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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI PAVAN KUMAR GADALE
O R D E R PER PAVAN KUMAR GADALE JM: These are the appeals filed by the assessee against the different orders of the Commissioner of Income Tax (Appeals)-28, Mumbai passed u/s 143(3) r.w.s 147 and 250 of the Income Tax Act, 1961.
The issues involved in all three appeals are common and identical. Hence are clubbed and heard and consolidated order passed. For the sake of convenience, we shall take up ITA No. , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 2 - 891/Mum/2018 for the A.Y 2007-08 as the lead case and the facts narrated. The assessee has raised the following grounds of appeal.
1. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming reopening the assessment on the basis of reasons recorded by the Assessing Officer even though that was bad in law and beyond jurisdiction.
2. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 50,00,000 as an unexplained cash credit merely based on third party statements and on presumptions and surmises and without making any independent investigation and without considering the evidence filed by the appellant. 3. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in confirming the disallowance of interest paid amounting to Rs.27,123. 4. On the facts and in the circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) erred in not accepting additional evidence as per Rule 46A of Income Tax Rules 1962. 5. In view of the above, the appellant prays that the AO be directed to not to initiate the penalty u/s 271(1)(c) of the Act. 6. The appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal.
The brief facts of the case are that the assessee is engaged in the business as Builder and Developers. The assessee has filed the return for the A.Y 2007-08 , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 3 - on 29.10.2007 with a total income of Rs. 2,72,131/- and the return of income was processed u/s 143(1) of the Act. The assessment was completed u/s 143(3) of the Act on 29.12.2009 assessing a total income of Rs. 2,72,840/-Subsequently, the Assessing officer (A.O.) received the information from the DDIT(Inv) Mumbai that during the course of search and seizure operations in the case of Bhanwarlal jain and family/ Group,which are engaged in providing accommodation entries. The A.O. found that the assessee has received unsecured loan of Rs.50 lakhs in the Financial year (F.Y) 2006-07 from M/s Jewel Diam, were the said the lender is a related concern of the group. Hence, the A.O has reason to believe that the income has escaped the assessment and after recording the reasons for reopening of assessment, the A.O. has issued notice u/s 148 of the Act. In response, the assessee has filed the return of income on 15.04.2014 with a total income of Rs. 2,72,837/-.The assessee was provided reasons for reopening of assessment. The assessee has filed objections vide letter dated 26.06.2014 and objections have been disposed by the order on 27.01.2014. Subsequently the A.O. has issued notice , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 4 - u/s 143(2) and 142(1) of the Act. The A.O has called for the clarifications and dealt on the statements and the information from the DGIT(Inv) Mumbai. In response to the notice, the Ld.AR of the assessee appeared from time to time and furnished the details and the case was discussed. The A.O has dealt on the information filed and issued show cause notice to treat Rs. 50 lakhs and interest on loan as a none genuine. Whereas, in reply the assessee has filed detailed information on 12.02.2015 along with confirmation letter, bank statement, affidavit from the lender regarding loan transaction to substantiate the genuiness, identity and creditworthiness. The A.O has considered the submissions of the assessee and dealt on the statement of Shri Bhanwarlal Jain who was in the business of providing accommodation entries at Para 8.1 of the order. The A.O has doubted the genuineness of the transaction and observed that the assessee has entered into bogus transactions with M/s Jewel Diam and the assessee could not satisfy the identity, creditworthiness and genuineness of the transactions and finally treated the loan as unexplained cash credit u/s 68 of the Act. Similarly , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 5 - interest on loan of Rs. 27,123/- was disallowed and assessed the total income of of Rs. 52,99,960/-. And passed the order u/sec143 r.w.s 147 of the Act dated 16-03-2015. 3. Aggrieved by the order, the assessee has filed an appeal before the CIT(A). Whereas the CIT(A) considered the grounds of appeal
, findings of the A.O. and submissions of the assessee on the issue of validity of reassessment proceedings and the A.O. made addition based on third party statements. The CIT(A) dealt on the facts and confirmed the action of the A.O and dismissed the assessee appeal. Similarly the CIT(A) has passed an separate order under section 46A(2) of income tax rules rejecting the additional evidence filed by the assessee. Aggrieved by the CIT(A) order, the assessee has filed an appeal with the Honble Tribunal.
