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Facts
The Assessing Officer initiated reassessment proceedings based on information about the sale of a property for Rs.1.2 crores, alleging concealment of Long Term Capital Gain. Subsequently, during reassessment, the AO observed another transaction involving a property sale and made an addition of Rs.36,00,000/- based on a difference in cash deposit, which was not the original reason for reopening.
Held
The Tribunal held that the Assessing Officer made the addition on a transaction different from the reasons recorded for reopening, rendering the reassessment proceedings bad in law. Relying on the Delhi High Court's decision in Ranbaxy Laboratories Ltd. vs. CIT, the Tribunal allowed the assessee's second ground.
Key Issues
Whether reassessment proceedings are valid when the addition made is based on a transaction different from the reasons initially recorded for reopening the assessment?
Sections Cited
148, 133(6), 151, 143(2), 142(1), 48
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI
(Assessment Year: 2011-12) Arun Tyagi, vs. ITO, Ward 1 (1), C/o Ch. No.206-207, Ansal Satyam, Ghaziabad. RDC, Rajnagar, Ghaziabad – 201 002 (Uttar Pradesh). (PAN : AWDPA3342A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Akhilesh Kumar, Advocate REVENUE BY : Shri B.S. Anand, Sr. DR Date of Hearing : 03.03.2025 Date of Order : 09.05.2025 O R D E R
The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 25.09.2024 for the Assessment Year 2011-12 raising following grounds of appeal :- “1 Because, the order of learned lower authority is bad in law & against the facts and circumstance of the case.
2. Because, ld. CIT (A) grossly erred in sustaining the impugned order and validity of proceedings as 'reason' became non-existent and admittedly Ld. AO has made no addition on the reason for issuance of notice u/s 148, hence subsequent proceedings/other additions are illegal in view of ration of Oriental bank of commerce - 99 taxmann.com 312 (SC), 49 taxmann.com 485 (DEL.) etc.
3. Because, ld. CIT(A) erred in sustaining the validity of notice u/s 148, which is issued mechanically without any enquiry, verification of information etc. with vague reasons without any application of mind and satisfaction of ld. AO sheerly to conduct roving enquiries only and is beyond jurisdiction.
Because, ld. CIT(A) further erred dismissing jurisdictional ground without appreciating that approval u/s 151 is also mechanical without having desired satisfaction so as notice u/s 148 is invalid.
5. Because, without prejudice and dilution to above grounds only in alternative Id. CIT(A) grossly erred in sustaining the addition of Rs.3600000/- by rejecting a very plausible explanation about source of deposit supported with affidavits of assessee hence order is against the settled law.
Because, ld. CIT(A} erred in not even considering, the affidavit of assessee more so when ld. AO has also failed to consider same and conduct enquiry on the contention in remand proceedings and summarily sustaining the addition on merits arbitrarily. Therefore, it is prayed that notice/order under question may kindly be quashed, however only as an alternative it is prayed that addition may kindly be quashed.”
At the time of hearing, ld. AR of the assessee pressed ground no.2 raised by the assessee. On the issue of reasons recorded by the Assessing Officer to initiate the proceedings, he submitted, however, the additions made by the Assessing Officer are not commensurate with the reasons recorded to reopen the assessment under section 148 of the Income-tax Act, 1961 (for short ‘the Act’). In this regard, he brought to our notice page 1 of the assessment order wherein Assessing Officer has recorded the reasons for initiation of reopening the assessment proceedings as per Assessing Officer had the AIR information for sale of property of Rs.1.2 crores during the assessment year under consideration which he has received from Director of Income Tax, Kanpur through the PCIT, Ghaziabad. As per the copy of sale deed of the property collected from SRO, it was observed that the assessee and his brother, Shri Johny has sold the property to Shri Sanjay Tyagi, Shri Praveen Tyagi and Shri Vijay Tyagi. To verify the same, notice u/s 133(6) of the Act were issued with prior approval from the PCIT, Ghaziabad. In compliance of the above, the parties did not submit any reply or any documents. Accordingly, the Assessing Officer formed an opinion that assessee has concealed his Long Term Capital Gain (LTCG) income of Rs.48,21,600/- against the abovesaid sale of property and issued the notice u/s 148 of the Act. In compliance, assessee has filed his return of income on 11.05.2018. Subsequently, notices u/s 143(2) and 142(1) were issued and served on the assessee.
