DCIT, NEW DELHI vs. M/S. SAAMAG CONSTRUCTION LTD., NEW DELHI
Income Tax Appellate Tribunal, BENCH ‘F’: NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI AVDHESH KUMAR MISHRA
PER AVDHESH KUMAR MISHRA, AM
The appeal for the Assessment Year (hereinafter, the ‘AY’) 2006-07 filed by the Revenue is directed against the order dated 30.03.2017, passed by the Commissioner of Income Tax (appeals)-27, New Delhi [hereinafter, the ‘CIT(A)’].
Following grounds have been raised in this appeal: - “1. That the Id. CIT(A) erred in law and on facts in quashing the order of the Assessing Officer without properly appreciating the facts and circumstances of the case.
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2. That the Ld. CIT(A) erred in law and on facts in deleting the addition of Rs.3,55,88,631/- made on account of section 69C of the Act without properly appreciating the facts and circumstance of the case.
(a) The order of the CIT(Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
The relevant facts giving rise to this appeal are that the assessee, engaged in the real estate business as Builder & Developer, was searched under section 132(1) of the Income Tax Act, 1961 (hereinafter ‘the Act’) on 29.01.2009. Consequential assessment of the relevant year was completed under section 153A/143(3) of the Act, vide order dated 03.08.2011, at income of Rs.4,34,09,680/-. Thereafter, on the basis of findings of the Ld. CIT(A) in his order dated 29.10.2013 in the case of Saamag Developers Pvt. Ltd. in Appeal No.25/11-12 and the order dated 28.10.2013 in the case of Pyramid Realtors Pvt. Ltd. in Appeal No. 21/11-12., the case of assessee was reopened under section 148 of the Act vide notice dated 19.03.2014. Saamag Developers Pvt. Ltd. and Pyramid Realtors Pvt. Ltd. were the business concerns of Saamag Group of cases which were searched on 29.01.2009. The relevant findings of the Ld. CIT(A) in the above-mentioned cases are extracted hereunder: - Saamag Developers Pvt. Ltd. and order dated 29.10.2013 “"From the facts on record and also evident from audit report of special auditors that the alleged payments were made by M/s Saamag construction Ltd. and not by appellant. I have also considered the seized
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material available on record and it is not clear whether these documents belonged to the appellant or M/s Saamag Construction Ltd. However, after a detailed examination of the seized material and regular books of account of the appellant, the auditors in their special audit report have gave a categorical finding that these payments were made by M/s Saamag
Construction Ltd. Section 69C can be invoked when the appellant on its on incurs any expenditure and the source of such expenditure was satisfactorily explained with regard to the expenditure or part thereof, where the amount covered by such expenditure would be deemed to income of the appellant. In view of above undisputed facts I am of the considered opinion that if any additions are required to be made then it should be made in the hands of M/s Saamag Construction Ltd. and not in the hands of appellant. Therefore, the addition of Rs. 2,59,47,379/- made by the AO u/s 69C deserve to be deleted and same is hereby deleted."
Pyramid Realtors Pvt. Ltd, dated 28.10.2013
“Section 69C can be invoked when the appellant only incurs an expenditure and such expenditure was not satisfactorily explained with regard to source of such expenditure or part thereof then the amount covered by such expenditure would be deemed to be income of the appellant. In the present case the expenditure was incurred by M/s Saamag Construction Ltd.
another person on behalf of appellant and such expenditure was not incurred by the appellant.
Since this expenditure amounting to Rs.96,41,952/- was incurred by M/s Saamag Construction Ltd., it would be taxed in its own hand. Accordingly, the addition made by assessing officer amounting to Rs.96,41,952/- on account of unexplained expenditure u/s69C is hereby deleted."
1 During the assessment proceedings, the assessee challenged the reopening of the assessment and the alleged investment. Further, the assessee submitted that it had not made any investment outside its books of account as on-money on acquisition of lands as it had not derived such income from its business as it came into the existence in February, 2003 and commenced its business activities in the FY 2005-06. However, the ITA No.3738 /Del/2017 Saamag Construction Ltd.
