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Income Tax Appellate Tribunal, DEHRADUN BENCH
Before: SHRI R.K. PANDA & SHRI SUDHANSHU SRIVASTAVA
PER R.K. PANDA, AM
This appeal filed by the assessee is directed against the order dated 24.11.2017 of the Ld. CIT(A) Dehradun relating to assessment year 2008-09.
The grounds raised by the assessee are as under :-
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
“That the learned Commissioner of Income Tax (Appeals), Dehradun has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, completion of assessment u/s 147/143(3) of the Act which were without jurisdiction and deserves to be quashed as such.
1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, there was no tangible, relevant, specific and reliable material on record on the basis of which, it could be held that, there was any reason to believe with the learned Assessing Officer that income of the appellant had escaped assessment and, in view thereof, the proceedings initiated were illegal, untenable and therefore, unsustainable.
1.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate that since there was no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 of the Act- after a period of four years from the end of assessment year in a case where original assessment has been framed u/s 143(3) of the Act was illegal and invalid.
1.3 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that approval granted was a mechanical approval and hence initiation of proceedings u/s 147 of the Act on this ground is invalid. 2. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding an addition of Rs. 95,25,000/- representing alleged undisclosed/unexplained investment made by the appellant. 2.1 That the learned Commissioner of Income Tax (Appeals) while upholding the addition has overlooked documentary evidence placed on record by the appellant to show that the investment made by the assessee was duly explained out of the funds available with the appellant and therefore, addition sustained is not in accordance with law. 2.2. That finding of the learned Commissioner of Income Tax (Appeals) that, “thus, prima facie, it was evidently established that the assessee, Shri Ganga Ram Adwani had paid of Rs. 95,25,000/- over and above the registered amount as undisclosed investment of the assessee which was out of his undisclosed income” is factually incorrect and hence not tenable.
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
2.3 That further the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that, “the onus to explain a document found during search and seizure always lies with the’person from whose premises it has been found and third person cannot be questioned from the same.”
2.4 That the learned Commissioner of Income Tax (Appeals) has erred both in law and on facts in observing that “admission of receipt of underhand amount against sale of the said property had been confirmed by the seller relating to the direct transaction and not by a third party”. 2.5 That the finding of the learned Commissioner of Income Tax (Appeals) that, “the statements are taken as uncontroverted and in any case they are backed by corroborative evidence of the investment of the proceeds in purchase of land” is perverse and hence not tenable.
2.6 That further finding of the learned Commissioner of Income Tax (Appeals) that “the assessee has apparently not asked for a cross examination of the witnesses” is factually incorrect, contrary to record, legally misconceived and untenable. 2.7 That various adverse findings and conclusion recorded by the learned Commissioner of Income Tax (Appeals) are also factually incorrect, contrary to record, legally misconceived and untenable. 3. That both the authorities below have framed the impugned order without granting sufficient proper opportunity to the appellant and therefore the same are contrary to principle of natural justice and hence vitiated.
That the learned Commissioner of Income Tax (Appeals) has erred both in law and 011 facts in upholding the levy of interest of Rs. 1,92,173/- under section 234B of the Act and interest of Rs. 88,67,147/- u/s 234C of the Act which are not leviable on the facts and circumstances of the case of the appellant ' It is therefore, prayed that it be held that assessment made by the learned Assessing Officer and sustained by the learned Commissioner of Income Tax (Appeals) deserves to be quashed as such. It be further held addition made and upheld by the learned Commissioner of Income Tax (Appeals) alongwith interest levied be deleted and appeal of the appellant be allowed.
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
2.1 The assessee has also raised the following additional grounds :-
“1. That order of assessment dated 8.3.2016 u/s 147/143(3) of the Act is without jurisdiction since no notice u/s 143(2) of the Act was either issued or served upon the assessee on filing of return in response to notice u/s 148 of the Act and prior to assessment framed u/s 147/143(3) of the Act
That since the learned Assessing Officer did not dispose of the objection by a speaking order in accordance with the judgment of G.K.N Driveshafts (India) Ltd vs ITO reported in 259 ITR 19, the assessment so made is invalid.”
