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Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
The present appeal is filed by the assessee against the order dated 30.04.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-11/10424/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 27.12.2018 passed u/s 147/143(3) of the Act for Assessment Year 2011-12.
2. Brief facts of the case are that the assessee filed her return of income, declaring income of INR 59,97,501/- on 04.02.2012 which was processed u/s 143(1) of the Act. The assessee had income from house property, profits & gains from business or profession, capital gains and income from other sources. The information received from DDIT (I&CI), New Delhi that vide Sale Deed dated 14.08.2012, assessee sold a property situated at Plot No.D-1, Saket District Centre, Saket, New Delhi to Shri Ranjit Kumar and Smt. Ritu Kumar for a total sale consideration of INR 7,00,00,000/-. The payment of INR 7,00,00,000/- was received by the assessee through cheques issued on different dates and deposited in her bank account maintained with HDFC Bank. According to the AO, the said property was purchased by the assessee in the year under appeal and sources of purchases consideration remained unexplained therefore, after recording the reasons, case of the assessee was reopened. During the course of assessment proceedings, the assessee was asked to explain why not provisions of section 50C be invoked as there was difference between the declared consideration and the stamp value determined by the respective authorities on the sale of other two properties and accordingly, the amount of capital gain on sale of property declared by the assessee in her ITR for Financial Year 2012-13 relevant to Assessment Year 2013-14 be changed. After considering the replies, additions/ disallowances of INR 1,03,04,361/- were made u/s 50C and by disallowing the interest expenses. Against this order an appeal was filed before ld. CIT(A) however, due to non-compliance, ld. CIT(A) vide impugned order dt. 30.04.2024 dismissed the appeal of the assessee ex-parte.
4. Aggrieved by the order of Ld. CIT(A), the assessee filed an appeal before the Tribunal wherein following grounds raised by the assessee:- 1. “On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent, ex-Parte without appreciating the fact that the notice sent on email was in dump/update/spam mail box and also without any massage alert, hence AR could not made submissions on facts as well as on law in absence of knowledge of the notice.
2. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent by initiating reassessment proceedings u/s 147/148 merely because he felt that he failed to do what he has ought to have done i.e. to issue of notice u/s 143(2) for normal scrutiny assessment.
3. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent in framing impugned assessment order without assuming jurisdiction as law and without complying with the mandatory conditions of section 147 to 153 of the Income Tax Act, 1961 and reopening of the case is bad in law and beyond the jurisdiction of the Ld. A.O.
4. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent in making the additions, since other additions cannot survive, when no additions were made on the basis of reasons recorded, as held in the case of Ranbaxy Laboratories Ltd. V. CIT (2011) 336 ITR 136 (Del) by the jurisdictional High Court of Delhi.
5. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent in framing impugned assessment order, by rejecting the request made for referring the case to Valuation Officer by the Assessee, hence violative of natural justice and liable to be quashed.
6. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent as per law and on facts in making an aggregate addition of Rs. 55,30,041/- (Rs. 20,11,341/- + 35,18,700/-) by invoking provisions of Section 50C being difference between the actual sale consideration and rate according to the Registrar, disregarding all the submissions made before Id. AO regarding disregarding all the submissions made Page | 3 before Id. AO regarding value declared by the assessee was actual and correct hence the impugned order passed is liable to be quashed.
7. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent has erred in making the addition of Rs. 47,74,320/- by disallowing the interest actually paid and claimed deduction u/s 24b.
8. On the facts and in the circumstances of the case, CIT (A) erred in upholding the impugned order passed by the respondent erred in invoking the provisions of section 50C of the Income Tax Act 1961.
9. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.”
5. Though, the order of Ld. CIT(A) is ex-parte however, since the Ground No.4 of the assessee is purely legal and requires no verification of facts therefore, we proceeded to decide the said ground of appeal No.4 taken by the assessee.
6. Before us, the ld.AR of the assessee has made submission on the ground of appeal No. 4 wherein the jurisdiction of AO in making the addition on the issues beyond the reasons recorded of escapement of income were considered and no addition was made on the issue for which the case was re-opened.