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Assessing Officer (hereinafter, the ‘AO’) was not satisfied with the explanation of the assessee; therefore, he made the consequential addition of Rs.3,55,88,631/- (Rs.2,59,47,379 + Rs.96,41,952/-). Aggrieved, the assessee filed appeal before the CIT(A) raising the legal/juri ictional/technical grounds along with the validity of additions on merit also. The Ld. CIT(A) decided the juri ictional issue i.e. the assumption of juri iction under section 148 of the Act in favour of the assessee by holding that the notice under section 148 of the Act for the relevant year issued on 19.03.2019 was barred by limitation. The relevant part of the impugned order reads as under: -
“Section 150(1), inter alia, provides that there is no time limit to issue notice u/s 148 of the act when the case is reopened u/s 147 in order to give effect to any finding or direction contained in an order passed u/s 250 of the act.
Explanation 3 to section 153(3), as it stood at the time of passing the appellate order in the case of Saamag Developers Pvt. Ltd. & Pyramid
Realtors Pvt. Ltd., inter alia, provides that where by an order passed u/s 250 any income is excluded from the total income of one person and is held to be the income of some other person, then for the purposes of section 150, the assessment of income of such other person is deemed to be one made in consequence of or to give effect to any finding or direction contained in the order passed u/s 250, IF SUCH OTHER PERSON WAS GIVEN AN OPPURTUNITY OF BEING HEARD BEFORE THE ORDER U/S 250 WAS PASSED.
The appellant in the appeal proceedings has submitted that no opportunity of being heard was provided to the appellant company by my predecessor when the appellate orders in the case of Saamag Developers Pvt. Ltd. &
Pyramid Realtors Pvt. Ltd. was passed. I have perused the appeal records in the case of Saamag Developers Pvt. Ltd. & Pyramid Realtors Pvt. Ltd. for ITA No.3738 /Del/2017
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AY 2006-07 in appeal nos. 25/2011-12 & 21/2011-12 and found that no such opportunity was provided to the appellant company.
As there was no opportunity being provided to the appellant company, as per the provisions of explanation 3 section 153(3), it could not be said that the reassessment u/s 147 in the case of appellant was made in consequence of or to give effect to the finding or direction contained in the order passed u/s 250 in the cases of Saamag Developers Pvt. Ltd. &
Pyramid Realtors Pvt. Ltd. Having said so the provisions of section 150(1) are not applicable and as a result notice u/s 148 cannot be issued beyond the limitation period prescribed u/s 149 of the act.
In this case notice u/s 148 for AY 2006-07 was issued on 19.03.2014 i.e., after six years from the end of relevant assessment year. Therefore, following the case laws relied upon by the appellant, I hold that the provisions of section 150(1) of the act are not applicable, hence the notice issued u/s 148 was invalid, the reassessment proceedings initiated thereafter were null and void as they assume juri iction on the basis of an invalid notice issued u/s 148 of the act. Accordingly, I quash the reassessment order passed by the Assessing Officer in this case as null and void.
Since, I have allowed the legal ground of the appellant, I do not deem fit to decide the other grounds raised by the appellant as adjudication of the same will be for academic purposes only.
6. In the result, the appeal is allowed.”
The Ld. Senior Departmental Representative (hereinafter, the ‘Sr. DR’) submitted that the Section 250 of the Act does not mandate that the CIT(A) can issue direction in case of the other person only after hearing such other person. Thus, the Ld. Sr. DR argued vehemently that the Ld. CIT(A) had erred in holding that the direction issued by her predecessor while deciding appeals in cases of Saamag Developers Pvt. Ltd. and Pyramid Realtors Pvt. Ltd. as mentioned above without affording opportunity to the assessee could
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not be termed as direction under section 250 of the Act and thus, the provisions of section 150 of the Act did not get attracted in this case. He further, argued that such finding of the Ld. CIT(A) was contrary to the law and therefore, the same required to be set aside by upholding the assessment order. It was specifically submitted that there was no condition prescribed in the section 250 of the Act as “IF SUCH OTHER PERSON WAS GIVEN AN OPPURTUNITY OF BEING HEARD BEFORE THE ORDER U/S 250
WAS PASSED” mentioned by the Ld. CIT(A). The Ld. Sr. DR submitted that such imaginary condition was coined by the Ld. CIT(A). The Ld. Sr. DR contended that such findings of the Ld. CIT(A) should be quashed being contrary to the law. The Ld. Sr. DR, drawing our attention the provisions of section 153(3) of the Act, submitted that there was no explanation to section 153(3) of the Act; therefore, the finding of the Ld. CIT(A) was uncalled for as the same was contrary to the law. It was therefore, submitted that the Ld.
