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Facts
The assessee initially filed and revised its return of income for A.Y. 2017-18, which was accepted under Section 143(3). Subsequently, a notice under Section 148 was issued to reopen the assessment based on CIB information about a transaction and an alleged claim of Rs. 2,74,000/- as stamp duty expenditure. The assessee raised objections to the reopening and disputed the addition.
Held
The Tribunal held that the reassessment proceedings initiated under Section 147/148 were bad in law because the Assessing Officer had no tangible material to prima facie conclude escapement of income, merely stating that information 'needs to be investigated further,' which amounts to reasons to suspect, not believe. The AO also failed to pass a speaking order on the assessee's objections. Furthermore, the addition of Rs. 2,74,000/- was unsustainable as the assessee had offered the entire stamp value for taxation, and the Revenue failed to demonstrate that the assessee had actually claimed this amount as an expenditure.
Key Issues
1. Validity of reassessment proceedings initiated under Section 147/148 of the Income Tax Act, 1961. 2. Validity of the addition of Rs. 2,74,000/- on account of alleged unexplained expenditure (stamp duty).
Sections Cited
Section 250, Section 147, Section 143(3), Section 151, Section 148, Section 133(6), Section 250(6)
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Income Tax Appellate Tribunal, PUNE BENCHES “SMC” :: PUNE
Before: DR.DIPAK P. RIPOTE & SHRI VINAY BHAMORE
ORDER
PER DR. DIPAK P. RIPOTE, AM:
This is an appeal filed by the Assessee against the order of ld.Commissioner of Income Tax(Appeal)[NFAC], passed under section 250 of the Income Tax Act, 1961 for the A.Y.2017-18dated 01.10.2025 emanating from the Assessment Order passed under section 147 of the Act, dated 27.08.2021. The Assessee has raised the following grounds of appeal :
1. Reassessment bad in law.
The learned CIT(A)-NFAC has erred in upholding the reassessment proceedings-initiated u/s 147 of the Act, though the same are bad in law, and void ab initio, as the reassessment order was passed without disposing of the appellant's objections to reopening of assessment and without passing a speaking order.
2. No fresh tangible material for reopening. The learned CIT(A) erred in confirming the reopening though no new fresh tangible material and corroborative evidence warranting the reopening of the case u/s 148 of the Act was available with the Assessing Officer; the reasons recorded merely reflect a change of opinion and is bad in law and without jurisdiction 3. Failure to furnish relied-upon material. The learned CIT(A) failed to appreciate that the AO did not furnish the documents and evidences allegedly relied upon while recording the reasons for reopening (such as the verbatim copy of the reasons recorded for re-opening of the assessment and the copy of sanction taken from Jt. Commissioner of Income Tax U/s. 151 of the Act to issue Notice u/s 148 of the Act), thereby violating principles of natural justice.
4. Non application of mind. The learned CIT(A) erred in not appreciating that the Id AO had not applied of his mind to the assertions and contentions raised by the appellant and the core issue to be examined and considered and further failed to appreciate the sales and expenses details provided. II. Merits of the Addition- Addition of Rs. 2,74,000/- on account unexplained expenditure.
1. Incorrect explained claimed in respect of Stamp Duty paid on the said flat. The learned CIT(A) erred in upholding the addition of Rs. 2,74,000/ on account of incorrect explained claimed in respect of Stamp Duty paid on the said flat holding that the appellant failed to provide adequate documentation and explanations for the expense.
Correct facts and the documents submitted by the appellant ignored. The learned CIT(A) failed to appreciate the correct facts and the documents submitted by the appellant and confirmed the addition on the ground that the appellant company had claimed incorrect expenditure 2 of Rs. 2,74,000/- in respect of Stamp Duty paid and failed to consider [A] the fact that the said addition was purely on the basis of presumption and surmises.
