MR. ABHIJEET SONI,MUMBAI vs. ITO-16(2)(1), MUMBAI

Date of Hearing : 23.01.2023 Date of Pronouncement : 20.04.2023 O R D E R PER S. RIFAUR RAHMAN (AM)

(A.Y: 2007-08) Abhijeet Soni 2. Brief facts of the case are, assessee is an individual filed his return of income on 25.10.2007 declaring total income of ₹.14,83,733/-. The return was processed u/s. 143(1) of Income-tax Act, 1961 (in short “Act”). A search was conducted by Director of Income-tax (Inv.), Mumbai on Hiranandani Group Builders and Developers on 11.03.2014. During the course of the search proceedings, evidences related to inter alia payment of on-money (Cash) by various flat purchasers has been found and the evidences were furnished to the Directors and promoters of the Hirandani Group, they accepted the fact that on-money was received on sale of various flats and the same has not been reflected in regular Books of Accounts. Further, the above group has also declared such on-money receipts as additional income in respective Assessment Years.

4. The Assessing Officer observed that assessee is a Doctor by profession and the assessee has declared house property income, professional income under the head income from Business/Professions, capital gains and income from other sources. Vide letter dated 05.12.2014 the assessee filed a petition u/s. 144A of the Act with the Joint CIT 16(2), Mumbai and Ld. JCIT passed the order u/s. 144A of the Act directing the Assessing Officer to dispose off the petitions filed by the assessee by way of speaking order before proceeding the case. Accordingly, further notices were issued to the assessee, in response authorised representative of the assessee vide letter dated 23.01.2015 submitted as under: - “6. i. Accordingly, show cause was issued vide letter dated 15.01.2015 to the assessee as to why Rs 33,75,900/- Rs 22,70,000/- paid on 10.04.2006, Rs. 10,00,000/- paid on 11.07.2006 and Rs. 1,05,900/- paid on 14.11.2006) should not be Page No. | 3 (A.Y: 2007-08) Abhijeet Soni included as your income under the head Income from Other Sources of the Income Tax Act 1961 The assessee's representative vide his letter dated 23.01.2015 has submitted the following: -

1. 1. The assessee had purchased the flat from M/s Lake View developers at the cost of Rs. 68, 10,000 under agreement dated 05 of October, 2006. The Details of payment made for the same has already been submitted.

2. The Stamp valuation Authority had valued the same at Rs. 47,51,347 and hence the amount paid was already more than the Stamp Duty Valuation 3. It has been claimed by your honor that assesse has paid on money amounting to Rs 33,75,900 in addition to the purchase consideration of Rs. 68,10,000/- 4. Till date, no copy of the material/ evidence which has been relied by your honor on various occasions, has been provided to the assessee. One more request for the same is hereby filed for rebuttal 5. In the copy of reasons recorded it is mentioned that evidences were found in respect of persons who had paid on money for the purchase of flat and assessee was one of them. However on request of the assessee to provide the materials/documents no evidence were provided.

6. Also in the showcause notice given dated 15th January, 2015 it is claimed by your good self that you had received information from Directorate of Investigation Wing - I under letter dated 27 March, 2014. However no such material was provided to assessee when requested.

7. Assessee had also filed petition under 144A which was rejected by the Hon. Addil. Commissioner Range 16(2) and against the same order a revision petition u/s 264 is pending before Hon. P Commissioner Of Income Tax - Range 16 8. Hence, we request your good self to not make addition on account of 'On money' paid as claimed by you as there is no payment made for the purchase of Flat apart from what was agreed in the agreement i.e. Rs. 68,10,000. ……..”

Page No. | 4 (A.Y: 2007-08) Abhijeet Soni 5. After considering the above submissions of the assessee and observing that objection u/s. 264 of the Act was rejected by the Learned Pr. Commissioner of Income-tax and further, relying on the statement of Shri Niranjan Hirandani, Managing Director of the Hiranandani Group who was accepted the receipt of on-money proceeded and made the addition in the hands of the assessee.

