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Income Tax Appellate Tribunal, MUMBAI BENCH “SMC” MUMBAI
Before: SHRI S. RIFAUR RAHMAN & SHRI RAVISH SOOD
ORDER PER S. RIFAUR RAHMAN, A.M. The present appeal is filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-36, Mumbai [in short ‘CIT(A)’] for the assessment year 2010-11 dated 27.12.2017 and arises out of assessment completed u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (in short the Act).
Brief facts of the case are, assessee filed her return of income for assessment year 2010 – 11 on 30.3.2011 declaring income of ₹ 1,49,720/–. The case was reopened under section 147 of the Income Tax Act 1961 (in short Act) by issue of notice under section 148 dated 30.3.2017 after recording the reasons for reopening. The case was reopened on the basis of information received from Smt. Meenakshi Prakash Jadhav 2 ITA No. 303/M/2020 the office of DCIT Central Circle – 5 (1) wide letter dated 24.3.2016 with the information that during the course of survey action conducted in the case of Shah Housecon Private Limited on 11.11.2014. They have declared that they received on money to the extent of ₹ 1,000,000 from the assessee on sale of flat A 504, A Wing building at Malad East, Mumbai – 97. Accordingly show cause notice was issue to the assessee with regard to payment of such on money payment. In response assessee wide letter dated 20.12.2017 submitted that no cash payment was made for purchase of the said flat and the amount paid through cheque based on agreement are the true and correct price for the purchase of such said flat. In the same letter assessee also requested to provide opportunity for cross examination with Shah Housecon Private Limited. The assessing officer served letter dated 20.12.2017 asking the assessee to produce the parties before him in case of any objections with regard to payment of on money. In response assessee submitted that the transaction with the builder is over and being a small person buying flat from large builder, she does not have control over them with regard to bringing the parties before assessing officer. Since no response from the seller Shah Housecon Private Limited, assessing officer rejected the contentions of the assessee.
On the reopening the assessment, assessing officer supplied the relevant information to the assessee that it is reopened based on the information received from central circle and statement from Mr Mansukh shah, the director of Shah Housecon Private Limited. Accordingly the assessment was completed with the addition of ₹ 1,000,000 as undisclosed investment.
Smt. Meenakshi Prakash Jadhav 3 ITA No. 303/M/2020
Subsequently, the assessing officer passed corrigendum correcting the para No. 4 as below:
‘In view of the above, the assessee has indeed paid on money of ₹ 1,000,000/– at the time of purchase of the property. Therefore the sum of ₹ 1,000,000/– is treated as assessee’s own money from unexplained sources and added to her total income.’ 5. We notice from the assessment order that the assessing officer did not complete the above said paragraph and he missed to write the following words i.e., the sum of ₹ 1,000,000/– is treated as assessee’s own money from unexplained sources and added to her total income.
6. Aggrieved assessee preferred an appeal before CIT (A) – 36 Mumbai and objected reopening of the assessment and passing of corrigendum as well as on merit. After considering the submissions of the assessee Ld. CIT(A) dismissed the appeal by justifying the reopening of assessment and sustaining the addition made by the assessing officer. For the sake of brevity, we are reproducing the assessee’s submissions before Ld. CIT(A) and findings of Ld. CIT(A): “To, Date : 01/12/2017 Income Tax Officer, Ward 20(3)(3), Mumbai. Sub: Reply to Notice u/s 148 of the Income Tax Act, 1961 Ref : Meenakshi Prakash Jadhav A.Y.: 2010-11 PAN: ACSPJ3509K Dear Sir, This is with reference to the above mentioned subject, We would like to inform you that assessee had received the notice U/s 148 from the income tax department dated 11.08.2017 stating that information was received that she had given 1000000/- in cash
Smt. Meenakshi Prakash Jadhav 4 ITA No. 303/M/2020 for purchase of Flat from M/s Shah House con Pvt. Ltd in F.Y 2009-10 and this information was retrieved from impounded documents and statement of managing director and senior accountant during course of survey action u/s 133A of the act at business premises of M/s Shah Housecon Pvt. Ltd on 11.11.2014.
In this regard we would like to inform you that no cash payment has been done for purchase of flat and that amount paid through cheque based on agreement is only the correct and true price for purchases of the said Flat. Merely receipt loose paper from third party in her name, does not amount to un-escaped income and re-assessment proceedings should not be done.