3. Violation of natural justice The learned CIT(A)-NFAC failed to grant personal hearing and to consider the detailed written submissions and judicial precedents relied upon by the appellant, rendering the appellate order non-speaking and in violation of section 250(6) of the Act. III The appellant craves leave to add, alter, amend, or delete any of the above grounds of appeal
.” Findings & Analysis :
2. We have heard both the parties and perused the records. In this case, Assessee Company had filed Return of Income electronically for A.Y.2017-18 on 30.03.2018 declaring total income at Rs.19,18,387/-. Then, Assessee filed Revised Return of Income on 19.05.2018, declaring total income at Rs.19,18,387/-. Assessee’s case was selected for scrutiny. During the scrutiny proceedings, assessee filed replies vide letter dated 23.10.2019, 14.11.2019, 05.12.2019, 16.12.2019, 17.12.2019, 21.12.2019, 26.12.2019. These replies are at page no.33 to 45 of the paper book filed by the Assessee. The Assistant Commissioner of Income Tax, Circle-2, Pune, Assessing Officer passed an assessment order u/s.143(3) on 27.12.2019 accepting the returned income.
2.1 Then, ACIT, Circle-4, Pune issued a notice u/s.148 for A.Y.2017-18 on 16.03.2020. In response to the notice u/s.148, 3 Assessee filed Return of Income declaring total income at Rs.19,18,390/-. Assessee asked for reasons recorded for reopening. Accordingly, same were provided to the Assessee. Copy of the reasons recorded is at page no.61 to 62 of the paper book. The relevant part of the reasons recorded is reproduced here as under : “The assessee is a private limited company is a builder, promoter and a contractor the assessee filed its e-return of income for the AY 2017-18 on 30.03.2018 declaring the income at Rs. 19,18,387/ Subsequently, assessee filed revised return of income 19.05.2018 without charging total income. The scrutiny assessment u/s 143(3) of the Income-tax Act, 1961 (the Act) was completed on 27 12 2019 by computing (1) Profit and Gains of Business of Rs. 14,58,049/- and (ii) Income from other sources of Rs. 4.60.338/-by arriving at Total Income at Rs. 19,18,390/- 02 As per the information available with the Department, it is seen that the assessee Mix Pinnacle Constro and Eco Homes Private Limited, having PAN- AAECP0400E has entered into transaction on 03.04.2016 as under Sr.No Sale Transaction Stamp Stamp Amount Date duty Paid Value (Rs) 1 50,51,650/- 03,04,2016 2,74,000/- 54,80,026/-
The information available in this office needs to be investigated further. Therefore to enquire further in this matter, proposal for execution of power to do open enquiry was taken from the Pr.CIT-2, Pune on 05.02.2020. Approval was granted by the Pr.CIT-2, Pune on 14.02.2020 Therefore, information was called for U/s 133(6) of the IT Act 1961, from the assessee on 19.02.2020. However, no compliance has been received from the assessee date. In view of the above, I have reason to believe that the income of Rs. 50,51,650 chargeable to tax has escaped assessment for the AY 2017-18 in the hands of the assessee 4 company.”
2.2 It has been argued by the ld.AR that there was no new evidence and 148 has been issued merely on change of opinion. Ld.AR relied on the decision of Hon’ble Supreme Court in the case of CIT Vs. Kelvinator India Limited 320 ITR 561.
2.3 We have studied the reasons recorded carefully, it is noted that the Assessing Officer has specifically mentioned “the information available in this office needs to be investigated further”. Thus, the Assessing Officer(AO) had issued notice u/s.148 to investigate the information. It means, the Assessing Officer was not having any material to prima facie arrive at a conclusion of escapement of income. It is noted that Assessing Officer has not carried out any independent verification of the so-called material available before issuing notice u/s.148 of the Act. Ld.AR also submitted that no material on which Assessing Officer has relied was provided to the Assessee.
2.4 On carefully studying the reasons recorded by the Assessing Officer, it is apparent that notice u/s.148 was issued to verify the information. Thus, there was no material before the Assessing Officer to prima facie arrive at a conclusion of escapement of 5 income. It is important to note here that in this case, assessment 2.5 The Hon’ble Bombay High Court in the decision of Chandni J. Ahuja Vs. Union of India [2024] 478 ITR 662 vide dated 01.03.2024 has held as under : Quote“9. In the case at hand, the Assessing Officer does not say that any income has escaped assessment. All that the Assessing Officer desires is examination of certain details pertaining to the actual extent of escapement of income which can be established only after detailed investigation. Even in the reasons recorded, it says " In this case as per the CIB information you have entered into huge share transaction . . . . . . . . . the value of the share transaction is . . . . . . it is necessary to verify the above aspect, it is necessary to reopen the case. . . . . . .. ".
