Loading judgment…
Facts
The assessee appealed against an ex-parte order confirming additions made under sections 69C and as income from other sources. The primary issue revolves around the reopening of assessment for AY 2016-17 for a property transaction valued at Rs. 66,95,000, which the assessee claimed was a joint purchase with her husband and part of it was financed by a loan.
Held
The Tribunal held that the reopening of assessment under section 147/148 was bad in law as the assessee's share in the property was less than Rs. 50 lakhs and the notice was issued after the expiry of three years. The additions under section 69C and as income from other sources were also deleted as the payments were made in installments and the income was already disclosed.
Key Issues
1. Validity of reopening of assessment under Section 147/148 after a lapse of three years. 2. Propriety of additions made under Section 69C and as income from other sources without proper verification.
Sections Cited
147, 144, 144B, 69C, 139(1), 148A, 148, 149(1)(b), 69C
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This appeal filed by the assessee is directed against the order of ld.Commissioner of Income Tax(Appeals)[NFAC], under section 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 06.02.2025 for the A.Y.2016-17. The Assessee has raised the following grounds of appeal : “1. On the facts and in law, the learned Commissioner of Income Tax (Appeals) [CIT(A)] erred in passing an ex-parte order without affording a reasonable opportunity to the appellant. The order was solely based on the observations of the Assessing Officer (AO) in the [A] assessment order, without conducting an independent examination of the case or providing proper reasoning.
2. The learned CIT(A), while confirming the addition, failed to appreciate that the assessment order passed under section 147 read with sections 144 and 144B of the Income-tax Act, 1961 ("the Act"), is bad in law and void ab initio for the following reasons: i. The alleged escaped income is less than Rs. 50 lakhs, rendering the reassessment proceedings invalid. ii. The reopening was based on mere presumption and surmises, as it was initiated on borrowed satisfaction without independent application of mind by the AO. iii. The AO failed to appreciate the submissions made by the appellant and did not consider the true facts of the case
3. Without Prejudice to the above: i. The learned CIT(A) erred in confirming the addition of Rs.6,69,652/- as unexplained investments under section 69C of the Act and Rs. 1,54,019/- as income from other sources. The additions were made solely based on the AO's observations without appreciating the facts of the case, the true nature of the transactions, and the surrounding circumstances. ii. In the interest of natural justice, it is prayed that the order of the learned CIT(A) be set aside, and the appellant be granted an opportunity to present her case.
4. The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal.” Submission of ld.AR :
2. The ld.AR for the assessee filed a paper book. Ld.AR submitted that the Notice u/s.148 is bad in law and the reopened assessment is bad in law. Ld.AR further submitted that as per the order u/s.148A(d) of the Act, dated 16.03.2023, the Assessee has [A] alleged to have invested Rs.66,95,000/- in purchase of immoveable property. Ld.AR further submitted that in the said order, Assessing Officer(AO) has reproduced Assessee’s submission wherein, Assessee has submitted that the said flat was purchased in Joint Name of Kalpana Vijay Kadam and Vijay Kadam. This fact is reproduced by the Assessing Officer. Assessee has further submitted that Assessee has obtained Bank Loan. Thus, Assessee has submitted that there is no escapement of income. In spite of that Assessing Officer issued Notice u/s.148 of the Act, for A.Y.2016- 17. Since without prejudice Assessee is Joint Owner with her husband Vijay Kadam, and Total Value of the Flat is Rs.66,95,000/-, hence, Assessee’s share would have been Rs.33,47,500/- which is less than Rs.50 lakhs, therefore, reopening of assessment for A.Y.2016-17 after a lapse of three years, is bad in law. Ld.AR pleaded that Assessment Order may be quashed. Even otherwise on merits, Assessee had obtained loan and documents were submitted during assessment proceedings, hence there is no escapement of income. Ld.AR took us through the paper book page no.76 to 79 is the Loan Account Statement for Loan of Rs.55,00,000/-. Ld.AR submitted that remaining amount was sourced from Assessee’s husband personal funds.
Submission of ld.DR : 3. Ld.DR for the Revenue relied on the order of Assessing Officer and ld.CIT(A).
Findings and Analysis : 4. We have heard both the parties and perused the records. In this case, admittedly assessee is an individual and had not filed Return of Income for A.Y.2016-17 under section 139(1) of the Act.
