RAM MOHAN RAO DARUMAGARI ,SECUNDERABAD vs. INCOME TAX OFFICER, WARD-15(1), HYDERABAD

Page 2 of 24 of the partnership firm. The Assessing Officer accordingly reopened the assessment by issuing notice u/s 148 on 5/3/2015 which stated to be duly served on the assessee on 7/3/2015. However, there was no response on behalf of the assessee to the notices issued u/s 148. After several opportunities and show- cause notices issued by the Assessing Officer for framing the assessment on best judgment basis, the assessee filed a reply dated 4/6/2015 requested for time up to 15/06/2015. Finally, the assessee filed his return of income on 5/10/2015 in response to notice u/s 148 of the I.T. Act, 1961. The Assessing Officer framed the assessment by making addition u/s 69 of the I.T. Act, 1961 of Rs.9,53,00,000/- as unexplained investment in purchase of land. Since the wife of the assessee was not a party to the sale deed dated 10/10/2007 whereby the land was purchased in the name of the partnership firm, the Assessing Officer has restricted the addition in the hand of the wife of Rs.10.00 lakhs on account of investment made in the partnership firm.

1.The order of the Learned Commissioner of Income Tax (Appeals) is against law, weight of evidence and probabilities of the case.

2. The learned Commissioner of Income Tax (Appeals) erred in upholding the validity of the assessment for Asst.Year 2008-09 even though copy of the actual reasons recorded were not for reopening the assessment furnished by the Assessing Officer in spite of request made by the assessee.

3. The learned Commissioner of Income Tax (Appeals) erred in upholding the reopening of the assessment for Asst.Year 2008-09 rejecting the contention of the of the assessee that the Assessing Officer had not applied his mind on the issue of escapement of income and merely acted upon untested information for reopening assessment for the A.Y 2008-09.

4. The learned Commissioner of Income Tax (Appeals) erred in upholding the validity of the assessment even though documentary evidence stated to be available with the A.0 was not furnished to the assessee thus, denying opportunity of rebuttal.

5. The learned Commissioner of Income Tax (Appeals) erred in rejecting the appellant's contention that assessment should have been made u/s. 153C r.w.s 153A holding that the appellant's name does not figure in the document seized from the premises of BB Patil.

7. The learned Commissioner of Income Tax (Appeals) having held that each one of the partners have contributed towards purchase of the property, erred in Page 4 of 24 upholding addition in the hands of the assessee to the extent of Rs.4,76,50,000 constituting 1/3rd share of investment though the assessee held only 10% share as against 90% share held by other partners.

8. The learned Commissioner of Income Tax (Appeals) erred in upholding addition to the extent of Rs.4,76,50,000 holding that the appellant is one of the partners of the firm having 1/3rd share in the property whereas the appellant has only 10% share as against other partners holding 30%, 20% and 15% share in the firm of M/s.Raja Rani Developers.

9. The learned Commissioner of Income Tax (Appeals) erred in directing enhancement of the assessment by Rs. 10,00,000 ignoring the submissions of the appellant that the addition made by the Assessing Officer took in its fold any and all allegedly unexplained investment made by the appellant and that separate addition of Rs.10,00,000 was called for.

10. The learned Commissioner of Income Tax (Appeals) ought to have appreciated and accepted the explanation officered by the assessee regarding the sources for investment to the extent of Rs.20,00,000 which was stated to have been corroborated by K.Ravi Kumar and consequently, learned Commissioner of Income Tax (Appeals) ought to have directed deletion of the addition made by the Assessing Officer to that extent.

11. For the above grounds and such other grounds that may be urged at the time of that the hearing, the appellant prays Craves appeal be allowed. The appellant leave to add to, amend or grounds of appeal either time of hearing of the considered necessary.”

5. Ground No.1 is general in nature and does not require any specific adjudication.

6. Ground Nos. 2 to 8 are regarding the validity of the reopening of the assessment. The learned AR of the assessee has submitted that the assessment has been reopened by the Page 5 of 24 Assessing Officer on the basis of the search & seizure operation in case of MP Patil Group and M/s. Raja Rani Developers, Aurangabad on 24/11/2011 which is not valid because a specific provision has been made in the I.T. Act, 1961 for initiating proceedings u/s 153C of the Act. Thus, the learned AR has submitted that resorting to the provisions of section 147 & 148 by the Assessing Officer instead of initiating proceedings u/s 153C is invalid as beyond the jurisdiction of the Assessing Officer. In support of his contention, he has relied upon the following judgment: i) G. Koteswara Rao vs. DCIT Central Circle, ITAT Vizag ii) Green Valley Tower (P) Ltd vs. ACIT, ITAT Delhi iii) Peninsula Land Ltd vs. ACIT Central Circle 1(3) Hon'ble Bombay High Court. iv) Pr.CIT (Central) vs. Ganesh Plantation Ltd, Hon'ble Gujarat High Court. v) Samanthapudi Lavanya vs. ACIT Central Circle, ITAT Visakhapatnam.