In this regard we rely on following decisions:-
CIT Vs. Lata Mangeshkar 97 ITR 2. CIT Vs. M. K. Brothers 53 CTR 228 (163 IT 249) 3. ACIT Vs Prabhat Oil Mill 52 TTJ 533 4. CBI VS V. C. Shukla3 SCC 410 In all these cases, it has been held that mainly because some loose papers or noting found out from thethird party mentioned the name of the assessee, additions cannot be made unless there are concreie corroborative evidence available showing the assessee having made such investment or received such unaccounted income. It has been held in all these cases that the A O must bring on record some corroborative material to M/s. Trident Creation Pvt. Ltd. Vs DCIT, CC- 1(1), Ahmedabad.
Without prejudice to the above we further like to state that Section 147 postulates that the AO has a reason to believe that there is an escapement of income and he has to record reasons under section 148(2) before issuing a notice under section 148. The general statement made by a third party before an altogether different authority, namely, the Income tax authority, to the effect that he had made cash payment, will not constitute material to form a reason to believe for the AO for reopening assessment under section 147.
Smt. Meenakshi Prakash Jadhav 5 ITA No. 303/M/2020 Assessment cannot be made on the basis of material which is vague, general, non-specific and distant; that there has to be a live link or direct nexus between the material and the reasons recorded fer reopening assessment under section 147. In this regard we rely on the following decisions: i. ITO v Lakhmani Mewal Dass [1976] 103 ITR 437 (SC); ii. S. P. Agarwalla v ITO [1983] 140 ITR 1010 (Cal); iii. ITO v Dwarka Dass & Brothers [1981] 131 ITR 571 (Del); iv. CIT v SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del); and v. Signature Hotels P. Ltd. V ITO (2011] 338 ITR 51 (Del).
Further, Supreme Court in case of Sheo Nath Singh v Appellate Assistant Commissioner [1971] 82 ITR 147 (SC), held that reopening of assessment can be done on the basis of direct or circumstantial evidence but not on mere suspicion, gossip or rumour.”
CIT(A) order “4.2.1 The Ground of appeal nos. 3 & 4 relates to the addition of Rs.10,00,000/- made by the AO on basis of information received from DCIT Central Circle. I have carefully considered the facts of the case and the submissions of the appellant and am of the considered opinion that the AO acted judiciously in taking his decision. The A0 made the impugned addition of Rs.10,00,000/- on the basis of information received from the Investigation wing wherein during the course of survey action at the business premises of M/s Shah Housecon Put. Lid. on 11.11.2014 certain incriminating documents with details of cash transaction (out of books) were found in the room of senior accountant The responsible persons Shri Binesh Balakrishnan senior Accountant and Shn Mansukh Shah Director M/s. Shah Housecon Put. Ltd. accepted the data and also admitted to having received cash payment from many parties including rom the appellant. Statements recorded during the course of survey action by income tax Authority is of very important evidentiary value. The Hon'ble Bombay High Court in the case of M/s. Pebble investment & Finance Ltd. vs. ITO 2017 TIOL 188HC held that "statement u/s. 133A can
Smt. Meenakshi Prakash Jadhav 6 ITA No. 303/M/2020 be relied upon for purpose of assessment, in absence of any contrary evidence as to why such statement made is not credible.
4.1.2 In the case of CIT vs. KUWER Fibers Pvt. Ltd. (2017) TIOL 30 HC the Hon’ble Delhi High Court held as under.
'Additions made on the basis of Director's statement recorded during the course of search proceedings is sustainable where the statement recorded are duly corroborated by evidences on record.
4.1.3 The facts of the case clearly reveal that the on the basis of incriminating documents found during the course of survey action from the cabin of Shri Binesh Balkrishnan, the Director of M/s Shah Housecon Put Lid & Shri Binesh Balkrishnan senior Accountant admitted to having accepted part payment in cash towards sale of various properties in which the appellant's name is mentioned along with the exact amount received in cash from the appellant This is a concrete evidence of cash payments made by the appellant which has been affirmed and confirmed under oath by the responsible persons to whom these payments have been made.
4.1.4 Section 101 of the Indian Evidence Act, 1872 states that whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that facts exists. When a person is bound to prove the existence of any fact, it is said that the burden of proof lies on the person According to section 103 of the Indian Evidence Act 1872 the burden to proof as to any particular fact lies on that person who wishes the court to believe in its existence Section 106 of Indian Evidence Act. 1872 says that when any fact is especially within the knowledge of any person, then burden of proving that tact is upon him. All the above provision are applicable to the case of the assessee In this case assessee claimed that the information w.r.t cash payment towards the flat purchased from Shah Housecon pvt. Ltd is false This is a fact which he asserts. Therefore, burden lies on him to prove the said facts (section 101 and 103 of Indian Evidence Act 1872) However, the burden of proof has not been discharged by the Smt. Meenakshi Prakash Jadhav 7 ITA No. 303/M/2020 assessee. Hence, I do not find any merit in the submission of the assessee and I am of the considered opinion that the AO has rightly made addition of ₹ 10,00,000/- on account of On-money paid towards purchase of flat. Accordingly, I confirm the addition of Rs.10,00,000/- made by the AO to the total income of the assessee. Thus, the ground of appeal Nos. 3 & 4 is Dismissed.