2.2. However, the Ld. Counsel for the assessee did not press the additional grounds at the time of hearing for which the same are dismissed as not pressed.
Facts of the case, in brief, are that the assessee is an individual and engaged in real estate business. He filed his return of income on 10th June, 2008 declaring total income of Rs. 63,73,700/-. The assessment u/s 143(3) was completed on 27th August 2009 at the returned income. Subsequently, the AO reopened the assessment u/s 147 by recording the following reasons :-
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
“The assessee Shri Ganga Ram Advani has filed his Income Tax Return for A.Y. 2008-09 on 10.6.2008 declaring total income of Rs. 63,73,700/-. Assessment order u/s 143(3) was passed on 27.08.2009 at total income of Rs. 63,95,063/-.
Subsequently, it has come to the notice that the assesee, Shri Ganga Ram Adwani has purchased a plot of land at Jwalapur, Haridwar, jointly with Sh. Sunil Agarwal S/o Late Shri Laxmi Narayan, R/o Mohalla Mayana, Kankhal, Hardwar, being 50% share of each vide sale/purchase deed dated 05/07.04.2007 for Rs. 15,50,000/- from Shri Ashwani Kumar S/o Shri Shanta Prasad, R/o Himgiri Hotel (Nath House), Hardwar as karta of Ashwani Kumar Mittal & sons (HUF), for which excess money over and above the amount mentioned in registered deed has been paid by the purchasers.
A search and seizure operation u/s 132 of the IT Act was conducted by the department at residential and business premises of Mittal family of M/s. Kanatal Resorts group of cases at Mussoorie Chamba Raod, Tehri Garhwal, Teg Bahadur Road, Dehradun, Chanderlok Colony, Rajpur Road, Dehradun and Nath House, Hardwar on 22/23.09.2011. During the course of search, certain documents were found & seized from different premises which include Ann. A-2, page No. 5
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
27, Ann A-11 page No. 143, Ann. PO-1 page No. 9 & 10 and statements on oath u/s 132(4) of Shri Deepak Mittal S/o Ashwani Kumar Mittal and Shri Ashwani Kumar Mittal were recorded on 23.09.2011. From these documents/evidences, it has been found that land measuring 0.5480 hect. situated at Jwalapur, Hardwar known as farm house land was sold by Ashwani Mittal & Sons (HUF), which was purchased vide deed dated 05/07.04.2007 jointly by Shri Ganga Ram Advani, the assessee and Shri Sunil Agarwal S/o Late Shri Laxmi Narayan, R/o Mohalla – Mayana, Kankhal, Harwar having 50% share each for Rs.15,50,000/-. The sale deed for entire land was made at Rs.15,50,000/- but it has been found from seized documents that the above land was actually sold for Rs.2,06,00,000/-. Sh. Deepak Mittal and Shri Ashwani Kumar Mittal in their statements on oath recorded u/s 132(4) have also admitted that the Form House land situated at Jwalapur Hardwar was sold for total consideration of Rs. 206 lacs including cash received from the purchasers over and above the amount mentioned in the registered deed dated 5/7.04.2007. From these facts, it is evidently clear that the assessee has jointly purchased ½ share of 0.5480 hectares land at Village – Jwalapur, Haridwar from Shri Ashwani Kumar Mittal for Rs.2,06,00,000/- whereas as per sale deed dated 5/7/.4.2007 purchase amount has been shown at
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
Rs.15,50,000/- only. Thus, the transactions recorded in the seized documents revealed that the total registered value of the said land was Rs.15,50,000/- but the actual total consideration received by the seller and paid by the purchasers was Rs.2,06,00,000/-. This way, ½ share of the assessee, Shri Ganga Ram Adwani comes to Rs.1,03,00,000/- as against Rs.7,75,000/- shown in the registered deed. Thus, prima facie, Shri Ganga Ram Adwani has paid Rs.95,25,000/- over and above the registered amount. This is unexplained money/ undisclosed investment of the assessee which is out of his undisclosed income.