6. Aggrieved, assessee preferred an appeal before the Ld.CIT(A) and filed a detailed submission on reopening of assessment before him. For the sake of clarity, it is reproduced below: - “a) Even though the notice u/s 148 was issued beyond the time limit, assessee filed return in response to the same under protest b) Assessee requested Ld. AO to provide the copy of reasons recorded for reopening the assessment. c) Ld. AO has recorded the reasons that he has received information from Investigation Wing, Income Tax Department, that assesse had paid on- money' in cash to M/s. Hiranandani Group while purchasing the flat to the tune of Rs 33,75,900/- d) Assessee had repeatedly requested the Ld. AO to provide the copy of document/material and statements relied on by the Ld. AO on making the reassessment. However, no such details, material/documents have been provided by the Ld. AO till date. e) Assessee vide letter dated 05th December, 2014 filed petition u/s 144A before Ld. Jt CIT range 16(2), requesting him to pass direction on whether Ld. AO had material leading to reasons to believe that income has escaped the assessment for making reassessment, whether other provisions of Chapter XIV were complied, directing Ld. AO to provide copy of material on the basis of which assessment is made. f. Ld. JCIT range 16(2), merely disposed-off the petition by directing Ld. AO to act as per law. Page No. | 5 (A.Y: 2007-08) Abhijeet Soni g. When no document was provided by the Ld. AO, on 04th December, 2014 assessee made an application under Right to Information Act, 2005 to provide the Certified copies of communication received from Investigation Wing Certified Copies of material/document, which suggests that assessee has made payment in cash to M/s Hiranandani Group, Certified copies of any other material/documents that might be used against assessee. h) On 23rd December, 2014, Ld. AO passed the Order under Section 7 (1), of the Right to Information Act, 2005 stating that as the above mentioned details as requested by assessee are not available with this office the same cannot be provided to assessee. i. After this order, assessee preferred an appeal against the same and appeal was filed u/s 19, of The Right to information Act, 2005 before Jt. CIT range 16(2) on 09th January, 2015. j. The First Appellate Authority disposed-off the appeal filed by the assessee vide order dated 27th January, 2015, in which Ld JCIT confirmed once again that information requested by the assessee was not available with the Ld. AO and hence the same could not be provided to assessee The same should be provided to assessee whenever the information will be received by the Ld. AO. k) Hence, it can be seen from the above that there was no material at all with Ld. AO to form the reason to believe that income had escaped assessment and initiate the reassessment proceedings l) Thereby your honour is requested to quash the order by allowing the ground no. 2, 3, 8 and 9 of appeal B) Reliance in this regard is placed on the following decisions: It has been held in various judgments coming from various courts that availability of fresh tangible material in the possession of AO at the time of recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case We begin with the judgment of Hon'ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession 'tangible material. The term tangible material has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment

Page No. | 6 (A.Y: 2007-08) Abhijeet Soni Recently, Hon'ble Delhi High Court in the case of Pr. CIT vs Tupperware India Pvt. Ltd in its order dt 10-8-15 (ITA no 415/2015) got an occasion to analyze latest position of law on this issue. After discussing many judgments on this issue, it was held that even in the case of original assessment order having been passed u/s 143(1), it is mandatory for the AO to have in its possession, fresh tangible material before reopening of the case. Further, in the case of CIT vs. K. L. Arora in ITA 118/2014 dated 21-04-2014, Hon'ble Delhi High Court observed as under "This Court is of the opinion that nofault can be found with the Tribunal's order. It is well settled that in order to issue a valid reassessment notice, the AO has to be satisfied on the basis of tangible material or information subsequently available to him that the assessee had not made full and true disclosure which led to income escaping assessment at the stage when the original assessment was completed. Short of that a re-appreciation of the existing materials which really amounts to review is impermissible. The Tribunal, in the circumstances of this case was justified in concluding that re- assessment proceedings themselves were not in accordance with law and consequently dismissing the Revenue's appeal No question of law arises for consideration." In the case of CIT vs. Shri Atul Kumar Swami in dated 18-03- 2014 reported at 52 Taxmann.com 47, Hon'ble Delhi High Court observed as under ...Reopening of assessment is valid if it is based on tangible material to justify conclusion that there was escapement of income in instant case note forming part of return clearly mentioned and described nature of the receipt under a non- compete agreement Reasons for issuance of notice u/s 147 nowhere mentioned that revenue came up with any other fresh material warranting reopening of assessment- Mere conclusion of proceedings u/s 143(1) ipso facto does not bring invocation of powers for reopening assessment-Reopening of assessment was unjustified- Revenue's appeal dismissed." Further reliance can be placed on the detailed judgment in the case of Madhukar Khosla vs. ACIT 367 ITR 165 (Delhi), wherein it has been held that the reopening is not permitted under the law unless it is based on fresh tangible material and that if The reasons to believe" are not based on new, "tangible materials", the reopening amounts to an impermissible review. It has been further observed that "The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or a link with an objective fact, in the form of information or facts external to the materials on the record. Such Page No. | 7 (A.Y: 2007-08) Abhijeet Soni external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective "trigger" the AO does not possess jurisdiction to reopen the assessment. It is at the next stage that the question, whether the reopening of assessment amounts to review or change of opinion" arises. In other words, if there are no reasons to believe" based on new, "tangible materials, then the reopening amounts to an impermissible review" In the case of CIT vs Jyoti Devi 218 CTR 264, Hon'ble Rajasthan High Court heldthat since Revenue could not point out any information or material which had subsequently come to the notice of the AO to enable him to form the requisite belief that any income liable to be assessed had escaped assessment, therefore, the initiation of reassessment proceedings was not valid. In the case of CIT vs Jyoti Devi 218 CTR 264, Hon'ble Rajasthan High Court held that since Revenue could not point out any information or matenal which had subsequently come to the notice of the AO to enable him to form the requisite belief that any income liable to be assessed had escaped assessment, therefore, the initiation of reassessment proceedings was not valid. Similar view has been expressed by Hon'ble Delhi Bench of ITAT in the case of M/s Nexgen School of Business Vs. Deputy Commissioner of Income Tax, [ITA No. 5609/DEL/2010] holding that the Assessing Officer was not justified to initiate the reopening proceedings in absence of any new information or material on record since the date of filing and processing of the return of income Thus, in view of judgments directly on the issue under consideration, reopening done by Ld. AO in the absence of fresh tangible material is invalid and bad in law Therefore, the initiation of reassessment proceedings was not valid. Ground No. 7 of the appeal: On the facts and circumstances of the case and judicial proposition, Ld. AO erred in framing the assessment only on the basis of information received from the Investigation Wing and such order is erroneous in facts and bad in law and liable to be quashed Submission: a) Assessee requested Ld AO to provide the copy of reasons recorded for reopening the assessment.

Page No. | 8 (A.Y: 2007-08) Abhijeet Soni b) In the copy of reasons recorded it is mentioned that evidences were received from Investigation Wing II, Income Tax Department in respect of persons who has paid on money for the purchase of flat and assessee was one of them. c. Assessee asked for the copy of the material/evidence on the basis of which Assessing officer had reason to believe that assessee has escaped income d. However no copy of evidences/ material was provided by the assessing officer even after repeated request for the same. e. When no document was provided by the Ld. AO, on 04th December, 2014 assessee made an application under Right to Information Act, 2005 to provide the Certified copies of communication received from Investigation Wing, Certified Copies of material/document, which suggests that assessee has made payment in cash to M/s. Hiranandani Group, Certified copies of any other material/documents that might be used against assessee. f. In response to the application, order dated 23/12/2014 was passed u/s 7(1) of the RTI act wherein it was stated "Since these details are not available in this office, it is not possible to provide the same" g. After this order, assessee preferred an appeal against the same and appeal was filed u/s 19, of The Right to information Act, 2005 before Jt. CIT range 16(2) on 09th January, 2015.

