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Facts
The assessee's assessment for AY 2012-13 was reopened under Section 147 of the Income Tax Act because an income of Rs.68,32,775/-, previously disclosed under Section 69B (for AY 2010-11) as an additional expenditure for land acquisition, was deemed by the department to fall under Section 69C. This reclassification led to the amount being added back to the assessee's income as capital gain, which the CIT(A) confirmed.
Held
The Tribunal observed that the CIT(A) failed to adjudicate the legal grounds challenging the validity of the reassessment under Section 147, deciding only on the merits of the addition. The Tribunal, emphasizing the CIT(A)'s duty to consider all grounds, remanded the case back for fresh adjudication of all legal and factual issues.
Key Issues
Whether the reopening of assessment under Section 147 was valid, and the correct classification of undisclosed expenditure under Section 69B versus Section 69C.
Sections Cited
147, 143(3), 69B, 69C, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Assessment Year : 2012-13 Jivaram Magaji Chaoudhary, Vs. ACIT, Circle-7, Pune. Plot No.4, Road No.5, Snehdeep Palace, Tingrenagar, Pune- 411032. PAN : AALPC3973B Appellant Respondent Assessee by : Shri V. L. Jain Revenue by Shri Uma Shankar Prasad : Date of hearing : 26.12.2024 Date of pronouncement : 25.03.2025 आदेश / ORDER
PER VINAY BHAMORE, JM:
This appeal filed by the assessee is directed against the order dated 05.03.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2012-13.
There is a delay of 48 days in filing of the present appeal. In this regard, the assessee has filed an application for condonation of delay along with an affidavit. We are satisfied with the explanation of the assessee that he was prevented by reasonable cause for not filing the present appeal within prescribed time limit. Ld. DR raised no serious objection to the condonation request made by the assessee. Accordingly, the delay of 48 days is condoned and the appeal is admitted for adjudication.
Facts of the case, in brief, are that the assessee is an individual and furnished his return of income on 28.02.2013 declaring total income of Rs.6,22,811/-. Later, the assessee also filed revised return on 22.11.2013 declaring total income at Rs.6,70,423/-. The assessment proceedings were completed u/s 143(3) on 12.01.2015 assessing the total income at Rs.12,99,210/-. Subsequently, it was observed that during the course of search operation the assessee has disclosed income of Rs.68,32,775/- u/s 69B of the IT Act for assessment year 2010-11 and while calculating short term capital gain on sale of fixed assets, the assessee claimed this undisclosed income as an expenditure by way of cost of acquisition for computation of capital gain during the period under consideration. According to the Department, the disclosure was required to be made u/s 69C of the IT Act, therefore, the case of the assessee was reopened u/s 147 of the IT Act and notices u/s 148 and 143(2) were issued to the assessee along with reasons for reopening. The Assessing Officer completed the assessment u/s 143(3) r.w.s. 147 of the IT Act by observing as under :- “4. In the present case, during the course of search action, it was admitted by the assessee that the assessee had incurred an additional expenditure of Rs 68,32,775/- in the purchase of land at Lohegaon. This additional expenditure was declared by the assessee under section 69B of the Act. However, the same being in the nature of an expenditure incurred by the assessee should have been declared under section 69C of the Act and not section 69B. The assessee has purposefully made the declaration under section 69B so as to claim this cost as a deduction in the future year while selling off the said land. The additional expenditure of Rs 68,32,775/- has been incurred by the assessee over and above the cost of the land and it correctly falls under the purview of section 69C of the Act.
5. In view of the above, the assessee has wrongly claimed an additional benefit of deduction of Rs 68,32,775/- while calculating the capital gain arising as a result of the sale of the land. In view of the above discussions, this additional benefit claimed by the assessee is hereby disallowed and is added to the capital gain of the assessee. Further, penalty proceedings under section 271(1)(c) of the Act is hereby initiated for furnishing inaccurate particulars of income. (Add: Rs 68,32,775/-) 6. After careful perusal of the submissions provided by the assessee, the income of the assessee is being computed as below: Sl. No. Particulars Amount (in Rs.) 1 Income as per return 12,99,210/- 2 Add: As per para 5 68,32,775/- 3 Income as assessed under section 143(3) 81,31,985/- ”
After considering the reply of the assessee, Ld. CIT(A)/NFAC confirmed the addition of Rs.68,32,775/- by observing as under :-