4.2.1 The Ground of appeal no. 5 is initiation of penalty us 271(1) (c) which is premature in nature. Hence this ground of appeal is Dismissed.”
Aggrieved, assessee is in appeal before us raising following grounds of appeal:
1. In the facts and circumstances of the case and law, the Learned CIT (A) has erred in confirming the validity of assessment order passed on 27/12/2017 and corrected Vide corrigendum order received 29/01/2018, after the limitation period us 153(1). It is prayed that the corrigendum order received on 29/01/2018 is barred by limitation and hence a nullity.
2. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming the validity of corrigendum order received on 29/01/2018, ignoring the legal position that Assessing officer has no power to review his order. 3. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in sustaining an addition of Rs.10,00,000/- without there being any finding on the same in the Assessment order dated 27/12/2017. 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming the reopening of assessment by Assessing Officer without any tangible material and merely on surmises and conjectures and without any application of mind on the information received from DCIT, Central Circle- 5(1). The reopening is based on borrowed satisfaction and hence not valid. 5. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming the action of Assessing officer in making an addition of Rs.10,00,000/- merely on the basis of statement of third parties and rejecting the appellant's
Smt. Meenakshi Prakash Jadhav 8 ITA No. 303/M/2020 request to provide opportunity of cross examination of said parties. The Assessment order passed is bad in law being in violation of the principles of natural justice as held by Supreme court in Kishanchand Chellaram v. CIT (1980) 125 ITR 713 and Andaman Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006).
In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in confirming the addition of Rs.10,00,000/- made by Assessing officer disregarding the factual matrix of the case.
7. The appellant craves leave to add, alter, delete or modify all or any of the above grounds of appeal
. All the above grounds are without prejudice to each other.
8. At the time of hearing, Ld. AR submitted that assessment order was passed on 27.12.2017 in which assessing officer did not give any finding in the order and he brought to our notice para No. 4 of the order to highlight that there is no conclusion. In this regard he brought to our notice page 10 of the paper book, which is corrigendum passed by the assessing officer which assessee has received on 29.01.2018. He submitted that assessing officer has no power to pass corrigendum after 2 years of passing the assessment order. In this regard, he brought to our notice page 11 and 14 of the paper book to submit that assessee has wide letter dated 30.01.2018 objected to such corrigendum and assessee informed the assessing officer that the order was passed only when the assessee brought to the notice of the assessing officer that the order is incomplete and bad in law. Only in order to rectify the same, the corrigendum was passed. Further, he brought to our notice letter addressed to Principal CIT on the issue of corrigendum involving circumstances and reasons for the passing corrigendum by the Assessing Officer. By relying on Hon’ble Bombay High Court decision in the case of PCIT versus Lionbridge Technologies Ltd. (ITA 622 of Smt. Meenakshi Prakash Jadhav 9 ITA No. 303/M/2020 2016), he submitted that assessing officer has no power to pass the corrigendum after the expiry of time to pass assessment order and he submitted that the corrigendum passed is time barred.
9. With regard to ground No. 4, he brought to our notice page 2 of paper book which is the letter of assessing officer for providing reasons recorded pursuant to reopening of the assessment, in which assessing officer gave the reasons for reopening based on statement of managing director and senior accountant of SHPL and at paragraph 4 of the same letter, he gave the reason for reopening on account of bogus purchase. He submitted that the reasons for reopening itself is improper and there is no application of mind of the assessing officer. He submitted that it shows clearly that the reopening is based on borrowed satisfaction and hence not valid.