The Ld.AR for the assessee argued that the case of the assessee was re-opened after recording the reasons wherein the AO has recorded his satisfaction that the source of investment of INR 5,50,00,000/- in acquisition of the property at D-1, Saket District Centre, Saket, New Delhi remained unexplained. The reasons so recorded before issue of notice u/s 148 of the Act, as available in the paper book filed by the assessee, are reproduced as under:-
Reasons for re-opening case u/s 147 of the IT Act, 1961 In this case, return declaring income of Rs. 59,97,501/- was filed on 04.02.2012. The returned income was accepted u/s 143(1) vide order dated 24.02.2012. The assessee has shown income from house property, profits & gains from business or profession, capital gains and income from other sources.
An information was received from DDIT (I&CI), New Delhi, in the case of Smt Sonea Dhir, providing the facts as under:- "As per sale deed dated 14/08/2012, the assessee Smt. Sonia Dhir w/o Sh. Shailesh Dhir, 2, Osho Drive, Gadaipur, New Delhi-110030 sold a property situated at plot no D-1 Saket District Centre, Saket, New Delhi to Sh. Ranjit Kumar and Mrs Ritu Kumar R/o A-47, Kailash Colony, New Delhi for sale consideration of Rs. 7,00,00,000/- The payment of Rs. 7,00,00,000/-was received by the seller in the following manner. S.No. Date Mode of Payments Amount 1. 13.08.2012 Chq. No. 028574, UCO Bank, Tilak Nagar 1,75,00,000/- 2. 13.08.2012 Chq. No. 956419, United Bank of India, Greater 1,50,00,000/- Kailash, New Delhi 3. 23.07.2012 Chq. No.210263, State Bank of India, G.K., Part- 11,00,000/- 1, New Delhi 4. 31.07.2012 Chq. No.210265, State Bank of India, G.K., Part- 2,39,00,000/- 1, New Delhi 5. 13.08.2012 Chq. No., State Bank of India, G.K., Part-1, New 1,25,00,000/- Delhi Total 7,00,00,000/- The above mentioned receipts have been reflected in her bank account no 00321000103067 with HDFC Bank. During the course of verification, the assessee Smt. Sonea Dhir was asked to explain quantum of capital gain on sale of property declared by her in her ITR for the FY 2012-13 relevant to AY 2013-14. SOURCE OF PURCHASE OF PROPERTY SOLD SUBSEQUENTLY: As per sale deeds and details it has been found that the assessee had purchased the said property vide sale deed dated 04/06/2012 from M/s United Air Products Pvt. Ltd having its registered office at F-1, Geetanjali Enclave, New Delhi-110017 for a sum of Rs 6,54,30,000/- on which stamp duty of Rs. 26,17,200/- was paid by her. Thus the total cost of the property to the assessee came at Rs. 6,80,47,200/- The payments of Rs 6,54,30,000/- to the seller were made by her from 17.01 2011 to 01 04 2011 as per schedule of payments mentioned in the sale deed. However, as per sanction letter dated 07.06.2012, the assessee was sanctioned/approved Non-Residential premises- Equity loan of Rs 2,75,00,000/- only on 07.04.2012 whereas the payments for purchasing the property was made on 17.01 2011, 18.02.2011 08.03.2011 26.03.2011 and 01.04.2011 as per sale deed dated 04.06.2011. the assessee has not furnished the details and documentary evidence of source of payments made by her prior to obtaining loan from the bank. Capital Gain on transfer of the property purchased on 01.04.2011 The assessee was asked to explain whether she has shown capital gain in her ITR for the AY 2013-14 In response thereto, the AR of the assessee vide reply dated 01.09.2016 filed a sheet showing short term capital gain of Rs. 3,70,499/-on transfer of property for Rs 7,00,00,000/- earlier purchased by her for Rs. 6,54,30,000/-. However, except a copy of letter dated 07.04.20112 from HDFC bank approving a loan of Rs 2,75,00,000/-only, no documentary evidence regarding source of payments made by the assessee during the prior periods of purchase of the property, and computation of cost of property at Rs. 6,96,29,501/- at the time of sale could be furnished by the AR of the assessee As per ITR available on ITD System for the AY 2013-14, the assessee has declared capital gain of Rs. 23.55,859/- However, no computation of capital gain i.e full value, cost of acquisition, indexed cost of acquisition etc has been provided in schedule CG of the ITR. The assessee produced a copy of computation of capital gain during verification proceedings but the same is incomplete and not reliable it has been noticed that the assessee sold a number of properties