CIT(A) had erred in deciding the issue in dispute that whether the case reopened under section 148 of the Act in pursuance of the direction of the Ld. CIT(A) was barred by limitation as she had not given categorical finding in view of the provisions of the section 150 of the Act.
1 The Ld. Sr. DR, drew our attention the provisions of section 150 of the Act, which read as under: “150. (1) Notwithstanding anything contained in section 149, the notice under section 148 may be issued at any time for the purpose of making an assessment or reassessment or recompilation in consequence of or to give
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effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision or by a Court in any proceeding under any other law.
(2) The provisions of sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken"
2 The Ld. Sr. DR, drawing our attention the provisions of section 150 of the Act, submitted that the Ld. CIT(A) had failed to give categorical finding on the applicability of the section 150(2) of the Act, which clearly provided that the AO had time to take remedial action in the year in which orders in cases of Saamag Developers Pvt. Ltd. and Pyramid Realtors Pvt. Ltd. in whose appeals the said direction was given by the Ld. CIT(A) were passed by the AO of Saamag Developers Pvt. Ltd. and Pyramid Realtors Pvt. Ltd.
Per contra, the Ld. Counsel submitted that the Revenue did not challenge the order of the CIT (A) wherein she had quashed the reassessment proceedings on account of the issuance of notice after expiry of limitation as prescribed under section 149 of the Act and in this way, the Revenue had accepted the position about the invalidity of the notice issued under section 148 of the Act. Hence, this appeal itself was not maintainable. The issue in dispute raised by the Revenue was quantum of addition and not the validity of reopening the assessment. The Ld. Counsel submitted that the notice
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issued under section 148 of the Act was barred by limitation as the same had been issued beyond the time prescribed under section 149 read with section 150 & Explantion-3 to the section 153 of the Act.
1 The Ld. Counsel contended that the Ld. Sr. DR did not contradict the finding of the Ld. CIT (A) that an opportunity of being heard to the assessee was not granted by the then CIT(A) deciding the appeals in the cases of Saamag Developers Pvt. Ltd. and Pyramid Realtors Pvt. Ltd. It was submitted that the Ld. CIT (A) had given the categorical finding that an opportunity of being heard to the assessee was not granted by the then CIT(A) deciding the appeals in the cases of M/s Saamag Developers Pvt. Ltd. and M/s Pyramid Realtors Pvt. Ltd. after verification of their appeal records. It was contended that in view of the section 150 of the Act read with Explanation 3 to section 153 of the Act, the allowance of an opportunity of being heard to the assessee was a precondition for the assumption of juri iction under the extended time limit prescribed under section 150 of the Act for issuance of notice under section 148 of the Act. Once the Ld. CIT (A) had categorically observed that no opportunity of being heard, as contemplated under Explanation 3 to Section 153 read with section 150 of the Act, was allowed to the assessee, the limitation as prescribed under section 149 of the Act could not extend the expiry of limitation prescribed under section 149 of the Act.
2 The Ld. Counsel submitted that the present appeal pertained to the AY 2006-07 and the notice under section 148 of the Act had been issued on ITA No.3738 /Del/2017 Saamag Construction Ltd.
