147 of the Act and consequently passing of the Assessment Order.
6.1 Relevant facts for adjudication of instant issue are that the Assessee declared its income of Rs. 19,81,52,840/- by filing its return of income on dated 27.11.2011, which was selected and resulted into passing of the Assessment order 06.02.2014 under section 143(3) of the Act, whereby the total income of the Assessee was determined at Rs. 19,88,89,870/-.
6.2 Subsequently acting on the information received from ACIT- 24(2), Mumbai qua survey operation conducted under section 133(A) of the Act in the case of M/s Hill Crest Joint Venture on dated 10.09.2015 wherein certain documents reflecting involvement of the Assessee were impounded, the case of the Assessee was re- opened under section 147 of the Act by recording the following reasons 03.10.2016, as reproduced by the AO in the Assessment order (para no 4).
“ The assessee, M/s Atul Projects India Ltd. PAN: AAGCA5921P is an assessee of this circle. The assessee for the A.Y.2011-12 has e-filed its return of income on 27.09.2011 declaring an income of Rs. 19,81,52,840/ which has duly processed u/s. 143(3) and assessment completed on 06.02.2014 determining the total income at Rs. 19,88,89,870/-
Information is received from the office of the ACIT 24(2), Mumbai vide letter No. ACIT-24(2)/Intimation/2015-16/ dated 21.12.2015, that a survey action u/s. 133A of the 1.T. Act was conducted in the case M/s Hillcrest Joint Venture on 10.09.2015.
M/s Atul Projects India Pvt. Ltd. The ACIT 24(2), Mumbai vide his letter dated 21.12.2015 has informed that the most important documents found and seized is Bundle No. 7 wherein on page nos. 76 and 77 a supplementary MOU has been entered into between M/s Atul Projects India Ltd. and Smt. Ashadevi Gupta for the land purchased wherein M/s Atul Projects India Ltd had paid sum of Rs. 21.00 Crores to Smt. Ashadevi Gupta in cash. After going through the information and the impounded material, it is clear that Page Nos. 76,77,81, & 82 of Bundle No. 7 are self-explanatory and clearly detect cash transaction which is unaccounted and not recorded in regular book of accounts.
Further, Shri Atul N. Gupta, Director of M/s Atul Projects India Ltd. has also admitted that he has executed the MOU with Smt. Ashadevi Gupta and made expenses such as compound building, surveying, appointing security on the plots.
Form the supplementary MOU dated 15.11.2010 available with this office between Ashadevi R. Gupta & Atul Projects India Ltd., it is seen that Rs. 21Cr. cash was to be paid on and before signing MOU dated 02.11.2010.
It is also mentioned in supplementary MOU para (5) that party of the second part hereby promises to pay the above amount and this MOU is to be treated as promissory note of amount lying in balance le Rs. 15,00,00,000/-in favour of the party of the first part. Rs 6 Cr is already paid to Smt Ashadevi Gupta by the assessee as evident from the supplementary MOU and the dates of payment of this amount in cash are also mentioned on the supplementary MOU which farther authenticates the genuineness of this transaction.
Hence, in view of the above, there is a failure on the part of the Assessee to disclose fully and truly all material facts necessary for his assessment for that AY. Therefore, I have reason to believe that the income has escaped assessment within the meaning of section 147 of the Income Tax, 1961.
M/s Atul Projects India Pvt. Ltd. 6.3 On the basis of the aforesaid reasons recorded, the AO issued the notice dated 07.12.2016 under section 148 of the Act and vide assessment order dated 31.03.2011 ultimately completed the assessment under section 143(3) r.w.s. 147 of the Act, by making the addition of Rs. 6 Crores in terms of section 68 of the Act.
6.4 We observe that admittedly the AY pertains to 2011-12 and the reasons were recorded on 03.10.2016 and the re-assessment proceedings have been initiated u/s 147 of the Act after the expiry of 4 years from the end of the relevant assessment year and therefore, the first proviso of section 147 of the Act is applicable, which mandates that where the Assessment has been made u/s 143(3) or 147 of the Act for the relevant assessment year, then after the expiry of 4 years from the end of relevant assessment year, no action under section 147 of the Act shall be taken, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the Assessee to make a return u/s 139 or in response to the notice issued in sub section 1 of section 142 or section 148 or to disclose fully and truly all material facts necessary for that assessment year.
6.5 The Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd. (supra) has also dealt with first provision to section 147 of the Act and specifically held as under:
M/s Atul Projects India Pvt. Ltd. ” That the AO must disclose in the reasons recorded u/s 147 of the Act, as to which material or facts was not disclosed fully and truly necessary for that assessment year so as to establish the vital link between the reasons and evidences where impugned notices beyond the period of 4 year from the end of the relevant assessment year and it is not complied with the requirements of proviso to section 147 of the Act, then AO has no jurisdiction to reopen the assessment proceedings, which were concluded on the basis of Assessee u/s 143(3) of the Act and this short count alone, the impugned notice is liable to be quashed and set aside.”
