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Income Tax Appellate Tribunal, HYDERABAD BENCH “A”, HYDERABAD
Before: SMT. P. MADHAVI DEVI & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, A.M.:
These two appeals filed by the above assessees are directed against the orders of CIT(A) – 6, both dated 14/02/2017, Hyderabad for AY 2007-08. As the facts are similar in both the cases, for the sake of convenience, to adjudicate both these appeals, we take facts from ITA No. 827/Hyd/2017.
Brief facts of the case, as taken from ITA No. 827/Hyd/2017, are, assessee, an individual, filed her return of income for AY 2007-08 on 31.10.2007 declaring total income of Rs.27,72,620/-. Later, a notice u/s 148 of the Income-tax Act, 1961 ( in short ‘the Act’) was issued on 18.03.2014 to the assessee with prior approval of the then Addl. Commissioner of Income Tax, Range-6, Hyderabad, for the reason that income chargeable to tax has escaped assessment. In response to the said notice, the assessee's AR filed letter on 13.01.2015 wherein it was
2 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy. requested to treat the return of income filed on 31.10.2007 for A.Y.2007-08 as return filed in response to notice u/s 148 of I.T. Act.
2.1 Consequent to the creation of new Range-l4, Hyderabad vide CBDT's Notification in F. No .50 12014 dt. 22. 10.2014 and Notification of the CIT -VI in F.No. CIT/HYD-VI/JURIS/2014-15 dt.15.11.20 14, this case was transferred to DClT, Circle-14(1), Hyderabad and accordingly notice u/s 142(1) was issued on 14/01/2015. In response to this notice, the AR of the assessee appeared and furnished the submissions.
2.2 On verification of the material available on record, the AO noticed that the assessee had purchased a plot admeasuring 116 sq. yards from Smt. L.Yamuna, W/o Sri L. Jaya Reddy vide document no.613/2007. The value of the plot as per registered document is Rs 4,79,660/-. However, it is seen from the statement on oath of Sri L. Jaya Reddy, husband of the seller who deposed before the DDIT(Inv.), Unit-II(I), Hyderabad that he and his family members sold the property originally at Rs.21,500/- per sq. yard as against the document value of Rs. 4,135/- per sq. yd. Thus, the assessee has paid Rs.24,94,000 towards the cost of plot as against the document value of Rs 4,79,660 and there is a difference of Rs.20,14,340/-. In the course of assessment proceedings, the assessee was provided with reasons for reopening of assessment u/s 148 for AY 2007-08 vide office letter dated 14.1.2015. Assessee vide letter dated 3.2.2015 raised the objections which were disposed off by A.O vide letter dated 13.2.2015. Further, a show cause letter was issued to the assessee on 18.2.2015 as to why capital gain shall not be taxed on the difference value of Rs.20,14,340/-. In response to the same, the assessee filed written submissions dated 23.2.2015 reiterating the same submissions as submitted earlier during the course of assessment proceedings and which were disposed-off by A.O vide letter dated 13.2.2015.
2.3 In view of the above observations, the AO was of the view that the income of Rs.20,14,340/- has escaped from the assessment, accordingly, he brought to tax the same in hands of the assessee.
3 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy. 3. Aggrieved by the order of AO, the assessee preferred an appeal before the CIT(A).
Before the CIT(A), the assessee challenged the validity of the assessment order on following grounds: i) Service of notice u/s 148 was not in conformity with the provisions of section 281 of the IT Act. ii) Reopening on the basis of information received from another authority without verification and application of mind did not meet the requirement of law. 5. As regards the first ground regarding challenging the initiation of proceedings u/s 147, the CIT(A) elaborately discussed the issue with various case law, rejected the ground.
5.1 Further, the CIT(A) observed that though the assessee has not argued on the merits of the addition, nevertheless, it would not be out of place to have a brief discussion on the same and accordingly, he observed as under: 04.9.1 The assessee accepts the purchase transactions. She also accepts the cheque payment. But she denies alleged cash payment. According to her, the reopening and the subsequent addition cannot be made without having any corroborative evidence. As already discussed, the seller of the latter confirmed having received the unaccounted consederation. The details of such payment are recorded in the handwriting of the employee the SMR Group, whose Managing Director is assessee's husband. If a document showing the cash payment, duly signed by the assessee, had been seized, that would constitute clinching evidence. But such signed documents relating to unaccounted cash payments are rarely found. In such a situation one has to go by over reaching circumstances and preponderance of probability. Considering that the information emerged from search u/s 132 of the Act and majority of the buyers and all the sellers confirmed the incidence of unaccounted cash payment, it stands to reason that the assessee should also have made such payment. There is nothing on record to show an existence of a special relationship due to which the unaccounted cash payment could have been waived in his case. It is pertinent to note that the property bought by the assessee formed part of land given on development to M/s Prithviraj Projects Pvt. Ltd., a group of concern of SMR Builders. The standard of evidence is strict for penalty and prosecution, but, for assessment, the available evidence is sufficient to conclude that unaccounted payments were made by the assessee. The addition is confirmed on merits also.