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19.03.2014, i.e. beyond the period of six years prescribed under section 149
of the Act. Hence, the notice issued under section 148 of the Act was barred by limitation being invalid and void ab-initio. Reliance was placed on the decisions in the cases of Rural Electrification Corporation Ltd. 355 ITR 345,
The Ld. Counsel, drawing our attention to the following part of the order of the Hon'ble Delhi High Court in the case of Rural Electrification
Corporation Ltd. (supra), submitted that the present case was squarely covered by the said decision:
“14. It is apparent from the said decision that before a notice under Section 148 can be issued beyond the time limits prescribed under Section 149, the ingredients of Explanation 3 to Section 153 have to be satisfied. Those ingredients require that there must be a finding that income which is excluded from the total income of one person must be held to be income of another person. The second ingredient being that before such a finding is recorded, such other person should be given an opportunity of being heard. In the context of the present case, when the Tribunal held in favour of the said society by concluding that the interest income was not taxable in its hands and held against the petitioner by concluding that the said interest income ought to have been taxed in the hands of the petitioner, an opportunity of hearing ought to have been given to the petitioner. The fact that such an opportunity was not given, has been recognized by the revenue in the order disposing of the objections dated
20.10.2011, where it has been observed that there was no need to have afforded an opportunity to the petitioner. Even in the counter affidavit, the revenue has taken the stand that it was not at all necessary for the Income
Tax Appellate Tribunal to have allowed an opportunity of hearing to the petitioner because that was in respect of the assessment proceedings pertaining to the said society.
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From the above, it is clear that no opportunity of hearing was given to the petitioner prior to the passing of the order dated 13.01.2010 by the Income Tax Appellate Tribunal, Hyderabad in the cases of the said society. As such, one essential ingredient of Explanation 3 was missing and, therefore, the deeming clause would not get triggered. That being the position, Section 150 would not apply and, therefore, the bar of limitation prescribed by Section 149 is not lifted.
The learned counsel for the revenue submitted that an opportunity of hearing could not be given to the petitioner because at the stage when the Tribunal at Hyderabad was hearing the appeal pertaining to the said society, there was no way to ascertain as to whether the decision would go in favour of the said society or not. In particular, the learned counsel for the respondent / revenue submitted that the question as to whether the interest income could be taxed at the hands of the petitioner would only come to be decided after the Tribunal came to the conclusion that it was not to be taxed in the hands of the society and, till that stage, there was no question of granting any opportunity of hearing to the petitioner. Be that as it may, the specific condition for attracting the deeming provision of Explanation 3 to Section 153 requires that the person ought to be given an opportunity of being heard before an order is passed whereunder any income is excluded from the total income of one person and held to be the income of another person. It is not as if the revenue is being faulted or the Tribunal is being faulted for not granting an opportunity of hearing to the petitioner. The placing of a blame is not the issue. What is relevant is whether the petitioner had been given an opportunity of hearing before the Tribunal concluded that the interest income was taxable in its hands and not in the hands of the society. It is obvious that this flows from the general principle that no prejudice should be caused to anybody without that person having been heard.
In view of the fact that the deeming provision provided in Explanation 3 to Section 153 does not get attracted in the present case because an opportunity of hearing had not been given to the petitioner, the provisions of Section 150 would also not be attracted. In such a situation, the normal provisions of limitation prescribed under Section 149 of the said Act would apply. Those provisions restrict the time period for reopening to a maximum of six years from the end of the relevant assessment year. In the present writ petitions, the notices under Section 148 have all been issued beyond the said period of six years. Therefore, we are of the view that the said notices are time barred.
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18. Consequently, the writ petitions are allowed. The impugned notices under Section 148 of the said Act are set aside and so, too, are all the proceedings pursuant thereto, including the assessment orders that have been passed. There shall be no order as to costs.”
[Emphasis supplied]
4 The Ld. Counsel, in view of the order of the Hon'ble Delhi High Court in the case of Rural Electrification Corporation Ltd. (supra), contended that the deeming clause of extension of time for reopening the case would not get triggered as sections 149 and 150 of the Act would not apply in view of the Explanation-3 to the section 153 of the Act as the assessee was never heard by the Ld. CIT(A) deciding appeals in the cases of M/s Saamag Developers Pvt. Ltd. and M/s Pyramid Realtors Pvt. Ltd.; therefore, the normal provisions of limitation under section 149 of the Act would apply in the present case. Since the notice under section 148 of the Act had been issued to the assessee after the expiry of six years; therefore, the said notice was barred by limitation.
5 The Ld. Counsel further contended that the perusal of the reason to believe clearly showed that the case was reopened by the AO on 19.03.2024 based on the observations made by the Ld. CIT (A) in his orders dated 28th & 29th October 2013 in the cases of M/s Saamag Developers Pvt. Ltd. and M/s Pyramid Realtors Pvt. Ltd. It was contended that the provisions of section 149 of the Act empowers the AO to issue notice only for six AYs from the end of the relevant AY. The time limit for the issuance of notice under section 148 for AY 2006-07 in the present case already expired on 31.03.2012. ITA No.3738 /Del/2017 Saamag Construction Ltd.