4.1 We have perused the order u/s.148A(d) of the Act, dated 16.03.2023 which was duly approved by Principal Chief Commissioner of Income Tax, Pune. The relevant paragraph of the order u/s.148A(d) of the Act, are reproduced as under : “03. On verification of information collected as per the CBDT’s Risk Management Strategy available in the Department’s Insight and E- filing portals, it is noted that the assessee has not filed any return of income for A.Y.2016-17 but has entered into transaction as mentioned in above Para No.
Considering the nature of information and details available on e-filing portal & 360-degree information, conducting of any inquiry before issue of show cause notice as per provisions of section 148A(a) is considered as ‘not required’. 3.1. In view of the above, it is evident that the assessee has entered into huge transaction but has not filed return of income. Therefore, a show cause notice was issued to the assessee u/s 148A(b) on 01.02.2023 bearing DIN No. ITBA/AST/F/148A(SCN)/2022- 23/1049300603(1), through ITBA online System and the same was dispatched to the assessee through ITBA and shared with the assessee through the e- proceedings tab of "Pending Actions” module of e-filing portal of the assessee electronically. Time of more than 7 days was duly provided to the assessee as per the provisions of section 148A(b) of the Act and the date of compliance was fixed as 13.02.2023.
Response of the assessee:- The reply of the assessee in response to the show cause notice u/s 148A(b) of the I. T. Act, 1961 is reproduced as under:- “Respected Sir, I have received notice under clause (b) of section 148A , thank you for the same . On checking the same, it is mentioned that TDS statement - Payment of consideration for purchase of immovable property. Rs 6695000/- During the year FY 2015-2016 , we have purchased residential property in Joint name Kalpana Vijay Kadam and Vijay L Kadam at Comfort Zone , S No 14 , Balewadi Road . Pune 411045. The first name in agreement is of Mrs Kalpana Kadam, hence tds has been deducted from her name by the builder. The assessee has also taken loan for purchasing the property. In case you require any further information or documents I shall be glad to submit you the same. ”
Finding of the AO:- On perusal of the submission of the assessee, it is seen that, in response to the transaction related to purchase of immovable property of Rs.66,95,000/-, the assessee has submitted that information of the same property is reflected from the TDS and SRO. Further, she has submitted that the property was purchased jointly with her husband and she has taken loan for purchasing the property. However, no any evidence regarding her claim of co-owner and housing loan along with supporting documents is submitted by the assessee in support of her claim. In absence of the explanation along with supporting documents the source of fund for purchase of immovable property of Rs 66,95,000/- remains unexplained. Therefore, the aggregate income of Rs.66,95,000/- chargeable to tax, which is more than Rs.50 lakhs and represented in the form of assets has escaped assessment within the meaning of section 147 of the I. T. Act, 1961. In view of these facts, this is A FIT CASE for issue of notice u/s 148 of the Income Tax Act, 1961 for A.Y.2016-17.” 4.2 Admittedly, Notice u/s.148 of the Act was issued for A.Y.2016-17 on 16.03.2023. Thus, the notice u/s.148 was issued after a period of three years from the end of the assessment year A.Y.2016-17. 4.2.1 The Section 149 of the Act is reproduced here as under : “149. (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); 5[(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:] 5. In this case, the total value of the Flat purchased by the Assessee along with her husband is Rs.66,95,000/-. Therefore, Assessee’s share will be 50% of Rs.66,95,000/- i.e. Rs.33,47,500/- which is less than Rs.50 lakhs. Therefore, as per Section 149(1)(b) of the Act, no notice could have been issued in the case of the assessee u/s.148 of the Act, after a period of three years from the [A] end of assessment year. In this case, the Assessing Officer had not bothered to read the Registered Agreement for Sale which has been relied by Assessing Officer as information received. The said “Agreement of Sale” dated 29.05.2015 is between Aditya Shagun Developers as Promoter and i) Mrs.Kalpana Vijay Kadam and ii) Mr.Vijay Laxmanrao Kadam as Purchasers. The Total Value of Transaction as per said agreement is Rs.66,95,000/-. Thus, it is clearly evident from the “Agreement of Sale” that it is a Joint Property between Mrs.Kalpana Kadam and Mr.Vijay Kadam, therefore, when Share is not defined, it is to be considered as 50%. Hence, Assessee Mrs.Kalpana Vijay Kadam’s share would have been 50% i.e. Rs.33,47,500/-. Therefore, as per Section 149(1)(b) of the Act, no Notice under section 148 can be issued in the case of Assessee after a period of three year from the end of the assessment year. Admittedly, in this case, Notice u/s.148 of the Act, has been issued after a period of three years from the end of assessment year.