4 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy. 4.10 There is merit in assessee’s submission that the AO has wrongly subjected the addition to capital gains. The assessee has bought the property from the sellers and therefore, the addition of Rs. 20,14,350/- is to be considered as unexplained investment u/s 69 of the Act and there is no question of the same being added as capital gains. The AO is accordingly directed to recompute the total income by taking the amount of Rs. 20,14,350/- as unexplained investment and tax it accordingly.” 6. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising the following grounds of appeal and additional grounds of assessee with application for admission of additional grounds of appeal: 1. Aggrieved by the order passed by the Commissioner of Income Tax (Appeals) - VI, Hyderabad (C.I.T(Appeals) in the case of the appellant for the Asst.Year 2007-'08, the appellant filed appeal before the Hon'ble Income tax Appellate Tribunal, Hyderabad. 2. The appellant case was reopened under section 147 consequent on the information received from DDlT investigation regarding discovery of some uncorroborated material/evidence in course of search under section 132 from the residence of Sri Jaya Reddy. 3. In course of filing the appeal before the Hon'ble Tribunal the appellant inadvertently omitted to raise certain legal grounds which go to the root of the matter. The grounds now raised are essential for adjudication of this appeal. 4. On a review of the facts of the case on the basis of instructions issued by the Board and in the light of the decision of this Hon'ble Tribunal on the subject, the appellant seeks to raise the under mentioned additional grounds of appeal in the above captioned appeal pending before the Hon'ble Income Tax Appellate Tribunal. 5. The appellant submits that all the relevant facts necessary for adjudicating upon the additional grounds now sought to be raised are already available on record. The appellant also submits that the Hon'ble Appellant Tribunal is empowered to admit the additional grounds in the light of the decision of the Apex Court in the case of NTPC Ltd. (1998) 229 ITR 383 (SC). 6 The appellant humbly prays that the Hon'ble Income Tax Appellate Tribunal may kindly admit the under mentioned additional grounds and take the same into account while adjudicating upon the above mentioned appeal. ADDITIONAL GROUNDS OF APPEAL (raised in ITA No. 827/H/17) 1. The learned Assessing Officer erred in initiating the proceedings u/s.147 instead of u/s.153C as the information regarding alleged payment of on money emanated out of documents seized from the premises of Sri Jaya Reddy whose premises was covered u/s.132 of IT Act.
5 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy.
The learned CIT(A) erred in arriving at an inference that provisions of Sec.292BB is applicable in the case and non-service of notice on the authorised person can be cured by application of Sec.292BB of IT Act. The learned CIT(A) should have appreciated that the provisions of Sec.292BB cannot cure a jurisdiction error, as the said section covers only service of notice but not issue of notice which is a jurisdictional one. 3. The learned CIT(A) should have appreciated that corroboration of on money transaction is a requirement before treating the same as income on the basis of settled judicial precedent including that of apex court. 4. The initiation of proceedings is bad in law as the same doesn't confirm to the standard operating procedure laid down by CBDT by its letter Dt.l0.12.2018 in as much as the AO mechanically followed the information received from investigation wing without any application of mind.”
After considering the submission of both counsels, additional grounds admitted for adjudication.
Before us, Ld. AR submitted that the notice was served on A.V. Ramana, Manager of the company, which is controlled by assessee. He brought to our notice the further notice issued by A.O u/s 143(2) and assessee’s submission, but, he specifically brought to our notice the objection raised by the assessee for not serving the notice u/s 148 before A.O. He submitted that the service of the notice with the employee who is not the agent of the assessee is bad in law. Further, he submitted that the reopening was made due to the statement given by Shri L. Jaya Reddy and accepted to have sold the land @ 21500/sqm where as assessee has actually paid Rs. 4135/-. He submitted that there is no evidence during search relating to assessee nor there is any reference in the statement about the assessee. Therefore, re-opening is not proper. He submitted that Sec. 292BB is not applicable to this case as the assessee has raised objection before the AO even though assessee participated in the proceedings.
10 On the other hand, Ld. DR supported the orders of revenue authorities and submitted that the notice was served properly and with proper reasons for reopening. He relied on the decision in the case of CIT
6 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy. Vs. Sudeev Industries Ltd., 94 taxaman. Com 373(Delhi) and referred para 24 of the order. He submitted that the AR of the assessee participated in the proceedings. He submitted that the case Rajesh Kumar relied on by the assessee is not applicable. He further submitted that Ld. CIT(A) has dealt with the reopening issue in para 4.2 of the order. On merit, he submitted that the sworn statement of Shri L. Jaya Reddy clearly indicate that the land was sold @ 21500/sqm. and there is corroborative evidence available on record. There is a reference of sale of land to other purchasers also and no mention of specific name of the assessee. The overall picture clearly indicate that the land was sold for Rs. 21500 Sqm. and assessee has paid additional payment.