10. With regard to ground No. 5 he submitted that on consistent request from the assessee to have the opportunity of cross examination with the managing director and senior accountant of the SHPL based on which the addition was made in the hands of the assessee but the assessing officer did not give proper opportunity of cross examination. He submitted that the assessment order passed is bad in law being in violation of the principles of natural justice as held by the Hon’ble Supreme Court in the case of Kishanchand Chellaram versus CIT (1980) 125 ITR 713 and Andaman Timber Industries versus Commissioner of Central Excise (Civil Appeal No. 4228 of 2006). He further submitted that there is no evidence with the assessing officer to make the addition and only on uncorroborated evidence. Ld. AR submitted that Ld. CIT(A) has concluded, it is on assessee to prove that assessee has not paid any on money and he submitted
Smt. Meenakshi Prakash Jadhav 10 ITA No. 303/M/2020 that this conclusion is not proper. Since the tax authorities who has initiated the proceedings and it is on their part to prove the same. It is not on assessee.
On the other hand, Ld. DR agreed that there is no power on the assessing officer to review his own order and he submitted that the para No. 4 of the assessment order is inconclusive due to typographical error and he submitted that every point relating to addition made by the assessing officer is already discussed in the assessment order and the assessing officer only corrected the inadvertent mistake i.e. he missed to record few words in the above said para. There is no effect on computation of demand or liability on the assessee. With regard to cross examination, he submitted that during assessment proceeding assessee was given an opportunity to cross examine but assessee refused to use the occasion by submitting the letter informing the assessing officer that she is too small person before the builders. It clearly shows that assessee has no intention to have cross examination. With regard to reasons recorded for reopening the assessment and allegation of non-application of mind, he submitted that the assessing officer has proper reason to reopen the assessment and the reopening was made with the proper information available with the assessing officer. He submitted that it is fact on record that money was declared by the builder during survey operation and they paid the relevant taxes. Therefore, the reopening of assessment is proper and just.
Considered the rival submissions and material on record. Before us Ld. AR made submission with regard to ground No. 1, 2 and 3 and submitted that the corrigendum passed by the assessing officer is bad in law and beyond period of limitation. He brought to our notice para No. 4 of the assessment order and on Smt. Meenakshi Prakash Jadhav 11 ITA No. 303/M/2020 careful consideration of the same we notice that the assessing officer merely omitted to mention relevant conclusion but completed the assessment order. After considering the corrigendum passed by the assessing officer we notice that there is no material change as far as conclusion of the assessment order. The Ld. AR relied in the case of Lionbridge Technologies Ltd (supra) to submit that corrigendum issued beyond time to pass the assessment order is bad in law. We notice that in the above case the issue was the final assessment order was passed without issuing draft assessment order. Subsequently the corrigendum was passed to rectify the above mistake. In the above case, the issue of jurisdiction is involved and the Courts have held that in the case of issues involving jurisdiction, they interpreted the law literally and strictly. Whereas in the given case, the assessing officer has merely rectified the apparent mistake in his order which has no impact on the conclusion of the assessment order. Therefore, we do not see any reason to entertain the claim of the assessee. Accordingly, these grounds are dismissed. 12.1 With regard to mistake in the reasons recorded to reopen the assessment, we notice that the reasons were communicated to the assessee and the assessee also understood and participated in the assessment proceedings. Once again the assessing officer has made the typographical error in the concluding para of the notice. It does not change any material outcome, as long as it communicates the reasons for reopening the assessment, mere typographical error without having any material impact on the assessment, these can be considered as simple mistakes and rectifiable.
Smt. Meenakshi Prakash Jadhav 12 ITA No. 303/M/2020 12.2 With regard to ground No. 5, we notice from the various communication exchanged between the parties, we noticed that the assessing officer completely relied on the statements given by the officials of SHPL during survey proceedings. It is not relevant whether they accepted the on money received from various parties and paid the relevant taxes. It is requirement of the principles of natural justice to give a proper opportunity to the assessee for cross examination before making any addition or completing the assessment. In the given case we notice that assessee was consistently requesting the assessing officer for the opportunity. But the assessing officer only insisted upon the assessee to bring the parties before him. We notice that assessee has expressed inability to bring the parties before the assessing officer considering the fact that the assessee is too small to make such request to the officers of SHPL. It is fact on record the contentions of the assessee is right that she cannot compel the SHPL officials to appear before the AO. From the record it is clear that assessing officer has made the addition without giving a proper opportunity for cross examination. The Courts have held that completing the proceedings without giving proper opportunity for cross examination to the other party is against the principles of natural justice and accordingly it is bad in law. In turn, the AO can issue show cause notice to SHPL officials and make them appear. In that process, he could have given opportunity to the assessee for cross-examination. We are in agreement with the submissions of the Ld. AR and by relying on the ratios of Hon’ble Supreme Court in the case of Andaman Timber Industries (supra) we are inclined to conclude that the assessment order passed by the Smt. Meenakshi Prakash Jadhav 13 ITA No. 303/M/2020