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Hence in view of such embargo placed by sub-section (2) of Section 150 of the Act on the powers of the AO, the impugned notice issued by the AO under section 148 on 29.03.2014 was barred by limitation.
6 In view of the above, the Ld. Counsel prayed for dismissal of the appeal.
We have heard both parties and have perused the material available on the record. The issues in dispute here are (i) quashing of the reopening of assessment (Ground No. 1) and (ii) the deletion of the quantum of the addition (Ground No. 2). The core juri ictional issue is that whether the case reopened under section 148 of the Act in pursuance of the direction of the Ld. CIT(A) is barred by limitation as held by the Ld. CIT(A) and provisions of section 150 of the Act are attracted here. We find that there is no dispute in the instant appeal that the assessment under section 153A/143(3) of the Act was not made in the case of the assessee which was later reopened. Undisputedly, the notice under section 148 of the Act has been issued on 19.03.2014, which is beyond six years and is, therefore, hit by limitation. However, we find that the AO has reopened the assessment under section 148 of the Act on the basis of the findings of the Ld. CIT(A) in the order dated 29.10.2013 in the cases of Saamag Developers Pvt. Ltd. in Appeal No.25/11- 12 and the order dated 28.10.2013 in the case of Pyramid Realtors Pvt. Ltd. in Appeal No. 21/11-12. ITA No.3738 /Del/2017 Saamag Construction Ltd.
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7. The Ld. CIT(A) has given a categorical finding that the Ld. CIT(A) in the order dated 29.10.2013 in the cases of Saamag Developers Pvt. Ltd. in Appeal No.25/11-12 and the order dated 28.10.2013 in the case of Pyramid
Realtors Pvt. Ltd. in Appeal No. 21/11-12 has not given any opportunity of being heard the assessee before giving observations based on which the assessee’s case has been reopened. Hence, the deeming clause of extension of time for reopening of the present case will not apply in view of the Explanation-3 to the section 153 of the Act as the assessee has never been heard by the Ld. CIT(A) deciding appeals in the cases of M/s Saamag
Developers Pvt. Ltd. and M/s Pyramid Realtors Pvt. Ltd.; therefore, the normal provisions of limitation under section 149 of the Act will apply in the present case. Since the notice under section 148 of the Act has been issued to the assessee after six years; therefore, the Ld. CIT(A) has held the reopening of the present case barred by limitation.
8. We find merit in the submissions/contentions/arguments of the Ld.
Counsel. The Revenue does not bring any material to demonstrate that the assessee has ever been heard by the Ld. CIT(A) before giving categorical observations while disposing of appeals in the cases of Saamag Developers
Pvt. Ltd. and Pyramid Realtors Pvt. Ltd. In view of the above, we are of the considered view that the provisions of Explanation 3 to section 153 of the Act does not get attracted in the present case as an opportunity of hearing had not been given to the assessee. In such a situation, the normal provisions of ITA No.3738 /Del/2017
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limitation prescribed under section 149 of the Act will apply. In the present case, the notice under section 148 of the Act has been issued beyond six years; therefore, we are of the view that the said notice is barred by limitation. We are of the considered view that this case is squarely covered by the decision of the Hon'ble Delhi High Court in the case of Rural
Electrification Corporation Ltd. (supra). We therefore, respectfully following the decision of the Hon'ble Delhi High Court in the case of Rural
Electrification Corporation Ltd. (supra), decline to interfere with the order of the Ld. CIT(A). Since the Ld. CIT(A) has not decided the issue on merit of addition, we therefore, refrain to comment thereon; i.e. merit of addition made in the assessment order as it becomes academic in nature. The respective grounds raised in this regard by the Revenue thus stand dismissed accordingly.
9. In the result, the appeal of the Revenue is dismissed as above.
Order pronounced in open Court on 29th July, 2025 (SATBEER SINGH GODARA) (AVDHESH KUMAR MISHRA)
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Dated: 29/07/2025
Binita, Sr. PS