10.1 In the rejoinder, Ld. AR submitted that there is reference to the name of the assessee as assessee is one of the purchaser, therefore, he submitted that assessee presses the additional Ground No.1. Hence, the A.O should have issued notice u/s 153 not u/s 148. Therefore, the whole assessment is void ab-initio.
Considered the rival submissions and perused the material on record. Before us, assessee is in appeal objecting to the following:. (a) Non serving of notice directly to assessee (not with the employee). (b) Information supplied by DDIT Investigation as evidence to reopen the assessment. (c) Reopening u/s 148 is bad and A.O should have initiated proceedings u/s 153C. (d) Non application of Sec. 292BB in assessee’s case. (e) Corroboration of on money transaction is a requirement before it is treated as income.
11.1 With regard to (a), we notice that the notice was handed over to the employee of the assessee, who is regularly representing for the company represented by assessee. When the employer represents habitually for the assessee, and not necessity that he should be an authorized agent in writing. He can be treated as deemed agent. Therefore, serving notice under bona-fide belief that it is served with the person who is habitually
7 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy. represent assessee is serving notice properly. Accordingly ground on this aspect is rejected. 11.2 With regard to (b), relevant ground 2 and additional ground No.4, the information supplied by DDIT investigation is not proper evidence to reopen the assessment. Therefore, we are of the view that this information supplied by DDIT investigation is internal source and not external source. Therefore, this information can be termed as proper information to reopen the assessment. Since, it is internal information, A.O need not have to satisfy himself one more time to initiate proceedings u/s 148. Therefore, the information of proceedings is proper.
11.3 With regard to (c), the initiation of proceedings u/s 153C is not possible since the material found during search is relating to sale between L. Jaya Reddy and SMR. The SMR builders sold this land to sevaral parties. The individual parties are not in contact with the L. Jaya Reddy. In the statement, no where, it is submitted that the land was sold to the assessee. It is only confirmation that this land was sold @ 21500/- Sqm. Therefore, there is no direct material available with the A.O to initiate proceedings u/s 153C. Therefore, this ground is rejected.
11.4 With regard to (d), non application of Sec. 292BB in assessee’s case, we are in agreement with the assessee that the assessee raised objection before A.O at the time of assessment itself. Therefore, sec 292BB has no application to this case.
11.5 With regard to (e), corroboration of on money transaction, we notice that the land was sold through SMR Builders. The second party Shri L. Jaya Reddy has accepted that they have sold the land for Rs. 21500/- Sqm and offered to tax. Since the transaction was through M/s. SMR Builders, who is the consenting parties to the agreement. The assessee and assessee’s husband are managing the company i.e. M/s. SMR builders, there is no need for corroboration of on money transaction before making any addition. Accordingly, grounds raised by assessee is rejected.
In the result, appeal of the assessee is partly allowed.
8 ITA Nos. 827 & 828/Hyd/17 Saritha Sai Reddy & Pruthbviraj Reddy.
As the facts and grounds in ITA No. 828/Hpyd/2017 are materially to the ITA No. 827/Hyd/2017, following the decision, therein, this appeal is also partly allowed.
To sum up, both the appeals under consideration are partly allowed.
Pronounced in the open Court on 30th August, 2019.
Sd/- Sd/- (P. MADHAVI DEVI) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 30th August, 2019 kv Copy to:-
1) S. Saritha Sai Reddy and 2) S. Prithviraj Reddy, Plot No. 275, Vinay Nivas, Room No. 25, Jubilee Hills, Hyderabad – 500 034 2) DCIT, Circle – 14(1), Hyderabad 3) CIT(A) – 6 Hyderabad. 4) Pr. CIT - 6, Hyd. 5) The Departmental Representative, I.T.A.T., Hyderabad. 6) Guard File
S . N o D e s c r i p t i o n D a t e I n t l s
1 . D r a f t d i c t a t e d o n S r . P . S . / P . S
2 . D r a f t p l a c e d b e f o r e a u t h o r S r . P . S / P S
3 D r a f t p r o p o s e d & p l a c e d b e f o r e t h e s e c o n d M e m b e r J M / A M
4 D r a f t d i s c u s s e d / a p p r o v e d b y s e c o n d M e m b e r J M / A M
5 A p p r o v e d D r a f t c o m e s t o t h e S r . P . S . / P S S r . P . S . / P . S
6 . K e p t f o r p r o n o u n c e m e n t o n S r . P . S . / P . S .
7 . F i l e s e n t t o t h e B e n c h C l e r k S r . P . S . / P . S
8 D a t e o n w h i c h f i l e g o e s t o t h e H e a d C l e r k
9 D a t e o f D i s p a t c h o f o r d e r