for Rs. 22.89,80,475/- and claimed cost of acquisition of Rs. 22,43,80,400/- and cost of improvement of Rs 22,44,216/- thereby resulting into short term capital gain of Rs. 23,55.859/-However sale deeds of properties, evidence of cost of acquisition, source of purchase of properties and their documentary evidence has not been furnished to justify STCG declared by her. As regards, documentary evidence of source of payment of Rs. 6.54.30.000/- made in earlier year for purchase of the said property sold for Rs. 7,00,00,000/- during the year the assessee vide her reply dated 01.09.2017 has stated as under- "A sum of Rs. 6,54,30,000/- was paid to the previous owners of the property Copy of bank statement for the relevant from where the payments were made. These have been highlighted for your ready reference. The assessee had received a total sales consideration of Rs. 7,00,00,000/- on sale of property Out of sales consideration received from the buyers namely Mr Ranjit Kumar and Mrs. Ritu Kumar a sum of Rs 2,76,99,031/- has been used for full and final repayment of loan to HDFC from whom the assessee had raised loan against the said property. This entry has also been highlighted in the bank statement. However. The assessee could not produce documentary evidence le names and addresses of the parties, their PANs, their creditworthiness, ITRs and bank statements of such parties from which Rs. 6,54,30,000/- was received by her As regards source of payment of Rs. 2,75,00,000/- from housing loan from HDFC Bank, the same could not be established by the assessee since there is no entry in her bank account which shows that the same pertains to housing loan receipts. As per bank statement of account no. 00321000103067 in the name of Smt. Sonea Dhir with HDFC Bank for Page | 6 the period 18/01/2012, the assessee made payments to M/s. United Air Products Pvt. Ltd. in the following manner: 19/01/2011 Rs. 50,00,000/- (Cheque paid) 21/02/2012 Rs. 1,50,00,000/- (Cheque paid) 11/03/2011 Rs. 1,50,00,000/- (Cheque paid) 26/03/2011 Rs. 2,00,00,000/- (Cheque paid) 05/04/2011 Rs. 1,04,30,000/- (Cheque paid) Rs. 6,54,30,000/- 3. I have independently examined the tifformation available on record and the return filed by the assessee for the relevant year. It has been gathered from information that the assessee has made payment of Rs 5.50.00,000/ for purchase of property at D-1 Saker District Centre, Saket, New Delhi, during the FY. 2010-11 relevant to AY 2011-12. The assessee was not able to submit the documentary evidences in support of source of payment of Rs. 5,50,00,000/- As per loan sanction letter the assessee was approved a non residential premises equity loan of only Rs. 275,00.000/ on 07.06.2012, whereas the payment of Rs. 6,54,30,000 for purchase of property has already been made from 19.01.2011 to 05.04.2011 The source of investment amounting to Rs. 5.50.00.000/ pertaining to the AY 2011-12 made by the assessee, therefore remains unexplained Hence, I am satisfied that the income amounting to more than Rs. 1 lakh has escaped assessment.
It is pertinent to mention that in the case of CIT v Nova Promoters & Finlease (P) Ltd of 2011) dated 15:02 2012 the Hon'ble Delhi High Court, which is the jurisdictional High Court held that as long as there is a live link between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- "We are aware of the legal position that at the stage of issuing the notice u/s 148 the ments of matter are out relevant and the Assessing Officer at that stage is required to form only. Here it would be worthwhile 500/16t the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. v. ACIT (2007) 291 ITR 500/161 Taxman 116 (Supreme Court) The Hon'ble Apex Court has held that "All that is required for the Revenue to assume valid jurisdiction u/s 148 is the existence of cogent material that would lead a person of normal prudence acting reasonably, to an honest belief is to the escapement of income from assessment" Also, in the case of Phoolchand Bajrang Lal v. ITO 203 ITR 456 (SC), the Hon'ble Apex Court has held that:- "An assessment completed u/s 143(3) but later on information received which war indefinite specific and reliable and the AD duly recorded the reasons for his belief that the fully and truly disclosed particulars of his income and hence there was escapement of income Held that the reopening of the case was valid."
