MR AJAY SADASHIV BHAGAT,PUNE vs. ITO WARD-7(3) PUNE, PUNE

On perusal of information available with the department, the Assessing Officer noted that the assessee, during the year under consideration, has purchased immovable property amounting to Rs.15,48,75,869/- on various dates, the details of which are as under: S No Name of Purchaser Amount Date of transaction 1 Ajay Sadashiv Bhagat 9215500 20.09.2014 2 As above 11000000 03.11.2014 3 As above 28900000 10.07.2014 4 As above 14162500 17.12.2014 5 As above 9831250 17.12.2014 6 As above 43200000 12.04.2014 7 As above 9831250 25.11.2014 8 As above 28738369 04.10.2014 Total 154878869

He noted that as per information uploaded on Insight portal by the Joint Sub Registrar, Talagaon, Dabade, Pune, the assessee has made above transactions in immovable property on various dates as mentioned above. The assessee has purchased immovable property amounting to Rs.15,48,78,869/- during the FY 2014-15 relevant to A.Y. 2015-16. Despite several opportunities given by the Assessing Officer by issuing notice u/s 142(1) of the Act, the assessee failed to provide the details required for verification of the transactions. The Assessing Officer, therefore, made addition of Rs.15,48,78,869/- to the total income of the assessee. Apart from the above, he also added a sum of Rs.3,01,411/- as income from salary and Rs.15,220/- as income from other sources to the total income of the assessee. The Assessing Officer accordingly determined the total income of the assessee at Rs.15,51,95,500/-.

In appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer.

Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1] The learned CIT(A) erred in confirming the addition of Rs.15,48,78,869/- as an undisclosed income on account of unexplained investment in purchase of immovable property. 2] The learned CIT(A) failed to appreciate that the assessee had not made any investment in purchase of immovable property and hence, the addition made of Rs.15,48,78,869/- ought to have been deleted. 3] The learned CIT(A) erred in not appreciating that the assessee has a power of attorney holder had signed the documents for purchase of immovable properties on behalf of his employer group and thus, there was no reason to make any addition in the hands of the assessee of Rs.15,48,78,869/- as an unexplained investment. 4] The learned CIT(A) ought to have appreciated that the employer group had duly accounted the purchase of immovable properties in its books of accounts and hence, there was no reason to make any addition in the hands of the assessee on account of unexplained investment. 5] The learned CIT(A) erred in simply rejecting the claim of the assessee without appreciating the correct facts of the case and ignoring the detailed submissions made in the course of the appellate proceedings. 6] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.

The Learned Counsel for the assessee referring to the above additional ground submitted that the additional ground raised is purely legal in nature which goes to the root of the matter and all the necessary facts are already available on record. Referring to the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (1991) 187 ITR 688 (SC) submitted that the additional ground raised by the assessee should be admitted.

The Ld. DR on the other hand strongly objected to the admission of the additional ground raised by the assessee on the ground that the assessee has not challenged the validity of re-assessment proceedings either before the Assessing Officer or before the Ld. CIT(A) / NFAC.

After hearing both the sides and considering the fact that the additional ground raised by the assessee is purely legal in nature and all the material facts are already available on record and no new facts are required to be investigated, therefore, in view of the decision of Hon’ble Supreme Court in the case of the National Thermal Power Co. Ltd. v. CIT (supra) and in the case of Jute Corporation Of India Ltd vs Commissioner Of Income Tax And Anr (supra), the additional ground raised by the assessee is admitted for adjudication.

The Ld. Counsel for the assessee at the outset drew the attention of the Bench to the notice issued u/s 148 of the Act which reads as under: “GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE INCOME TAX OFFICER WARD 7(3), PUNE To AJAY SADASHIV BHAGAT KALAS GAION 112 SHIVAGI CHOWK, ALANDI ROAD DHIGHI CAMP PUNE PUNE 411015, Maharashtra India PAN AY: Dated DIN & Notice No ALHPB6151B 2015-16 26/03/2021 ITBA/AST/S/148/2020-21/ 1031795160(1) Notice Under Section 148 Of The Income Tax Act, 1961

Referring to the provisions of section 151 of the Act, he submitted that as per the said provisions the specified authority for the purpose of sanctioning issue of notice u/s 148 of the Act and 148A of the Act shall be the Principal Commissioner or Principal Director or Commissioner or Director if three years or less than three years have elapsed from the end of the relevant assessment year. Similarly, if more than three years have elapsed from the end of the relevant assessment year the sanctioning authority for issue of notice u/s 148 of the Act shall be the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General, as the case may be. He submitted that in the instant case the notice u/s 148 of the Act was issued on 26.03.2021 and the assessment year involved is assessment year 2015-16. Thus, more than three years have elapsed from the end of the relevant assessment year when the notice was issued. Therefore, the sanctioning authority is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General. However, in the instant case the notice has been issued after obtaining the necessary satisfaction of Range 7, Pune which is the office of the Joint Commissioner or Additional Commissioner. Since there is no Range 7 for PCCIT or CCIT or Principal Director General or Director General, thus, the notice issued u/s 148 of the Act being not in accordance with law, has to be quashed and the subsequent proceedings also become void ab initio.