On the basis of discussion made above, I have reason to believe that an income to the extent of Rs.95,25,000/- has escaped assessment within the meaning of section 147 of the IT Act, 1961. Necessary approval u/s 151(1) of the Act 1961 of the CIT, Dehradun for initiating proceedings u/s 147 has been received vide his office letter F. No. Pr.CIT/DDN/Sct.Appr./148/2014-15/2734 dated 26.03.2015.”
3.1. Thereafter notice u/s 148 was issued on 26th March 2015. The assessee in response to the said notice submitted that the original return filed u/s 139(1) may be treated as the return filed in response to notice u/s 148. The assessee also requested for supply of reasons for re-opening of the assessment. The AO supplied the reasons to the assessee. 7
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The AO noted that the assessee during the year under consideration derived income from property business, commission income and income from other sources. He noted that during the course of search and seizure operation conducted u/s 132 of the I.T. Act at the residential premises of Mittal family of M/s. Kanatal Resorts group of cases at Mussoorie Chamba Road, Dehradun, certain documents were found & seized from different premises and statements on oath u/s 132(4) of Shri Deepak Mittal S/o Ashwani Kumar Mittal and Shri Ashwani Kumar Mittal were recorded on 23.9.2011. The documents found and seized from different premises included Ann.A-2, page No. 25, Ann. A-11 page No. 143, Ann. LP-1 page No. 9 & 10. From the above documents / statements, it was found that land measuring 0.5480 hect. situated at Jwalapur, Hardwar known as farm house land was sold by Ashwani Mittal & Sons (HUF), which was purchased vide deed dated 07.04.2007, jointly by Shri Ganga Ram Adwani, the assessee and Shri Sunil Agarwal S/o Late Sh. Laxmi Narayan, R/o Mohalla-Mayana, Kankhal, Haridwar (having 50% share each) for Rs. 15,50,000/-. The sale deed for entire land was made at Rs. 15,50,000/- but it was found from the seized documents that the above land was actually sold for Rs. 2,06,00,000/-. Shri Deepak Mittal and Shri Ashwani Kumar Mittal in their statements on oath recorded u/s 132(4) stated that the Farm House land situated at Jwalapur, Haridwar was sold for total consideration of Rs. 2.06
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
crores (including cash received from the purchasers over and above the amount mentioned in the registered deed dated 07.04.2007). From these facts, the AO held that it was evidently clear that the assessee had jointly purchased 0.5480 hectares land at Village, Jwalapur, Haridwar from Shri Ashwani Kumar Mittal for Rs. 2,06,00,000/- whereas as per sale deed dated 5/7.04.2007 purchase amount had been shown at Rs. 15,50,000/- only. He therefore held that ½ share of the asseseee, Shri Ganga Ram Adwani comes to Rs. 1,03,00,000/- as against Rs. 7,75,000/- shown in the registered deed. Thus, prima facie, it was evidently established that the assessee, Shri Ganga Ram Adwani had paid Rs. 95,25,000/- over and above the registered amount as undisclosed investment of the assessee which was out of his undisclosed income.
During the course of assessment proceedings, the AO asked the assessee to explain the investment of Rs. 95,25,000/-. .Rejecting the various explanations given by the assessee the AO made an addition of Rs. 95,25,000/- to the total income of the assessee.
Before the Ld. CIT(A) apart from challenging the addition on merit, the assessee also challenged the validity of reassessment proceedings. However, the Ld. CIT(A) was not satisfied with the arguments advanced by the assessee
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
and upheld the validity of reassessment proceedings as well as the addition of Rs. 95,25,000/- made by the AO u/s 69B of the Act.
Aggrieved with such order of the Ld.CIT(A), the assessee is in appeal before the Tribunal.
Ld. Counsel for the assessee, at the outset, submitted that in the reasons recorded by the AO there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment . He submitted that the original assessment in the instant case was completed u/s 143 (3) on 27th August, 2009. The assessment year involved is assessment year 2008-09and the notice u/s 148 was issued on 26th March, 2015. Therefore, in view of the proviso to section 147 the notice issued u/s 148 for the impugned assessment year has to be held as invalid being without jurisdiction. For the above proposition, he relied on the decision of Hon’ble Delhi High Court in the case of Haryana Acrylic Manufacturing Company vs. CIT reported in 308 ITR 38.