14. The first appellate authority disposed off the appeal filed by the assessee vide order dated 27th January, 2015, in which Ld JCIT confirmed once again that information requested by the assessee was not available with the Ld. AO and hence the same could not be provided to assessee. The same should be provided to assessee whenever the information will be received by the Ld AO. h) Order against the First Appellate authority has been challenged before Central Information Commission (CIC) and appeal is pending till date. i. It can be implied from the above that the assessee had no incriminating material on record in respect of the information received from Investigation Wing j. Hence the Assessing Officer has not applied his mind and not come to an independent conclusion that he has reason to believe that the income of the Assessee has escaped assessment which was the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act.

Page No. | 9 (A.Y: 2007-08) Abhijeet Soni k. Also, assessee during the course of assessment proceedings had repeatedly requested the Ld AO to provide the opportunity to cross examine the person who had allegedly made statements against the assessee. However, no such opportunity was provided to assessee by the Ld. AO before completing the assessment l. Assessee vide its petition filed exercising the powers conferred to the assessee u/s 144A dated 05th December 2014 requesting the Ld. Jt. CIT to direct the AO for allowing the assessee to cross examine the person who had allegedly made statements against the assessee m. After multiple requests assessee was given the opportunity for cross examination with the seller (Niranjan Hiranandani) n. Ld. AO cross-examined Shri. Niranjan Hiranandani. The following question were asked As per Q 6) Have you received an amount of Rs. 33.75,000/- from Dr. Abhijeet C Soni as cash regarding this flat no 708, Plaza Powai of which agreement for sale is also being shown to you? Ans: No o. As can be observed Shn. Niranjan Hiranandani has specifically refused that he has not received any cash money from assessee. p. Further Assessee has cross examined and questioned the following: As per Q2) I am showing you the letter issued by the Income Tax Department to me dated 15.01.2015 wherein it is shown in the table that an amount Rs.33,75,000/- has been paid to you as cash regarding this flat no. 708, Powai Plaza, of which agreement for sale is also being shown to you. What do you have to state about it? Did I pay the said amount? Ans: The on money receipts declared by me for the purpose of taxes were derived at by this statement! irrespective of the confirmation of individual receipts in order to arrive at a settlement with the department. This does not confirm any individual entries I did not receive any cash or on money from you. q. Basis the above cross examination, Mr Niranjan Hiranandani has clearly declined the fact that no on money has been received from the assessee.

Page No. | 10 (A.Y: 2007-08) Abhijeet Soni r. Considering the above facts and circumstances, the Assessing Officer has erred in making addition as no on-money has been paid to the seller and the same has been recorded on oath s. Thereby your honour is requested to quash the order as the order passed is without any basis by allowing the ground no. 7 of the appeal. Ground No. 11, 12 and 13 On the facts and circumstances of the case and judicial proposition. Ld. AO erred in framing the assessment by making entire additions in the hands of assessee, even though, assessee was joint owner of the property, and such addition is erroneous in facts and bad in law and liable to be deleted. On the facts and circumstances of the case and judicial proposition, Ld. AO erred in framing the assessment by making entire additions in the hands of assessee, even though, assessee was joint owner of the property, and such addition is excessive and bad in law and liable to be reduced Without prejudice to the above, on the facts and circumstances of the case and judicial proposition, Ld. AO erred in framing the assessment by making entire additions as Income from Other Sources, even when assessee was joint holder and such addition is excessive and liable to be reduced. Submission: a) During the course of assessment proceedings, assessee had mentioned the fact that he is a joint owner along with Kala Soni in the property purchased. both sharing equal ownership (50% each). The said flat was purchased at Rs. 68,10,000 and the payment was equally made (34,05,000 each) by both the owners ie the assessee and Kala Soni. The stamp duty valuation of the flat stood at Rs. 47,51,347 Entire payment amounting to Rs. 68, 10,000 was made through banking channels and there was no question of making any payment in cash. Hence addition on this account is not warranted. The payment summary for the purchase of flat is as under: No. Kala Sr Date Cheque AbhijitSoni Amount Soni 1. 1,00,000 10/04/2006 458218 Axis Bank 2. 1,00,000 11/04/2006 855369 OBC Bank 3. 18,00,000 26/05/2006 58501 Axis bank 4. 18,00,000 31/05/2006 855371 OBC Bank 5. 5,00,000 07/07/2006 58518 Axis bank Page No. | 11 (A.Y: 2007-08) Abhijeet Soni No. Kala Sr Date Cheque AbhijitSoni Amount Soni 6. 5,00,000 10/07/2006 855374 OBC Bank 7. 5,05,000 14/07/2006 58519 Axis bank 8. 5,05,000 13/07/2006 2303 OBC Bank 9. 5,00,000 01/11/2006 570582 Axis bank 10 5,00,000 07/1 1/2006 2308 OBC Bank Total 68,10,000 b) The above mentioned property was registered vide agreement dated 05th October, 2006 and the stamp duty on the same was paid on 06th October, 2006 c) In the assessment order, Ld. AO has relied on the statement of Mr. Niranjan Hiranandani wherein he has allegedly accepted that on money has been received by the group. d) Ld. AO further in the assessment order stated that evidence that assessee. had paid cash for the purchase of property were found, however no such evidence or document ever has been provided to assessee despite repeated requests made before Ld.AO. e. It was categorically submitted before Ld. AO while filing reminders for providing materials/documents and opportunity to cross examine, that at a later stage, department may allege that failure to grant the material that is used against assessee is mere a lapse of natural justice and curable error which will send the assessee into avoidable hassles of reassessment after a considerably long time. f. There is no cash balance sufficient to make impugned payment contrary to the claim of AO. There is no cash withdrawal or cash income generation up to the impugned date of payment. g. Hence it can be seen from the above that no on money was made & payment was made through appropriate banking channels. h) Also Ld AO disregarded the fact of assessee being a co-owner (having 50% share) in the property purchased and made entire addition of the cash component in the hands of assessee. i. Considering the above facts & circumstances your honour is hereby requested to delete the addition by allowing the ground no. 11, 12 and 13 of appeal. j. Kindly take the above on records and oblige."