He also brought to our notice that during the course of assessment proceedings, the Assessing Officer observed that assessee has sold property of Rs.23,00,000/- on 19.08.2010 in cash and deposited cash in the bank account of Rs.24,00,000/- on 09.08.2010 and Rs.23,50,000/- on 20.08.2010. The assessee was asked to submit the details of cash deposit in the bank account from the sale proceed of the agricultural land as the Rs.47,50,000/-. In order to verify the same, notices u/s 133(6) of the Act were issued to the purchaser i.e. Shri Sanjay Tyagi, Shri Praveen Tyagi and Shri Vijay Tyagi to furnish the details. In compliance to the notices issued u/s 133 (6), the above said parties did not submit any details or documents. The Assessing Officer observed that the abovesaid land was sold by the assessee along with his brother, therefore, the share of the assessee is 50% of the sale consideration i.e. Rs.11,50,000/-. Since the cash deposit in the bank account was of Rs.47,50,000/-, the Assessing Officer made the addition in the hands of the assessee of the difference of Rs.36,00,000/-. He submitted that reassessment proceedings were initiated on the basis of a property sold by the assessee for a sum of Rs.1,20,54,000/-, however Assessing Officer proceeded to make the addition on the issue of another transaction which was not the reasons recorded for reopening of the same. He submitted that the decision of Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (2010) 331 ITR 236 (Bom.) and Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (2011) 335 ITR 136 (Del.) squarely applies to the case in hand and he prayed that the reassessment proceedings itself is bad in law, deserves to be quashed.
4. On the other hand, ld. DR of the Revenue relied on the findings of the ld. CIT(A) and submitted that the issue raised by the assessee are elaborately discussed by the ld. CIT (A) in paras 6.3, 6.3.1. and 6.3.2 of the appellate order.
Considered the rival submissions and material placed on record. We observed from the record that the Assessing Officer has initiated the proceedings by recording the reasons from the AIR information forwarded by the DIT (Inv.), Kanpur through PCIT, Ghaziabad that assessee has sold a property worth of Rs.1,24,54,000/- and not disclosed the capital gains. By recording the abovesaid reasons, reassessment proceedings were initiated. Accordingly, he determined the LTCG earned by the assessee in this transaction. After initiating the reassessment proceedings and during the course of re-assessment proceedings, Assessing Officer observed that assessee has sold another property of Rs.23,00,000/- and deposited the cash of Rs.47,50,000/-. After giving credit of 50% of the sale consideration received by the assessee for sale of agricultural land, he proceeded to make addition of Rs.36,00,000/- in the hands of the assessee. It clearly shows that the Assessing Officer has initiated the proceedings based on the information available with him and recorded the reasons for reopening the assessment, however he does not make any addition on the basis of reasons recorded for initiating the proceedings. However, he made the addition on verification of some other transaction entered by the assessee during the year. Therefore, in our considered view, the ratio of the decision of Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (2011) 335 ITR 136 (Del.) is squarely applicable to the facts in the present case. Further we observed that the ld. CIT (A) has tried to distinguish the case of Ranbaxy Laboratories Limited and Jet Airways (I) Ltd. (supra) by heavily relying on the decision of Hon’ble Karnataka High Court in the case of N Govindaraju vs. ITO in (2015) 60 taxmann.com 333 (Karnataka). In our considered view, the decision of Ranbaxy Laboratories Limited (supra) is the decision of Hon’ble jurisdictional High Court which is squarely applicable to the facts of the present case. Therefore, reasons recorded in the reassessment notice do not survive in this case, as held by the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Limited (supra). Accordingly, ground no.2 raised by the assessee is allowed and all other grounds raised
by the assessee are not adjudicated at this stage.