Also, in the case of Raymond Woollen Mills Ltd. 236 ITR 34 (SC), the Hon'ble Apex Court has held that:- Assessee did not include certain direct manufacturing costs and fiscal duties in the valuation of closing stock. This came to light in the subsequent years assessment proceedings. We have only to see whether there was prima facia some material on the basis of which the Department could reopen the case The sufficiency or correctness of the material is not a thing to be considered at the stage of issue of notice u/s 148". Furthermore, in the case of Jyoti Goyal vs ITO (ITA NO. 1259/Del/2010), the Hon'ble ITAT Delhi held that "As regards the other contentions of the assessee that the reopening was done in a mechanical manner without application of mind, we find there is nothing on record to support such a contention. There is a live link between the information which was available with the Assessing Officer and his formation of belief that income has escaped assessment Sufficiently of such information cannot be gone into while deciding the issue of validity of reopening. The Assessing Officer can also not make enquiries as no proceedings were pending before him for the relevant assessment year. In the above view of the matter, we are in agreement with the finding of the Ed CIT(A) that the reopening of assessment 2/1 147 of the Act was valid."
In present case, the live link between the material provided by DDIT(I&CI), New Delhi and income escaping assessment has been demonstrated above. Further. I have independently analysed the material available on record and have reasons to believe that income greater than 1 Lacs has escaped assessment for AY 2011-12 and hence it is a fit case for initiation of proceedings in terms of section 147 of the IT Act, 1961.
Submitted for necessary approval u/s 151 of the IT Act, 1961 to issue notice u/s 148 of the 1.T. Act to re-open the assessment u/s 147 of the IT Act, 1961.”
Ld.AR further submits that from the perusal of the assessment order, it could be seen that no addition was made towards the investment made in acquisition of the said property and the AO has made the additions of INR 20,11,341/- as short term capital gain from sale of commercial property at 318, 3rd Floor, Vipul Agora, M.G. Road, Gurgaon. Further addition of INR 35,18,70/- being short term capital gain from sale of another property at 317, 3rd Floor, Vipul Agora, M.G. Road, Gurgaon was made. Besides AO made disallowance of INR 47,74,320/- of the interest paid on home loans taken on various properties as expenses. However, none of the addition / disallowance made is linked with the reasons recorded for re-opening of the assessment. It is thus submitted by Ld.AR that the AO has no jurisdiction to travel beyond the reasons recorded to examine and decide the issues which are not forming part of the reasons more particularly he found no fault on the issue for which the case was reopened. For this, he placed reliance on the judgement of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs CIT reported in 336 ITR 136 (Delhi). He, therefore, prayed that the AO has exceeded his jurisdiction of making additions on other issues when the reasons for which the re-assessment proceedings initiated were seized to survive and requested for quash the reassessment order.
On the other hand, Ld. Sr. DR for the Revenue supported the order of the lower authorities and stated that once the case is re- opened, the AO has jurisdiction to consider and decide all the issues which have come to his knowledge. He thus, requested for the confirmation of the initiation of the proceedings and consequent order passed u/s 143(3)/147 of the Act by making various additions /disallowance.
Heard the contentions of both the parties and perused the material available on record. From the perusal of the reasons recorded it is seen that the case of the assessee was reopened on the issue of the verification of payment made towards purchases of property for INR 5.50 crores. The AO after reopening the case, vide notice issued u/s 142(1) on 03.12.2018 asked the assessee to file the details of source payment made for purchases of property at Saket District Centre, Saket, Delhi and after considering the submission of the query was made which is apparent from the observations made in para 3 at page 3 of the assessment order which reads as under :
During the relevant year, the assessee had made an investment in the property situated at plot no. D-1, Saket District Centre, Saket, New Delhi purchased from M/s United Air Products Pvt. Ltd. through an agreement to sale dated 26.03.2012 for a sum of Rs. 6,54,30,000/-on which stamp duty of Rs. 26,17,200/- was paid. Payment amounting to Rs. 3,70,00,000/- was paid in the relevant year from loans received from her husband and refund of loan from Cambell Realty Pvt. Ltd. and Madhukar Multispecialty Hospital and Research Centre. 11. Thereafter, the AO from para 4 onwards of the reassessment order went on discussing the issues of capital gains declared on the other properties viz application of provisions of section 50C and disallowance of interest paid on home loans.