6.6 Even the co-ordinate bench of the Tribunal in the case of Sangeet Kumar Sawarmal Hisaria Vs. DCIT, CC-2(4) also considered the identical situation and by relying upon the judgment in the case of Hindustan Lever Ltd. (supra) and observing that identical view has been expressed by Hon’ble Madras High Court in the case of Shri Sakti Textile Ltd. Vs. JCIT (2010) 193 taxmann.com 216, categorically held the re-opening as bad-in-law and consequently quashed the orders passed by the Tax Authorities, by observing as under:
Admittedly, there is huge variation in the wordings/sentences mentioned in connection with “reasons for reopening”, between that given in the letter supplied to the assessee and that mentioned in the assessment order. Further, we notice that the original assessment of the assessee was completed under section 143(3) of the Act on 16.11.2013 and the assessment has been reopened on 31.3.2018, i.e., after expiry of four years from the end of the assessment year. Hence, the assessee would be M/s Atul Projects India Pvt. Ltd. protected by the first proviso to section 147 of the Act, which reads as under:-
"Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
A perusal of the above said proviso would show that it is imperative on the part of the assessing officer to show that there was failure on the part of the assessee to disclose fully and truly all material necessary for his assessment. It has been held so by Hon’ble Bombay High Court in the case of Hindustan Level (268 ITR 332).
“20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is Sangeetkumar Sawarmal Hisaria 7 permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose
M/s Atul Projects India Pvt. Ltd. his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.”
Identical view has been expressed by Hon'ble Madras High Court in the case of Shri Shakti Textiles Ltd. Vs. JCIT (2010) 193 Taxmann 216.
Admittedly, in the instant case, the Assessing Officer has not stated or pointed out in the “reasons recorded for reopening” that there was such failure on the part of the assessee. Further, there are two different versions of “reasons for reopening”. Since the AO has reopened the assessment without pointing out that there was failure on the part of the Assessee to disclose fully and truly all material facts, we hold that the impugned reopening is bad in law and accordingly quash the orders passed by the tax authorities for A.Y. 2011-12.
Since we have quashed the assessment order on the above said legal ground, there is no necessity to adjudicate the issues urged on merits.” (Highlighted by us for clarity)
M/s Atul Projects India Pvt. Ltd. 6.7 We observe, that the AO in the assessment order dated 31.03.2011 reproduced the reasons recorded in para-4, wherein in last para of the reasons, recorded as under:
“Hence, in view of the above, there is a failure on the part of the Assessee to disclose fully and truly all material facts necessary for his assessment for that AY. Therefore, I have reason to believe that the income has escaped assessment within the meaning of section 147 of the Income Tax, 1961.”
However, in the reasons dated 03.10.2016 as produced by the Assessee before us, no such para is there, therefore, in order to clarify, we have called for the assessment record, in which the reasons recorded as produced by the Ld. DR are the same as produced by the Assessee and having no such para (last para) as appears in the reproduction of the reasons recorded in para-4 of the assessment order. Admittedly, there is variation in the reasons recorded as reproduced in the assessment order and supplied to the Assessee & as available in the assessment record.
6.8 As we have noted above that in this case the assessment has already been made under section 143(3) of the Act and therefore, the 1st proviso to section 147 of the Act is applicable, hence, we have to see as to whether the Assessee has failed to disclose fully and truly all material facts necessary for his assessment for the AY under consideration.
6.9 In the reasons recorded, there is no whisper about the nature of material facts or documents which were necessary for the M/s Atul Projects India Pvt. Ltd. assessment year under consideration and therefore the AO while recording the reasons and initiating the reassessment proceedings u/s 147 r.w.s. 148 of the Act, has not followed the first proviso of section 147 of the Act.
6.10 As we have noted above that two different versions of reasons for reopening of Assessee’s case are available and variations clearly appears in the reasons reproduced in the Assessment order and supplied to the Assessee & as available in assessment record, which is really surprising and if the same is true then it is a serious lapse, and therefore we legitimately expect from the higher authority of the Revenue Department, to at least unearth the reality.
6.11 Considering the facts and circumstances in totally and the documents (reasons recorded reproduced in assessment order and supplied to the Assessee & as available in assessment record) and decisions of the Hon’ble Jurisdictional High Court in Hindustan Lever case (supra) and of the Hon’ble Co-ordinate bench of the Tribunal in Sangeet kumar Sawarmal Hisaria, wherein the Hon’ble Coordinate Bench specifically dealt with two different versions of “reasons for reopening” as also involved in this case, in our considered view, the re-opening under section 147 of the Act is un-sustainable being void-ab-initio, hence it would be appropriate to quash the re-opening of case u/s 147 of the Act and the Assessment order dated 13-12-2017 as well. Thus ordered accordingly.
M/s Atul Projects India Pvt. Ltd. 6.12 As we have already quashed the assessment order itself, therefore not adverting to the merit of the case, as adjudication of the same, would prove futile exercise.
6.13 Resultantly, impugned order is also set aside being infructuous.
In the result appeal filed by the Assessee is allowed.
Orders pronounced in the open court on 19-07-2023.