Referring to the decision of the Tribunal in the case of Shri Sunil Agarwal vs. ITO vide ITA No. 988/Del/2018 order dated 24th May 2018 he submitted that in the case of the co-owner of the property, the Tribunal has held the reassessment proceedings as invalid on the ground that there was no
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and the notice u/s 148 of the Act was issued after a period of four years from the end of the relevant assessment year where such assessment was completed u/s 143(3). It was further held in said decision that the reasons recorded are vague and non- speaking and reflect complete non application of mind much less independent application of mind. He accordingly submitted that on this issue itself the reassessment proceedings initiated by the AO and upheld by the Ld. CIT(A) should be dismissed.
Ld. DR on the other hand heavily relied on the order of AO and Ld. CIT(A). He submitted that the reasons have been recorded in accordance with law and, therefore, the reassessment proceedings cannot be quashed on account of technical reasons.
We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions including the decision of the coordinate bench of the Tribunal in the case of co-owner of the property Shri Sunil Agarwal. We find the assessment in the instant case was originally completed u/s 143 (3) on 27th August 2009 accepting the returned income of Rs. 63,73,700/-. The notice u/s 148 was issued on 26th March, 2015 11
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which is after a period of four years from the end of the relevant assessment year. A perusal of the reasons recorded, which have also been reproduced in the preceding paragraphs, nowhere show that there is any allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment.
11.1. We find the Hon’ble Delhi High Court in the case of Haryayana Acrylic Manufacturing Company vs CIT 308 ITR 38 has observed as under :-
“19. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) 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 (ii) to disclose fully and truly all material facts necessaiy for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
must arise out 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. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section 147 could have been taken after the four year period indicated above. So, the key question is whether or not the petitioner had made a full and true disclosure of all material facts.
In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently,
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wei Intertrade (P.) Ltd.’s we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year- period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2- 3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.
The various other decisions relied on by the Id. Counsel also support his case to the proposition that where there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 after a period of four years from the end of the relevant assessment year in a case where original assessment has been framed u/s 143(3) of the Act is illegal and invalid since proceedings are without jurisdiction.”
We further find the Tribunal in the case of the co-owner Shri Sunil Agarwal vide ITA No. 988/Del/2018 order dated 24th May, 2018 has also quashed the reassessment proceedings on the ground that there is no allegations in the reasons recorded of any failure on the part of the assessee to 14
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
disclose fully and truly all material facts necessary for completion of the assessment and the notice u/s 148 of the Act was issued after a period of four years from the end of the relevant assessment year where the original assessment was completed u/s 143(3) of the Act. The Tribunal has further held that the reasons recorded are vague and non-speaking and reflect complete non-application of mind much less independent application of mind. The AO has taken action mechanically on the basis of information of DCIT, Central Circle, Dehradun and not on independent application of mind of his own and therefore on this count also the proceedings were held to be without jurisdiction. Since in the instant case the original assessment was completed u/s 143(3) and the notice u/s 148 was issued after a period of four years from the end of the relevant assessment year where the original assessment was completed u/s 143(3) and since there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment, therefore, we are of the considered opinion that the notice issued u/s 148 is without jurisdiction as no action u/s 147 could have been taken in the instant case after the period of four years from the end of the relevant assessment year. Therefore, the subsequent order passed u /s 143(3)/147 also becomes invalid. In view of the above discussion, we hold that the reassessment proceeding initiated by the AO and upheld by the Ld.
ITA No. 1511/Del/2017 Ganga Ram Adwani vs DCIT
CIT(A) is not in accordance with law. The grounds raised by the assessee challenging the validity of reassessment proceedings are accordingly allowed. Since the assessee succeeds on this legal ground, the grounds challenging the addition on merit are not being adjudicated being academic in nature.
The appeal filed by the assessee is accordingly allowed.
In the result the appeal filed by the assessee is allowed.
Order pronounced on 11th November, 2020.
sd/- sd/-
(SUDHANSHU SRIVASTAVA) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 11/11/2020 Veena Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR