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Facts
The assessee purchased land for Rs. 60,00,000/-. The Assessing Officer reopened the assessment under Section 147 alleging cash payment over the sale consideration. The CIT(A) upheld this addition.
Held
The Tribunal held that the reopening of assessment was bad in law as the Revenue could not demonstrate any failure on the part of the assessee to disclose material facts. The opportunity for cross-examination was also inadequate.
Key Issues
Whether reopening of assessment under Section 147 is justified when no failure to disclose material facts is established and cross-examination opportunity was inadequate.
Sections Cited
250, 147, 69, 698, 143(3), 148, 131, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Appeal in this case has been filed against the order dated 13.10.2023 passed by the ld. CIT(A) NFAC Delhi for assessment year 2011-12.
Grounds of appeal taken by the assessee are as under:
A.Y. 2011-12 2 “1. That order passed u/s 250 of the Income Tax Act 1961 by the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi is against law and facts on the file in as much as NFAC was not justified to uphold the action of the Learned Assessing Officer to reopen completed assessment proceedings by resort to provisions of Section 147.
2. That the NFAC gravely erred in upholding the action of the Learned Assessing Officer in making an addition of Rs. 1,89,70,000/- by resort to the provisions of Section 69/698 of the Income Tax Act, 1961 on account of alleged payment made in cash for purchase of land at Village Bhagwanpura.
3. That the order passed by the NFAC is bad in law in as much as opportunity to cross examine was not provided by the Learned Assessing Officer to the appellant and was wrong on the part of NFAC to observe in the appellate order that opportunity to cross examine was provided.
During proceedings before us, the ld. counsel of the assessee has filed a written submission along with his written arguments which are reproduced as under:
“Original return in this case was filed on 28.09.2011 declaring income at Rs.1,32,18,384/- Assessment u/s 143(3) was framed by the Learned Assessing Officer vide order 21.03.2014 at a total income of Rs. 1,50,79,180/- by the Learned Deputy Commissioner of Income Tax, Central Circle-1, Ludhiana. The disallowance made was restricted A.Y. 2011-12 3 to Rs. 7,59,919/- by the Appellate Authorities. Thereby, the income f inally assessed at Rs. 1,39,78,303/-, Notice u/s 148 was issued by Learned Deputy Commissioner of Income Tax, Circle-5, Ludhiana on 28.03.2018 on the ground that the appellant company has paid some cash over and above the sale consideration mentioned in the sale deeds in purchase of property from Late Sh. Jagir Singh son of Sh. Kehar Singh, Village Bhagwanpura.
Copy of the reasons recorded by the Learned Assessing Officer have been placed at page 25 of the paper book. The return was filed by the appellant company in response to notice u/s 148 on 21.04.2018.
After providing to the appellant the copies of bank statements, statement of Sh. Gurmeet Singh and Sh. Bahadur Singh as recorded by Learned Income Tax Officer, Ward-3(1), Ludhiana which were recorded at the back of the appellant, the appellant requested for cross examination of the parties. Summons were issued to the seller party, Sh. Gurmeet Singh, who through his counsel Sh. I. S. Khurana informed that he would be present for cross examination in this office on 18.12.2018 forenoon. Accordingly, a notice u/s 131 was issued for cross examination. In this regard, it is also understood that the Ld. Assessing Officer had issued a notice u/s 131 on 13.12.2018 to Sh. Gurmeet Singh, but had not marked a copy to the appellant or its counsel, whereas the general practice is to give a copy of the said communication to the assessee/appellant. However on the same very day due to late information received from the office of the Ld. Assessing Officer regarding availability of the seller for cross-examination and the counsel of the appellant was pre-occupied with other matters, the counsel A.Y. 2011-12 4 of the appellant asked to give at least a day's notice or the matter be fixed for the next day or the day after Another statement of Sh. Gurmeet Singh was recorded by the Ld. Assessing Officer on 18.03.2018. Thus, in light of the aforesaid submissions, it is prayed that the appellant be provided with an opportunity of cross examination of Sh. Gurmeet Singh as the appellant had been deprived of such opportunity in the course of natural justice.
Assessment has been framed u/s 143(3) r.w.s. 147 vide order dated 30.12.2018 at a total income of Rs 3,29,48,303/- The appellant is agitating the addition made at Rs. 1,89,70,000/- by resort to provisions of Section 698 on the ground that the appellant company has paid some own money in purchase of agricultural land.
Facts in brief are that during relevant assessment year, the appellant company purchased land on 08.04.2010 from Sh. Jagir Singh for a total sum of Rs 60,00,000/- Sh. Jagir Singh expired on 22.06.2014.