4. At the time of hearing, the Ld. AR of the assessee submitted that the CIT(A) has erred in confirming the validity of reassessment proceedings beyond four years and confirming the action of the assessing officer on addition of unsecured loan as unexplained cash credit based on third party statement and , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 6 - without any independent inquiry or investigation and further overlooking the evidences filed in the proceedings. The assessee has filed the information in compliance to the notice issued u/s 148 of the Act even after lapse of four years from the end of the assessment year. Whereas the original assessment was completed u/sec143(3) of the Act on 29.12.2009.The assessee has made a full disclosure of material information in the original assessment proceedings and no new material or information was found by the A.O but it is only a mere change of opinion. The A,O, has relied only on the statement recorded by the DGIT(Inv) Mumbai and no independent enquiry was conducted and supported the submissions with judicial decisions and paper book and prayed for allowing the appeal. Contra, the Ld. DR relied on the order of the lower authorities.
We heard the rival submissions and perused the material on record and judicial decisions. The assessee has filed the grounds of appeal on legal issue of validity of assesseement u/s 147 of the Act and on the merits of the case. The Ld. AR emphasized that the A.O has issued the notice on the same set of , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 7 - information which was available on record in the original assessment and no material was available to make reassessment. It is only a mere change of opinion based on the third party statement recorded in search operations of the group concern. We find the Ld. AR has demonstrated the reasons recorded for the reopening of assessment at page 7 to 8 of the paper book. Further the original assessment was completed u/s 143(3) of the Act and the assessee has produced all the material information and the A.O. has duly verified the information as per the observations at page 1 of the A.O. order, which cannot be disputed. The Assessee has complied with the scrutiny guidelines in submitting the information and the A.O. has passed the order u/s 143(3) of the Act on 29.12.2009. We considered it appropriate to refer to the provisions of Sec. 147 of the Act and the first proviso which is read as under: “147. If the[Assessing] Officer[has reason to believe] that any income chargeable to tax has escaped assessment91for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess91 such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings91 under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 8 -
(hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year”
Further we found that the A.O issued notice u/s 148 of the Act dated 11.06.2014 for reopening of assessment. Whereas the original assessment was completed u/s 143(3) of the Act vide order dated 29.12.2009. The A.O has recorded the reasons without any tangible material/ fresh material except charges based on the search conducted by the DGIT(Inv) in respect of Bhawarlal Jain and family. The assessee has obtained unsecured loan from M/s. Jewel Diam in the F.Y. 2006-07. The Ld.AR submitted that the information of the unsecured Loan obtained from M/s. Jewel Diam was already filed on record in the original assessment proceedings U/sec143(3) of the Act and the A.O after verifying the facts and information has passed order on 29-12-2009. Therefore the reopening of assessment is based on the same set of facts and is only a change of opinion based on third party statement and no inquiry or independent , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 9 - investigation by the A.O. The assessee in the present reassessment proceedings has submitted letter dated 26-06-2014 mentioning that the loan confirmations from M/s jewel Diam were filed during the original scrutiny proceedings and the loan was obtained by account payee cheque dated 10-3-2007 and was repaid on 1-4-2019 through banking channel. Further the assessee has deducted TDS on interest and issued TDS Certificates. The Interest payment on unsecured loan was debited to the profit & Loss account in A.Y.2007-8,2008-09&2009- 10.The assessee has filed bank statements supporting the loan received transaction and the repayment of loan along with the interest payments disclosure.
We considering the facts and circumstances and evidences filed are of the view that the notice issued by the A.O falls beyond the period of time limit specified and the assessing officer has to show/high light the failure on part of the assessee to disclose fully and truly all material facts at the time of assessement. The Ld.AR demonstrated the reasons recorded for reopening of the assessement but on perusal of reasons there is no finding /allegation mentioning that there is a failure on the part of the assessee to fully and truly disclose material facts necessary for assesseement. Accordingly, we find the notice issued for reassesement is bad in law and quash , 2528 & 2529/Mum/2018 M/s. Shantistar Builders, Mumbai - 10 - the assessment order passed u/s 143(3) r.w.s 147 of the Act. Since the legal issue is decided in favour of the assessee and again adjudicating on merits becomes academic and are left open and we allow the grounds of appeal
in favour of the assessee.
8. Similarly, we find in & 2529/Mum/2018 for the A.Y 2008-09 and 2009-10 where the common issue is with regard to disallowance of interest paid on unsecured loan obtained in the A.Y 2007-08. We have considered these facts in the above case A.Y 2007-08 where the reasseesment proceedings are quashed and there is no addition sustainable. As the facts and circumstances in these appeals are identical to ITA No.891/Mum/2018 for A.Y. 2007-08, the decision rendered in above paragraphs would apply mutatis mutandis for these appeals also. Accordingly, the grounds of appeal in these appeals are allowed.
9. In the result, the three appeals filed by the assessee are allowed. Order pronounced in the open court on 07.09.2021.