So far as the merit of the case is concerned, he submitted that the assessee is an employee of Malpani Estates and the company purchased certain land and the assessee was only a Power of Attorney Holder. Referring to page 4 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the notice issued u/s 142(1) which is dated 28.10.2021 where the Assessing Officer has asked to furnish certain details electronically. However, the assessee could not furnish any details since it was during Covid-19 period. Referring to page 6 of the paper book, he drew the attention of the Bench to the notice issued u/s 142(1) dated 13.06.2022 along with annexure where the Assessing Officer has asked for certain details. Referring to the reply of the assessee, copy of which is placed at pages 9 to 12 of the paper book, he drew the attention of the Bench to the same and submitted that the assessee has duly replied to the same. He submitted that the assessee has duly submitted the replies before the Assessing Officer, the details of which are placed at pages 9 to 30 of the paper book. Referring to pages 31 to 85 of the paper book, he drew the attention of the Bench to the submissions made before the Ld. CIT(A) / NFAC. Referring to page 42 of the paper book, he submitted that the assessee has clearly and categorically mentioned that all the transactions were made by the firm and were duly recorded in the books of account of the respective purchasing firms of the ex-employer of the assessee. The Ld. Counsel for the assessee drew the attention of the Bench to para 6 of the reply of the assessee to the Ld. CIT(A) / NFAC which reads as under:

Referring to sample sale deeds enclosed in the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the name of the assessee where it has been mentioned that the assessee is only a Power of Attorney Holder. He submitted that where the entire money has been paid by M/s. Malpani Estates / Giriraj Enterprises and the assessee was only a Power of Attorney Holder, no addition could have been made in the hands of the assessee when the concerned concerns have paid the money and shown those assets in their balance sheets and have also given confirmation to that effect. Since neither the Assessing Officer nor the Ld. CIT(A) / NFAC have applied their minds, therefore, the addition so made by the Assessing Officer and sustained by the Ld. CIT(A) / NFAC should be deleted.

The Ld. DR on the other hand while relying on the order of the Ld. CIT(A) / NFAC submitted that the assessee is an important person and therefore, the addition has rightly been made in his hands in absence of any cogent evidence although he is a power of attorney holder.

The Ld. Counsel for the assessee in his rejoinder submitted that the power of attorney holder was given by the company to the assessee only for purchase of property and the Assessing Officer reopened the assessment on this basis only. The government records show that the assessee is only a power of attorney holder. Both the Assessing Officer and the Ld. CIT(A) / NFAC have ignored this aspect and there was complete non-application of mind and the assessee should not suffer for such non-application of mind.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the notice u/s 148 of the Act is dated 26.03.2021 and the assessment year involved is assessment year 2015-16. We find the provisions of section 151 of the Act read as under:

A perusal of the above clearly and categorically shows that where the reopening of assessment is made within a period of three years, the competent authority for sanctioning the issue of notice u/s 148 is the Principal Commissioner or Principal Director or Commissioner or Director. If three or more years have elapsed, then the competent authority for sanctioning the issue of notice u/s 148 is the Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, the Chief Commissioner or Director General. However, in the instant case a perusal of the notice issued by the Assessing Officer shows that he has obtained the necessary satisfaction of Range 7, Pune. On a pointed query raised by the Bench to the Ld. DR regarding the head of Range 7, Pune, he fairly conceded that there is no Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General of Range 7, Pune and it is headed either by the Joint Commissioner or the Additional Commissioner. Under these circumstances, since the approval for issue of notice has been given by a JCIT / Addl CIT instead of the PCCIT or PCIT, therefore, we hold that the re-assessment proceedings being not in accordance with law have to be quashed. We, therefore, quash the re- assessment proceedings and the additional ground raised by the assessee is accordingly allowed.

Even otherwise on merit also, it is an admitted fact that the assessee is only a power of attorney holder and the name of the purchases mentioned in the sale deeds are M/s. Malpani Estates in 7 cases and Giriraj Enterprises in one case. The name and PAN of the purchaser has been clearly mentioned in the sale deed. The assessee had clearly and categorically replied before the Assessing Officer and the Ld. CIT(A) / NFAC that the concerned properties were purchased by M/s. Malpani Estates / Giriraj Enterprises and the assessee was only the power of attorney holder. Even the partners of M/s. Malpani Estates have also certified that the lands in question are purchased by them and accounted for in their books of account and the considerations have been paid from their respective bank accounts. It was also categorically stated in the certificate that Mr. Ajay Sadashiv Bhagat i.e. the assessee is merely a power of attorney holder for M/s. Malpani Estates appointed for purchase and registration of the documents only. They have also certified that the PAN of Mr. Ajay Sadashiv Bhagat is not reflected in any of the documents executed or registered in their names. Under these circumstances, when M/s. Malpani Estates and Giriraj Enterprises are clearly and categorically certifying that the lands in question are purchased by them by paying money from their bank accounts and such lands have been reflected in their balance sheets and the assessee’s name is entered only as power of attorney holder without his PAN number, therefore, no addition could have been made in the hands of the assessee. We, therefore, hold that the Ld. CIT(A) / NFAC was not justified in sustaining the addition made by the Assessing Officer. The grounds raised by the assessee are accordingly allowed.

In the result, the appeal filed by the assessee is allowed.