Firstly, the appellant company is agitating the very reopening of the assessment as notice has been issued beyond 4 years and going through the reasons, as per the appellant, no case has been made out by the Learned Assessing Officer as to what is the failure on the part of the appellant. During the course of original assessment proceedings, a specific query with respect to the purchase of land was made by the Learned Assessing Officer. Copy of notice u/s 142(1) dated 30.12.2013 has been placed at pages 11 to 14 of the paper book Copy of reply dated 29.01.2014 has been placed at pages 15 to 17 of the paper book, vide which the appellant had submitted the details with respect to the purchase of said property. The A.Y. 2011-12 5 Department has tried to place reliance on the statement of Sh. Gurmeet Singh son of Sh. Jagir Singh recorded by the Learned Assessing Officer on 18.12.2018 vide which he was trying to explain the source of cash deposit in his bank account. It may be submitted that Sh. Gurmeet Singh is not even a witness to the impugned registration deed. Copy of the registration deed has been placed at pages 38 to 51 of the paper book. Thus, no reliance can be placed on the statement of Sh. Gurmeet Singh by going through the reasons. Looking to the facts of the case, it can be inferred that there was no failure on the part of the appellant to disclose any material fact. Thus, the very reopening of the proceedings by the Learned Assessing Officer is bad in law. The appellant has placed reliance on the judgment of the of Honorable Chandigarh Bench of Income Tax Appellate Tribunal in the case of Mis S.P. Singla Constructions Private Limited in dated 02.01.2025 wherein the proceedings uls 148 have been quashed on similar issue.”
The ld. CIT(A) in his appellate order has given his findings as under:
“4.6 It is undisputed fact that a transaction of land purchase as detailed above was genuinely took place between Sh. Jagir Singh and M/s Vallabh Steels Ltd. for purchase of land at Village Bhagwanpura District Ludhiana. The statement of Sh. Gurmeet Singh son of Ld. Jagir Singh and of the witness to the sale agreement and also of the person who prepared the sale agreement recorded during A.Y. 2011-12 6 the assessment of Sh. Gurmeet Singh by AO of Central Circle clearly establish that the cash deposit in the account of Sh. Gurmeet Singh, Sh. Jagir Singh and Smt. Dalip Kaur, is linked with the sale of their land to M/s Vallabh Steels Ltd. opportunity of cross examination was also provided by AO to the assessee as per the details mentioned in the assessment order at para 5.11. Therefore, in view of the above, I see no reason to disagree with the action of the AO making addition of Rs.1,89,70,000/- u/s 69 of the IT Act, 1961. This ground is also dismissed.”
The ld. DR relied on the order of the ld. A.O. as well as the appellate order of the ld. CIT(A).
The ld. counsel of the assessee has pressed the legal issue involving in this case that the reopening of the assessment and issue of notice u/s 148 is bad in law because while going through reasons as per the counsel no case has been made out by the Assessing Officer as to what is the failure on the part of the appellant. According to the counsel of the assessee during the course of original assessment proceedings, a specific query in respect of the purchase of land was made by the ld. Assessing Officer and in response to that the appellant had submitted the details with respect to the purchase of the said property.
A.Y. 2011-12 7 7. We have considered the findings given by the A.O. in the assessment order and the order of the ld. CIT(A) on this issue in his appellate order. We have also considered the arguments of the ld. DR which is basically based on the findings given by the ld. CIT(A). We have considered the written submissions filed by the counsel of the assessee and his arguments made during proceedings before us. We find that the assessee has given all the relevant documents as required by the Revenue during the proceedings before the A.O. as well as before the ld. CIT(A). The addition has been made by the A.O. on the basis of statement of one Sh. Gurmeet Singh who has got no connection with this case except that he is the son of Sh. Jagir Singh. The cash deposit in the accounts of Sh. Gurmeet Singh is liable to be taxed for dealings by Sh. Jagir Singh. In this case, Sh. Jagir Singh is not a party and as per the counsel of the assessee he has not even the witness in the sale deed made between the assessee and the seller of the land. The counsel of the assessee has also argued that when the assessee requested for the cross-examination of Sh. Gurmeet Singh, a notice was issued by the A.O. to the Gurmeet Singh but a copy of the same was not provided or intimated to the assessee as A.Y. 2011-12 8 to when the cross-examination could take place, therefore, in reality there is no cross-examination of Mr. Gurmeet Singh.
Finally, the counsel of the assessee has relied on the order of the co-ordinate Bench of Hon'ble ITAT Chandigarh in the case of M/s S.P. Singla Construction Pvt. Ltd. in dated 02.01.2025 where the proceedings u/s 148 was quashed as there was nothing on record that the assessee had not produced before the A.O. during the original assessment-based u/s 143(3). The counsel further argued that in this case also everything sought by the A.O. or details or documents were filed before the A.O. in the original proceedings u/s 143(3), therefore, as noting new has been brought on record, the proceedings initiated u/s 148 is liable to be quashed.
We find that the Revenue could not rebut the arguments of the assessee and could not bring anything on record to disprove the claims made by the counsel of the assessee. The Revenue could also not bring on record any to prove that it was not submitted in the original proceedings before the A.O. for assessment u/s 143(3). Therefore, we are of this considered opinion that the action A.Y. 2011-12 9 of the ld. CIT(A) in sustaining the reopening of the assessment cannot be confirmed. Accordingly, assessee’s appeal on this legal issue is allowed.
Since, we have decided the case on legal issue. Therefore, we are not inclined to give findings on other issues.
In result, the appeal of the assessee is allowed.
Order pronounced on 01.04.2025.