Page 6 of 24 contained therein relates to a person other than the searched person, the Assessing Officer shall proceed against such other person as per the provisions of section 153C of the I.T. Act, 1961. The learned AR has thus, contended that, the reopening of the assessment on the basis of seized material and information received by the Assessing Officer is invalid and consequently, the re-assessment order is liable to be quashed. He has further contended that, the assessee was also not supplied the reasons recorded by the Assessing Officer and therefore, the re- assessment order passed by the Assessing Officer without inviting objections of the assessee against the reopening of the assessment is also invalid and also liable to be quashed.

As per the information received, M/s. Raja Rani Developers had purchased a land worth of Rs.3.35 crores vide deed dated 10.10.2007 against the actual on-money transaction worth Rs. 15.45 crores. Later, a land worth of Rs. 1.39 Crores was transferred to the above 3 partners on 24.9.2009 as part of dissolution of partnership firm. However, on verification from the records available, it is noticed that you had not filed your return of income for the A.Y.2008-09. Hence, the sources for investment made by you for purchase of property in the name of Partnership Firm M/s. Raja Rani Developers, remained unexplained. Since there is a reason to believe that income chargeable to tax has escaped assessment for AY 2008-09, by reason of failure on your part to file your return of income for the relevant asst. year, within the meaning of the provisions of Sec. 147 of the I.T. Act, 1961, a notice u/s. 148 was issued."

Page 10 of 24 the investment was made only by the persons who were parties to the transactions and cannot be considered as investment either by the partnership firm or by the partners who were inducted at the time of formation of the partnership firm at a later point of time. This fact was revealed from the information received by the Assessing Officer from the Dy.CIT, Central Circle-1, Aurangabad and constitute a tangible material to form the belief that the income assessable to tax on account of unexplained investment in the purchase of the land by the assessee has escaped assessment. Since it is a case of non-filing of return on the part of the assessee, therefore, there is no question of any other objections against the reopening of the assessment except whether the reasons recorded by the Assessing Officer are sufficient to form the opinion that the income assessable to tax has escaped assessment or not. The assessee has not disputed the transaction of purchase of land which is also a matter of record as the said transaction was carried out vide registered sale deed dated 10/10/2007 and therefore, the Assessing Officer was having a sufficient reason to believe that income on account of unexplained investment in purchase of land has escaped assessment.

Page 11 of 24 of section 153C can be invoked only when the conditions as prescribed therein are satisfied. It is not mandatory for the Assessing Officer to initiate the proceedings u/s 153C even if the Assessing Officer has received the material found and seized in case of search conducted on a 3rd person, if the Assessing Officer is not satisfied on analyzing of the said material that any undisclosed income in the hands of the assessee is found. Since in the case in hand, there was no satisfaction recorded by the Assessing Officer of the searched person and further, the seized material pertaining to the assessee was also not remitted by the Assessing Officer of the searched person to the Assessing Officer of the assessee therefore, the question of recording satisfaction on the part of the Assessing Officer to initiate proceedings u/s 153C does not arise. In these facts and circumstances, the Assessing Officer was having the remedy only u/s 147 & 148 of the I.T. Act, 1961 to assess the income escaped assessment on account of unexplained investment made by the assessee in purchase of the land as an undisputed transaction. It appears that the sale deed was executed in the name of a non-existing partnership firm to create a smoke screen and hide the transaction in the hands of the purchaser including the assessee. The sale deed is a misleading document executed by the assessee and other persons in the name of non-existing partnership firm and therefore, the said information received by the Assessing Officer from the Dy.CIT, Central Circle-1, Aurangabad leads to the conclusion that the intention of the parties right from the beginning was to conceal the transaction and avoid the tax. Once the satisfaction

Page 12 of 24 as required for initiation of proceedings u/s 153C of the I.T. Act, 1961 are not satisfied in the case of the assessee, then the initiation of proceedings u/s 147 and 148 of the I.T. Act, 1961 is the only remedy left with the Assessing Officer. Even otherwise, there is no legal impediment for initiation of proceedings u/s 147 & 148 based on the information received by the Assessing Officer in pursuant to a search & seizure action on a 3rd person. The Hon'ble Supreme Court in the case of Pr. CIT vs. Abhisar Buildwell (P) Ltd reported in (2023) 454 ITR 212 has held in Para 14 as under:

“14. In view of the above and for the reasons stated above, it is concluded as under: i) that in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under section 153A; ii) all pending assessments/reassessments shall stand abated; iii) in case any incriminating material is found/unearthed even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the ‘total income’ taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and iv) in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act, 1961. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are Page 13 of 24 saved. The question involved in the present set of appeals and review petition is answered accordingly in terms of the above and the appeals and review petition preferred by the Revenue are hereby dismissed. No costs”

Page 14 of 24 Page 15 of 24 Page 16 of 24 Page 17 of 24 Page 18 of 24

21. In the appeal filed by the assessee represented by her husband as a legal heir, the issue of validity of reopening of the assessment is identical as in the case of Shri Ram Mohan Rao Darumagari. In view of our findings on this issue in Para 10 to 12 of this order the Ground Nos. 1 to 4 stands dismissed.