“2.1 The Income Tax assessment for Ay 2010-11 was completed on 18/12/2012 assessing the above income u/s 153A r.w.s 143(3) of the Act. Assessee held this land as Capital Asset and accordingly disclosed the same in the WT returns for Ay 2010-11 and Ay 2011-12. Wealth Tax assessments were completed accepting the returned wealth for Ay 2010-11. Assessee sold this land in Fy 2011-12 and claimed the total cost of Rs 10832775 as deduction from sale price while computing STCG. The taxpayer submitted that the amount of Rs 6832775 paid to the land owners for acquisition of the land having been explained in both Income Tax and Wealth Tax retums for Ay 2010-11 and accepted by the department as Capital Asset and surplus on sale was offered as Capital Gain. 2.2 A sum of Rs 20058000 introduced in the books of account in cash in Ay 2012-13 is not unexplained cash credit u/s 68 of the Act. The assessee is a builder, promoter and dealer in land. During the course of his business he had given advances in cash to various land owners staying in rural areas against lands owned by them and which the assessee had intended to purchase for business purpose. These amounts were paid in cash to the rural land owners and were not recorded in the books of account. The total amount of unaccounted advances and interest there on was Rs 20058000 on 6/9/2010 which were paid during Fy 2010-11. In a reply to question no 18 recorded u/s 132(4) the taxpayer admitted that the above unexplained advances were out of his unaccounted income from real estate business for Fy 2010-11 relevant to Ay 2011-12. The taxpayer following the search recorded these advances in his books in Fy 2010-11 on 6/9/2010 under the head "Other Advances" and offered the same for tax in Ay 2011-12. The assessing officer accepted the explanation of the assessee as regards to unexplained advances of Rs 20058000 and completed the income tax assessment for Ay 2011-12 including the aforesaid amount as undisclosed income. 2.3 A sum of Rs 2.55 crores was seized by the department during the course of action under u/s 132 on 6/9/2010 and was appropriated towards taxes payable by the assessee. As a result assessee was cash strapped as suddenly substantial cash was taken out from the business. Due to cash crunch some of the rural advances had to be called back. The amounts were received by the assessee in cash and recorded in his regular books of accounts as and when amounts were received. The amounts received were credited to "Other Advances". Taxpayer did not receive any interest on these advances. 2.4 SUMMARISING THE DISCUSSION it can be held that taxpayer had introduced his unaccounted income in his books following a search that was conducted. The admission came when statement was recorded u/s 132(4) which has highest evidentiary value. Cash of Rs 2.55 cr was also seized during search. The assessing authority had rightly assessed u/s 69B excess amount of investment made over and above the value entered in the books of account. The registered value of the property which was purchased is Rs 80 Lakhs paid in cheque. Above that Rs 13665550 was paid in cash by both the brothers equally. Following the search some realignment in the books of account was done and it was disclosed as "Other advances". The addition on account of excess amount of money found is correctly done u/s 69B. The addition of Rs 6832775 is upheld. 2.5 In the result the appeal is dismissed.”
It is this order against which the assessee is in appeal before this Tribunal.
Ld. AR appearing from the side of the assessee submitted before us that the order passed by Ld. CIT(A)/NFAC is unjustified. Ld. AR submitted before the Bench that the assessee has raised as many as 5 effective grounds of appeal
before Ld. CIT(A)/NFAC wherein ground nos.1 and 3 were legal grounds challenging the reopening of assessment u/s 147 of the IT Act and rest of the grounds were related to addition of Rs.68,32,775/-. However, while deciding the appeal, Ld. CIT(A)/NFAC only decided the grounds regarding addition of Rs.68,32,775/- and legal ground i.e. ground nos.1 and 3 were not adjudicated by Ld. CIT(A)/NFAC. Accordingly, Ld. AR prayed before the Bench that the order passed by the Assessing Officer as well as by Ld. CIT(A)/NFAC may kindly be set-aside, since according to him it is simply a change of opinion without any tangible material. In support of its contention, Ld. AR relied on various judgements, copies of which are produced in separate paper book, which are as under :- (i) CIT vs. Bhagwati Land Developers (P.) Ltd., 261 ITR 658 (Cal). (ii) PCIT vs. Mukeshbhai R. Prajapati, 398 ITR 170 (Guj). (iii) PCIT vs. Phoenix Mills Ltd., 175 DTR 433 (Bom). (iv) PCIT vs. Sun Corporation, 419 ITR 414 (Guj). (v) Dempo Brothers Pvt. Ltd. vs. ACIT, 403 ITR 196 (Bom). (vi) Purity Tech Textile vs. ACIT, 325 ITR 459 (Bom). (vii) Royal Infrastructure vs. DCIT, 425 ITR 491 (Guj). (viii) BPTP Ltd. vs. PCIT, 421 ITR
59. (Delhi).
7. Ld. DR appearing from the side of the Revenue relied on the orders passed by subordinate authorities and requested to confirm the same.
We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that the assessee has challenged the reassessment order passed u/s 147 of the IT Act, on legal as well as on factual ground since according to him the reopening is bad in law. We further find that the assessee has Ld. CIT(A)/NFAC, however, Ld. CIT(A)/NFAC has not adjudicated ground nos.1 and 3 which are purely legal in nature challenging the validity of reopening of assessment u/s 147 of the IT Act. We also find that Ld. CIT(A)/NFAC has gone into the merits of the case without deciding the legal grounds raised by the assessee. Before us also the assessee has challenged the reopening of assessment u/s 147 of the IT Act as bad in law. We find force in the argument of Ld. Counsel for the assessee that Ld. CIT(A)/NFAC is duty bound to adjudicate the legal ground raised before him. Accordingly, without going into the merits of the case, we deem it proper to remand the matter back to the file of Ld. CIT(A)/NFAC with a direction to decide the appeal afresh in accordance with law by adjudicating all the grounds including the legal grounds raised before him. Needless to say, Ld. CIT(A)/NFAC shall give reasonable opportunity of hearing to the assessee. The assessee is also hereby directed to respond to the notices issued by Ld. CIT(A)/NFAC in this regard and produce documents/evidences to substantiate his case without taking any adjournment under any pretext, otherwise, Ld. CIT(A)/NFAC shall be at liberty to pass