It is thus, clear that the AO has recorded its satisfaction of the escapement of income of INR 5,50,00,000/- being the payment towards purchases of immovable property however, no adverse inference was taken on this issue as has been observed in para 3 of the reassessment order and no addition was made on this account. In the context, the Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. (supra) has held as under:-
18. “We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of V. Jaganmohan Rao (supra). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Section 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.” 13. The Hon’ble Jurisdictional High Court in the case of CIT vs Adhunik Niryat Ispat Ltd. reported in [2011] 63 DTR 212 (Delhi) has held as under: “Reassessment – Scope - Additional reason - Notice issued by AO on the ground that the assessee had accepted accommodation entries in the garb of share capital-During the reassessment proceedings additions made in respect of the credits received from some other parties additions for accommodation entries were made were not found valid and additions were deleted by the Tribunal-Additions in respect of other items which were not part of "reasons to believe" were also not sustainable.”
Further the Hon’ble Jurisdictional High Court in the case of ATS Infrastructure Ltd. vs ACIT reported in [2025] 166 taxmann.com 61 (Delhi) has held that AO cannot be permitted to improve the reasons recorded which form basis for initiating action under section 148A of the Act. The relevant observations of the Hon’ble High Court as contained in para 29 to 32 of the order reads as under:
In our considered opinion, and bearing in mind the import of Explanation 3 as well as the language in which Section 147 of the Act stands couched, we find no justification to differ from the legal position which had been enunciated in Ranbaxy Laboratories Ltd. We also bear in consideration the said decision having been affirmed and approved subsequently in CIT (Exemption) v. Monarch Educational Society 2016 SCC OnLine Del 6636/[2017] 79 taxmann.com 43/387 ITR 416 (Delhi) and CIT v. Software Consultants 2012 SCC OnLine Del 316/[2012] 21 taxmann.com 155/211 Taxman 120/341 ITR 240 (Delhi).
We thus, come to the conclusion that the enunciation with respect to the indelible connection between Section 148A(b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened.
Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated. 32. Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, Page | 12 supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions.
Similarly, the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. reported in [2011] 331 ITR 236 (Bom.) has held that “it is not open to AO to independently assess some income other than the income referred in section 148 for which reason was recorded”. The relevant head note of the judgement reads as under:- “Section 147 of the Income-tax Act, 1961 Income escaping assessment - Non-disclosure of primary facts Assessment years 1994-95 and 1995- 96 Whether an Explanation to a statutory provision is intended to explain its content and cannot be construed to override it or to render substance and core nugatory Held, yes Whether after insertion of Explanation 3 to section 147 by Finance (No. 2) Act, 2009, with effect from 1-4-1989, section 147 has an effect that Assessing Officer has to assess or reassess income ('such income') which escaped assessment and which was basis of formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during course of proceedings Held, yes Whether, however, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income; if he intends to do so, a fresh notice under section 148 would be necessary, legality of which would be tested in event of a challenge by assessee - Held, yes Words and phrases: The words 'and also' as occurring in section 147 of the Income-tax Act, 1961.”
In view of the facts of the case as discussed above and by respectfully following the judgements of Hon’ble Delhi High Court and Hon’ble Bombay High Court, we are of the considered view that the AO in the instant case has exceeded its jurisdiction by making additions on the issues which are not forming part of the reasons recorded for re-opening the assessment when no addition was made Page | 13 on the issue covered in the reasons recorded. Therefore, no additions could be made dehorse the reasons recorded before issue of notice u/s 148 of the Act. Accordingly, the reassessment order passed u/s 147 of the Act is hereby quashed. Ground of appeal No. 4 taken by the assessee is accordingly, allowed.
As we have already quashed the re-assessment order dt. 27.12.2018 passed u/s 147 r.w.s. 143(3) of the Act while allowing the ground of appeal No. 4 taken by the assessee, thus the other grounds of appeal taken by the assessee become infructuous.
In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 23.07.2025.