That cannot be stated to be founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. Just because some information has been received from CIB does not entitle the Assessing Officer to reopen assessment. The reasons must be founded on the satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment. Once that is not to be found, then, the impugned notice cannot be sustained. As noted earlier, what we find is that there are no reasons to believe but only reasons to suspect. Hence, reopening of assessment is not satisfactory.
In the circumstances, the rule issued on 13th April 2016 is made absolute. The impugned notice dated 20thMarch 2015 and the order on objections dated 6th November 2015 are hereby quashed and set aside.”Unquote 2.6 The Hon’ble Supreme Court in the case of CIT Vs. Kelvinator India Limited [2010] 320 ITR 561 vide dated 18.01.2010 has observed as under : Quote “4………………………Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.” Unquote 2.7 Thus, Hon’ble Supreme Court observed that reasons must have live link with the formation of belief based on tangible material.
2.8 In this case, there is no tangible material to arrive at a belief of escapement of income.
2.9 It is also to be noted that Assessee filed objections after receiving the reasons recorded before the Assessing Officer. The objections are at page no.74 to 78 of the paper book. In the said objections, assessee had explained that the transaction mentioned in the reasons recorded pertains to sale of Flat i.e.B-704 at Pinacle Gulmohar. Assessee also submitted the copy of Index-II of the said Flat. Assessee submitted that agreement value of the said flat was Rs.50,51,650/- and valuation as per stamp duty authority was Rs.54,80,026/-. It was specifically submitted that Assessee had 7 offered the entire amount of Rs.54,80,026/- for taxation. Assessee 2.10 It is noted that Assessing Officer has not passed any speaking order discussing the objections raised by the Assessee against reasons recorded for reopening. This is in violation of Hon’ble Supreme Court guidelines in the case of GKN Driveshafts (India) Ltd., vs. ITO [2002] 259 ITR 19.
For all the reasons discussed above we hold that Reopening is Bad in law. Accordingly the Legal grounds number 1-4 raised by the assessee are allowed.
On merits, it is noted that Assessing Officer passed assessment order u/s.147 on 22.08.2021. Assessing Officer in the assessment order alleged that Assessee has claimed expenditure of Rs.2,74,000/- on account of stamp duty which was paid by purchaser. Hence, Assessing Officer made addition of Rs.2,74,000/-. It is noted that Assessing Officer mentioned in the assessment order that assessee failed to file replies. However, it is noted that Assessee had made elaborate submission during re-assessment proceedings. Assessee 8 had specifically denied AO’s allegation that Assessee had claimed Rs.2,74,000/-. However, Assessing Officer has not considered the submission of the Assessee. During the hearing, we specifically asked ld.DR for the Revenue to demonstrate how Assessing Officer has arrived at a conclusion that Assessee has claimed Rs.2,74,000/- as expenditure. Ld.DR could not answer. We have gone through the profit and loss account and its annexures filed by assessee in the paper book. However, we have not come across any such expenditure being claimed. It is also noted that in the assessment order, Assessing Officer has mentioned as under : “On perusal of reply as well as documents, ITR filed by assessee, it is found that the assessee company has shown Gross profit in P/L a/c Rs. 6,45,84,737/-whereas the statement filed with last submission Gross Profit shown Rs. 5,65,89,240/-. It means assessee manipulated the GP in the books of account for the year under consideration. The assessee also accepted in his submission that the amount of sale consideration should be added in GP not in total income for the year under consideration. The assessee was provided a list of flats at Gulmohar "B', in this list of flats assessee claimed amount which were agreement on stamp value of the property.
4.1 We have perused the profit and loss account and noted that Rs.6,45,84,737/- is the turnover of the assessee and not Gross Profit. Assessee filed an elaborate submission in response to the show cause notice and explained the same. But, Assessing Officer has not considered. Assessing Officer has referred to submission date 9 4.2 On these facts and circumstances of the case, we are of the considered opinion that the addition of Rs.2,74,000/- is unsustainable. Accordingly, we direct Assessing Officer to delete the addition of Rs.2,74,000/-. Accordingly, Grounds of Appeal-II, 1 and 2 are allowed.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 08 January, 2026.