5.1 Ironically, neither the ITO, nor the Additional Commissioner of Income Tax nor the Pr.CIT has bothered to verify these facts which were already in their possession.
We have also gone through the Notice issued by the ITO to the Assessee dated 01.02.2023 under section 148A(b) of the Act. Vide said Notice, the ITO had not asked assessee to file any specific document, but merely asked for explanation, which was duly submitted by Assessee. To demonstrated the same, the relevant paragraph 3 and 4 of the said notice u/s.148A(b) of the Act is reproduced here as under : “03. On verification of E-filing portal, it is seen that you have not filed the return for A.Y.2016-17. Therefore, in view of the above it is assumed that you have earned an income from the sources as mentioned in the table as above during the F.Y.2015-16 relevant to A.Y.2016-17 and there is an escapement of income represented in the form of asset of Rs.1,33,90,000/- from assessment for A.Y.2016-17. Therefore, it is proposed to reopen you case for A.Y.2016-17 and proceedings u/s 147 are to be initiated in your case. 04. Vide this notice, you are requested to show cause as to why notice u/s 148 should not be issued in your case for A.Y.2016-17. Your reply in the matter may be submitted on the E-filing Portal or email-id: pune.ito2.2@incometax.gov.in If not reply is received from you in this matter, it will be assumed that you have nothing to say in the matter and proceedings shall be initiated u/s 147 in your case as proposed in this show cause notice.” 6.1 Thus, in spite of not asking any specific question, the Assessing Officer(AO) in para 5 says that Assessee has not filed any evidence, which was never asked. Nothing prevented the ITO from asking a specific question.
Even otherwise, we have studied the impugned “Agreement of Sale” dated 29.05.2015, the relevant Paragraphs of the said agreement are reproduced as under : “G] The Flat Purchaser offered to the Promoter for allotment to the Flat No.102 on First floor in the Building B-4 to be constructed on the portion of the land of plot no.2 of first schedule property which is more particularly described in annexure D hereunder written and which for the sake of convenience is hereafter referred to as ‘the said Flat’…………………………………………. The Flat Purchaser/s herein shall pay the aforesaid agreed consideration to the Promoter herein in the following manner – Amount Particulars i] At the time of this Agreement. Rs.16,73,750/- ii] Rs. 6,69,500/- On casting of the First slab, iii] On casting of the Second slab, Rs. 6,69,500/- iv] Rs. 6,69,500/- On casting the Third slab, v] Rs. 6,69,500/- On casting the Fourth slab, vi] On casting the Fifth slab, Rs. 6,69,500/- vii] Rs. 6,69,500/- On completion of brick work of the said flat, viii] On completion of internal plaster of the said flat. Rs. 6,69,500/- ix] Rs. 3,34,750/- and other dues when the Promoter herein obtains the occupation certificate in respect of the said flat from the local authority or said flat is ready for occupation. ========= TOTAL Rs. 66,95,000/- 7.1 Thus, it can be observed that Assessee along with her husband jointly had booked a Flat No.102 in an under-construction building. As per the Registered Agreement of Sale, the payment of Rs.66,95,000/- was to be paid in various instalments. Thus, at the time of registration, admittedly as evident from the registered agreement, the entire payment of Rs.66,95,000/- was not made.
Therefore, there is no unexplained investment during A.Y.2016-17 of Rs.66,95,000/-, as the amount was paid in various instalments. The Assessing Officer has not bothered to read these covenants of the impugned Agreement of Sale. Therefore, even based on these installments, there is no escarpment of income more than Rs.50 lakhs during A.Y.2016-17, therefore, no Notice u/s.148 could have been issued.
7.2 In these facts and circumstances of the case, we are of the opinion that Notice u/s.148 and Order u/s.148A(d) of the Act, are bad in law. Therefore, consequential assessment order is also void ab initio. Accordingly, Ground No.2 raised by the assessee is allowed.
