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Facts
The assessee, a salaried employee, booked a flat for Rs. 34,41,000/- in joint name and paid cash. Search operations at a group led to incriminating material indicating this payment. The AO initiated reassessment proceedings under Section 148 of the Income Tax Act.
Held
The Tribunal held that the AR had not provided sufficient material to establish that the information originated from seized material during search operations. The matter was remitted back to the CIT(A) to decide this specific issue.
Key Issues
Whether the reassessment proceedings under Section 148 were validly initiated, considering the source of information and the applicability of Section 153C, and whether the AO recorded valid reasons and obtained proper approval for reopening.
Sections Cited
147, 148, 151, 153C, 132, 133A, 143(1), 2(40), 144
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI AVDHESH KUMAR MISHRA
ORDER
PER AVDHESH KUMAR MISHRA, AM
1. This appeal of the assessee for the Assessment Year (hereinafter, the ‘AY’) 2017-18 is directed against the order dated 14.03.2024 passed by the Commissioner of Income Tax (Appeals), NFAC, New Delhi [hereinafter, the ‘CIT(A)’].
Vide various grounds and sub grounds, the assessee has challenged the initiation of proceeding under section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’) and taxability of cash payment/investment of (i) initiation of reopening proceeding under section 148 of the Act without recording the reasons under section 147 of the Act duly approved under section 151(2) of the Act and (ii) non-completion of assessment under section 153C of the Act.
The relevant facts giving rise to this appeal are that the assessee, a salaried employee, booked a flat in a joint name, along with his wife; Mrs. Prachi Gupta, in the residential complexes of Sweta & Oriental Group. Search & seizure and survey operations under section 132 and 133A of the Act were carried out at various premises of Sweta & Oriental Group on 27.11.2019. During the course of intrusive operations, certain incriminating material were seized/impounded which showed that Shri Pawan Kumar Gupta along with his wife; Mrs. Prachi Gupta, had booked a flat and had paid cash of Rs.34,41,000/- during the relevant year. Since the source of the same; prima facie, did not get disclosed from the ostensible source of income; therefore, the Assessing Officer (hereinafter, the ‘AO’) initiated proceedings under section 148 of the Act on 31.03.2021 after taking due approval as evident from the letter of the AO submitted, before us, by the Sr. DR, placed on the record. Since, the source of the same was not explained by the assessee (assessee always denied such investment)
Before us, the Ld. Authorized Representative (hereinafter, the ‘AR’) pressed for admission and adjudication of the additional grounds first. He did not argue the case on merit. First of his contention is that the proceeding initiated under section 148 of the Act on 31.03.2011 is without any valid satisfaction recorded under section 147 read with section 151 of the Act. To support of his claim, the Ld. AR submitted that the AO had failed to furnish the requisite information duly called from time to time under RTI and other letters. His argument was that the AO had recorded satisfaction, subsequent to the issuance of notice under section 148 of the Act, under section 147 of the Act on 16th July, 2021 as evident from the information provided by the AO in response to the RTI application. Further, the Ld. AR admitted that the AO did not make available the approval duly granted under section 151 of the Act even after specific request of the assessee.
4.1 Alternative plea taken by the Ld. AR is that the information entailing reopening of the case under section 148 of the Act has emanated from the incriminating material (wherein the name of the assessee along with his wife is mentioned having paid the sum of Rs.34,41,000/- during the relevant year) seized during the course of search operations carried out at various premises of Sweta & Oriental Group on 27.11.2019; therefore, the Pawan Kumar Gupta legal recourse to tax that income is to initiate the proceedings under section 153C instead of section 148 of the Act. The Ld. AR therefore, prayed for annulment of the assessment order being void ab-initio.
5. On the other hand, the Ld. Sr. DR supported the order of the lower authority and prayed for dismissal of the appeal. She submitted that the factual finding of the AO had to be believed to be true unless proved otherwise. She submitted that the Ld. AR had not brought any material on the record that demonstrate that the said information relating to the sum of Rs.34,41,000/- paid during the relevant year by the assessee had emanated from the incriminating material seized during the course of search operations carried out at various premises of Sweta & Oriental Group on 27.11.2019. She submitted that the reply provided in response to the RTI application was dated 16th July, 2021 which had been taken mistakenly as the date of recording of satisfaction under section 147 of the Act. She placed emphasis on the letter of the AO, which read as under: “From The Income Tax Officer-3(3) Bijnore To, The Commissioner of Income Tax (DR) The Income Tax Appellate Tribunal F-Bench, Delhi Sir/Madam, Subject- Factual report on additional grounds of appeal in the case of Shri Pawan Kumar Gupta, PAN-AHCPG7931M, A.Y. 2017-18- reg.
Kindly refer to your office e-mail on the above mentioned subject.
In this regard, it is to submit that in the case of Shri Pawan Kumar Gupta, PAN-AHCPG7931M, A.Y. 2017-18, information was pushed into insight Portal by investigation wing that during the F.Y. 2016-17 the assessee had entered into transaction related to purchase of Immovable Property from M/s Sweta Group where consideration was paid into cash. As per the report of Investigation wing, it was noticed that the assessee had paid cash of Rs. 34,41,000/- to the M/s Sweta Group for purchase of a Residential Flat.
On receipt of Investigation wing report, all the information available of portal & database was perused and it was found that assessee is only earning income under the head Salary, whereas the payment made in Cash towards the purchase of Immovable property is not in line with the financial background shown in ITR. Since, the assessee has made cash payment for the purchase of residential flat from M/s Sweta Group which is not permissible under the provisions of IT Act, 1961 and also source of such heavy investment is not known. A proposal to issue notice u/s 148 of the Income Tax Act, 1961 for this purpose was submitted for kind approval.
The factual report on additional legal grounds of appeal is as follows:
The assessee claimed that the proper recourse is to initiate proceedings u/s 153C, thus the initiation of proceedings u/s 147 is not valid. In this regard, it is submitted that in this case the assessee has filed return of Income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return of Income was only processed u/s 143(1) of the Act. In view of the above, provisions of clause of (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration was deemed to be a case where Income chargeable to tax has escaped assessment.
2. The assessee claimed that the reassessment proceedings were without jurisdiction. In this regard, it is to submit that the PAN is lying with jurisdiction of Assessing Officer and the case was reopened after recording valid reasons to do so with the prior approval of competent authority.
3. The prior approval of competent authority was obtained before issuing notice u/s 148.
4. Since the case was lying under the provisions of NFAC and hence the same was transferred to National Faceless Assessment Centre for assessment.
in this case, the escaped Income was reported Rs. 34,41,000/- and hence the notice u/s 148 could be Issued upto 31.03.2021. In this case, notice u/s 148 was Issued on 31.03.2021. Copy of the same is being enclosed herewith for your kind perusal.