Page No. | 12 (A.Y: 2007-08) Abhijeet Soni 7. After considering the detailed submissions Ld.CIT(A) dismissed the ground raised by the assessee on reopening of assessment and he has given an opportunity for cross examination, with regard to additions made u/s. 69 of the Act he dismissed the appeal of the assessee with the following observations: - “8.2 The appellant in his written submission claimed that he only owns 50% of the said property, the remaining 50% is owned by Kala Soni. The property was purchased at Rs. 68,10,000/- making it Rs.34,05,000/- each. The appellant failed to furnish the proof of sources of income, prior returns of income or bank statement of the co owner (Kala Soni) either at assessment stage or at appellate stage to show that the two purchases are separate entities with separate sources of income contributing equally to the cost of purchase. As no sufficient proof/documentary evidence furnished by the appellant in support of his claims, the decision of the AO is upheld. Hence, the addition u/s 69 is confirmed and these grounds of appeal are dismissed.”

8. Aggrieved assessee is in appeal before us, raising following grounds in its appeal: - “1. On given facts, circumstances and judicial pronouncements Hon. CIT (Appeals) erred in confirming the action of Ld. AO in issuing the notice u/s 148, without having reasons to believe that income has escaped the assessment and hence assessment order pursuant to such invalid notice. is erroneous in facts and bad in law and liable to be quashed

2. On given facts, circumstances and judicial pronouncements Hon. CIT (Appeals) erred confirming the action of Ld. AO of issuing notice u/s 148, without having any tangible material to believe that income has escaped. the assessment and hence assessment order pursuant to such invalid notice is erroneous in facts and bad in law and liable to be quashed.

Page No. | 13 (A.Y: 2007-08) Abhijeet Soni 3. On given facts, circumstances and judicial pronouncements Hon. CIT (Appeals) erred confirming the assessment made by Ld. AO, without having valid issue of notice under section 143(2) and hence assessment order passed without valid issue of notice under section 143(2) is erroneous in facts and bad in law and liable to be quashed.

4. On given facts, circumstances and judicial pronouncements Hon. CIT (Appeals) erred in confirming the assessment made by Ld. AO, without having valid service of notice under section 143(2) and hence assessment order passed without valid service of notice under section 143(2) is erroneous in facts and bad in law and liable to be quashed.

6. On the facts and circumstances of the case and judicial proposition, Hon. CIT (Appeals) erred in confirming the addition made by the Ld. AO despite the fact that during the cross examination provided during appellate proceedings, Mr. Niranjant Hiranandani had specifically denied receiving any on-money from assessee and therefore confirmation of such addition made is bad in facts and bad in law and liable to be deleted.

7. On the facts and circumstances of the case and judicial proposition, Hon. CIT (A) erred in confirming the additions made by Ld. AO on account of payment made to M/s. Lakeview Developers as on-money, and such addition is erroneous in facts and bad in law and liable to be deleted.

8. Without prejudice to the above, on the facts and circumstances of the case and judicial proposition, Hon. CIT (A) erred in confirming the action of the Ld. Assessing Officer by making entire additions in the hands of assessee, even when assessee was only joint holder of the said property and such addition is excessive in facts and bad in law and liable to be reduced.”

Page No. | 14 (A.Y: 2007-08) Abhijeet Soni 9. At the time of hearing, Ld. AR of the assessee brought to our notice facts of the case and filed its written submissions, for the sake of clarity it is reproduced below: - “1. Ld. AO issued undated notice u/s 148, based on Search conducted on Hiranandani Group. The reasons recorded for reopening are at (Page 3 of the Paper Book) 2. Assessee had purchased property from Lakeview Developers wherein, the Stamp Duty Value of the Flat was Rs. 47,51,347, whereas the consideration paid by assessee wasway higher then that at Rs. 68,10,000 despite which the AO proposed to add Rs.33,75,900 which he allegedly claimed to have been paid by assessee as On-Money(Para 2.1 of Assessment Order) 3. Since no data basis which the reassessment was made by the AO was provided. assessee had filed a petition u/s 144A requesting the Ld. JCIT 16(2) to direct the Ld. Assessing Officer to provide the documents and information relied upon by him. However, said petition was disposed of by the Ld. JCIT 16(2) by directing the LD. Assessing Officer to act as per the law. (Paper Book Page -4-10).

11. Once again request was filed with the CIT Appeals to grant Cross-Examination of Mr. Hiranandani. Hon'ble CIT(A) directed Ld. Assessing Officer to grant cross examination of Mr. Niranjan Hiranandani. In the said Cross examination, Mr. Hiranandani categorically denied receipt of any On-Money from Assessee. (Page No. 38-39 of the Paper Book) 12. Thereafter, in the remand report, Ld. AO once again relied on the statement given by Mr. Hiranadani during search proceedings and requested to sustain the additions made. (Pg. 40 of the paper book) 13. After, considering these facts and circumstances, Hon'ble CIT(A) passed the order u/s 250, wherein, it dismissed the grounds 1&2 by stating that, AO had sufficient information for initiating the reassessment and therefore upheld the validity of Notice under Page No. | 16 (A.Y: 2007-08) Abhijeet Soni 148. (Para 7.4 and Para 7.8 of CIT Appeals Order - Page 21 and 22) 14. Further, while raising the above mentioned grounds assessee had placed reliance on following precedents wherein it was concluded that AO should be in the possession of tangible material and in the absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment:  CIT v/s Kelvinator India Ltd. 320 ITR 561(SC)  Pr. CIT v/s Tupperware India Private Limited. (Delhi High Court) 15. Further, Ld. CIT(A) dismissed grounds 11&13 which were related to the fact that the property was equally co-owned by the assessee and her sister Mrs. Kala Soni but the entire addition was made in the hands of the assessee.

Page No. | 18 (A.Y: 2007-08) Abhijeet Soni basis and not declared on the individual flat owners basis. It clearly shows that there is no material available with the assessing officer to form an opinion for reopen the case. Since the assessment was reopened without their being any material in hand and proceeded to make reassessment and also completing the reassessment without sharing the material relied by him to form an opinion with the assessee is bad in law and void ab intio.

Page No. | 19 (A.Y: 2007-08) Abhijeet Soni 13. Accordingly, the Ground Nos. 1 & 2 raised by the assessee are allowed and other grounds are not adjudicated at this stage.