Now, coming to the merits of the addition, on perusal of the Home Loan Account of Mr.Vijay Laxmanrao Kadam with L& T Finance, it is evident that Mr.Vijay Laxmanrao Kadam received Loan of Rs.55 lakhs from L & T Finance. It is also evident that he had paid installments to L & T Finance. It is evident from Page 80 of the Paper book which is permission to mortgage issued by Aditya Shagun Developers that initially loan was obtained from L & T Housing Finance Limited by mortgaging the impugned Flat, later on, the Loan was transferred to Axis Bank. Ironically, the Assessing Officer has only referred to the Loan Document of Axis Bank. Be it as it may be, even that Loan was obtained by Mr.Vijay Laxmanrao Kadam. We have also perused the HDFC Bank Account Statement of Mr.Vijay Laxmanrao Kadam which is at Page No.83 to 92 of the paper book and it is evident that installments have been paid through this account. On perusal of the HDFC Bank Account Statement of Mr.Vijay Laxmanrao Kadam, it is seen that following payments were made to M/s.Aditya Shagun Developers for the purchase of impugned Flat : 23.03.2015 - Rs.1 lakh 10.04.2015 - Rs.2 lakhs 24.04.2015 - Rs.1 lakh 28.04.2015 - Rs.1 lakh 22.05.2015 - Rs.1 lakh 8.1 Similar are the payments on various dates. This again explains that the payments have been made through the Bank Account of Mr.Vijay Laxmanrao Kadam.
8.2 Mr.Vijay Laxmanrao Kadam had field a Return of Income for A.Y.2016-17 with ITO, Ward-13(2), Pune vide Acknowledgment No.341822490290716 dated 29.07.2016. Thus, Mr.Vijay Laxmanrao Kadam had filed Return of Income u/s.139(1) of the Act, disclosing total income of Rs.15,70,770/-. As per the said Return of Income of Mr.Vijay Laxmanrao Kadam, he has sold a Flat during the A.Y.2016-17. The Income Tax Department had all this information as this information is visible from the Income Tax Return of Mr.Vijay Laxmanrao Kadam, but the Department did not bother to verify the facts. Ironically, PAN of Mr.Vijay Laxmanrao Kadam is also mentioned in the impugned Agreement of Sale along with copy of PAN Card. Therefore, Department was well aware about all these facts. Ironically, the Assessing Officer ITO, Ward- 2(2), Pune of Mrs.Kalpana Kadam do not bothered to verify Return of Income of Mr.Vijay Laxmanrao Kadam filed with ITO, Ward- 13(2), Pune.
8.3 In these facts and circumstances of the case, it is evident that the amount was paid by Mr.Vijay Laxmanrao Kadam.
8.4 The Assessing Officer(AO) has made addition u/s.69C of the Act. Section 69C is reproduced as under : “Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.” 8.5 Thus, Section 69C is applicable when Assessee incurs an expenditure, but fails to offer any explanation. In this case, as discussed in earlier paragraphs, Assessee Mrs.Kalpana Vijay Kadam has not incurred any expenditure as claimed by Assessing Officer. The entire addition u/s.69C of the Act, made by Assessing Officer is based on conjecture and surmises. Since the amount appears in the Agreement of Sale, the Assessing Officer presumed that Assessee has incurred the expenditure. In earlier paragraphs, we have categorically reproduced the facts to demonstrate that Assessee has not incurred the impugned expenditure during the year. Therefore, no addition can be made u/s.69C of the Act, in A.Y.2016-17 in the [A] case of the Assessee. Hence, we direct the Assessing Officer to delete the addition made u/s.69C of the Act, of Rs.6,69,652/-.
8.6 The Assessee had offered Rs.1,54,019/- in the Return of Income filed in response to Notice u/s.148 of the Act. The Assessing Officer added Rs.1,54,019/- as Income from Other Sources, whereas the said amount is already disclosed by the Assessee in her Return of Income. Therefore, the Assessing Officer is directed to delete the addition of Rs.1,54,019/- and consider the total income shown in the Return of Income. Accordingly, Ground No.3 raised by the assessee is allowed.
8.7 Ground No.1 and 4: Since we have adjudicated the Ground No.2 and 3 in favour of assessee, Ground No.1 and 4 become academic in nature, accordingly, dismissed.