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Facts
The assessee filed an original return of income, which was subsequently reopened under Section 147 of the Income Tax Act, 1961. The Assessing Officer made an addition of Rs.2,51,73,000/- on account of alleged unexplained investment in a property.
Held
The Tribunal held that the Assessing Officer's satisfaction for reopening the case was recorded without having primary documents and lacked application of mind, making the assessment proceedings liable to be quashed.
Key Issues
Whether the Assessing Officer had valid reasons and sufficient material to initiate reassessment proceedings under Section 147 of the Income Tax Act, 1961?
Sections Cited
147, 148, 144B, 69, 132, 132A, 148A, 151, 149
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: DR. B.R.R. KUMAR, VICE-SHRI T.R. SENTHIL KUMAR
(Assessment Year: 2019-20) Ankur Chandrakant Patel, Income Tax Officer, Vs. Prop. Tractor Trading Co., Ward-1, 9, Green City, Modhera Road, Mehsana Mehsana-384002 [PAN : AMPPP 1214 N] (Appellant) .. (Respondent) Appellant by : Shri Anil Kshatriya, AR Respondent by: Shri Surendra Kumar Agal, Sr. DR Date of Hearing 10.12.2024 Date of Pronouncement 25.02.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi (hereinafter referred to as "CIT(A)" for short), dated 09.07.2024 passed under Section 250 of the Income-tax Act, 1961 [hereinafter referred to as "the Act" for short], for Assessment Year (AY) 2019-20.
2. The Assessee has taken following grounds of appeal:-
1. On facts and circumstances of the case and in law, the order passed by the Ld. CIT(A), NFAC, Delhi is bad in law, illegal besides being in violation of principle of natural justice & equity as passed without considering the material already placed on record, as such it is liable to be quashed and set aside.
2. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in sustaining addition of Rs.2,51,73,000/- on account of alleged unexplained investment u/s.69 by the A.O., when there is no justification in sustaining the same.”
3. The brief facts of the case are that the Assessee is an individual deriving income from house property, proprietary business in the name of M/s. Tractor Trading Co. and other sources. For the year under consideration, the Assessee has filed his original return of income on 29.10.2019 showing total income of Rs.11,77,940/-. Subsequently, the case of the Assessee was reopened u/s. 147 of the Act as per notice u/s. 148 dated 29.03.2023. The Assessing Officer completed assessment u/s.147 r.w.s. 144B of the Act on 01.03.2024 determining the total income of Rs.2,63,450,940/-, making addition of Rs.2,51,73,000/- u/s.69 of the Act on account of unexplained investment in a property.
3. Aggrieved by the assessment order, the assessee has filed appeal before the Ld. CIT(A) who confirmed the order of the ld. CIT(A).
4. Aggrieved with the order of the ld. CIT(A) confirming the addition made by the Assessing Officer, the assessee has filed an appeal before the Tribunal.
5. Before us, ld. Counsel for the assessee submitted the Ld. CIT(A) had dismissed the legal ground so raised in a quite routine manner without addressing the issues raised by the assessee. The Ld. AR also contended that the reasons recorded for initiating proceedings under Section 147 reflect a lack of application of mind, being mechanically recorded based on borrowed satisfaction. He also argued that the Assessing Officer in paragraph 3 of the Annexure, under the conclusion, has wrongly stated that “Shri Ankur C. Patel PAN-AMPPP1214N purchased property for Rs.4,81,00,000 from Shri Jagdish Sharma in the SKY CITY VERNIS project, but the SRO valuation is Rs.2,29,27,000, implying a cash/on- money difference of Rs.2,51,73,000.”, but the property was jointly purchased with his late father for Rs.2,29,27,000/- under a registered deed (No. 8077 of 2018, dated 03.07.2018), with payment made through M/s. Safal Goyal Realty LLP; therefore, the department's claim of Rs.4,81,00,000/- towards purchase of property is factually incorrect.
The Ld. DR on the other hand relied upon the orders of the authorities below.
Heard both the parties and perused the material available on record.
We have gone through the reasons recorded which reads as under:-
“1. Brief details of source of information collected/received by the AO: a. A search & seizure operation on Shivalik, Shilp and Sharda Group was conducted on 10.02.2022. b. During the search & seizure action, certain incriminating document in the form of diaries, loose paper files, etc. and digital data of computers, hard disks, mobile phones, etc. was seized from the premises of Sh. Manish Brahmbhat [who was also covered u/s 132 at premises of Manish Brahmbhatt]. These incriminating documents pertain to or the information contained therein, relates to the assessee. The satisfaction note in this regard has already been drawn with prior approval of Pr. CIT- 3,Ahmedabad vide letter No.Pr.CIT/Tech/148A/Approval/ACP /2022-23 dated 26.03.2023.
Applicability of the provisions of section 147/151 to the facts of the case:
a. As per the provisions u/s 148, ““Before making the assessment, reassessment or recomputation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice along with a copy of order passed under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
Provided that no notice under the said section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.” b. Further, as per Explanation 2 u/s 148, " For the purposes of this section, where,- i. the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee, the Assessing officer shall be deemed to have information which suggests that the income chargeable to tax has escaped assessment in the case of the assessee where the search is initiated or books of account, other documents or any assets are requisitioned or survey is conducted or money, bullion, jewellery or other valuable article or thing or books of account or documents are seized or requisitioned in case of any other person. c. As per the provisions u/s 151, "Specified authority for the purpose of section 148 and section 148A, shall be- (i) Principal Commissioner of Income-tax or Principal Director of Income-tax or Commissioner of Income-tax or Director of Income-tax, if three years or less than three years have elapsed from the end of the relevant assessment year; (ii) Principal Chief Commissioner of Income-tax or Principal Director General of Income-tax, or where there is no Principal Chief Commissioner of Income-tax or Principal Director General of Income-tax, Chief Commissioner of Income-tax or Director General of Income-tax, if more than three years have elapsed from the end of the relevant assessment year 3. Conclusion: a. As the search action was initiated under section 132 and after the 1st day of April, 2021, therefore, as per clause iv of Explanation 2 to section 148, the AO is deemed to have information for A.Y. 2019-2020. b. Further, the provisions of section 148A are not applicable in this case. Since three years have not elapsed from the end of relevant assessment year, thus as per provisions of Section 149 r.w.s 148 r.w.s 151, the specified authority to grant approval is Pr.CIT -3, Ahmedabad. d. Shri Ankur C. Patel PAN-AMPPP1214N has bought the property of Rs.4,81,00,000/- from JAGDISH SHARMA in project SKY CITY VERNIS. However, as per valuation of SRO, the value of the said property is of Rs.2,29,27,000/-. So, the difference of Rs. 2,51,73,000/- was given in cash/on-money by Shri Ankur C. Patel PAN-AMPPP1214N for purchasing the property in project SKY CITY VERNIS.”
The Assessing Officer recorded that the assessee has purchased the properties from Jagdish Sharma in project Sky City Vernis, whereas there was no proof that the assessee has indeed purchased the property from Jagdish Sharma. The Revenue had no document in their possession to even primarily to prove this fact. And it is also fact on record that the assessee had purchased property from M/s. Safal Goyal Realty LLP for Rs.2,29,27,000/-. There was no evidence of any purchase from Jagdish Sharma. He is not even an authorized representative in the entire transaction which goes to prove that the Assessing Officer had recorded his satisfaction even without having primary documents in his possession to derive at the satisfaction. Hence, the assessment proceedings are liable to be quashed owing to erroneous satisfaction drawn, devoid of any material to record the satisfaction.
In the result, the appeal of the assessee is allowed.