JANAK PRANLAL LADHANI,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX-11(2)(2), MUMBAI

This appeal filed by the assessee is against the order of CIT(A)-18, Mumbai, dated 11.04.17 for the assessment year 2007-08 on the grounds mentioned herein below:-

We have heard both the counsels of the parties at length and we have also perused the material placed on record as well as the orders passed by revenue authorities. We find that Ld. CIT(A) has discussed this ground at page no. 21 of its order and Shri JanakPranlalLadhani after having gone through the arguments of both the parties, we find that the return of income was filed by the assessee on 29.11.07 declaring total income of Rs. 83,19,830/- and the same was processed u/s 143(1) of the I.T. Act. Subsequently the AO on the basis of information received had find that the assessee had paid „on money cash‟ aggregating to Rs. 1 crore to M/s Classic Associates belonging to Hiranandani Group during the relevant previous year in connection with purchase of land. Further, the AO reopened the assessment after duly recorded reasons which were served upon the assessee. Keeping in view the reasons recorded by the AO and reply /objections filed by the assessee, we find that in this case, no scrutiny assessment was carried out prior to reopening initiated by the AO. Moreover the AO had relied upon the information received from the search wing during the course of investigation carried /conducted by the Investigation Wing on the Hiranandani Group on 11.03.14 and the evidence related to inter alia on money „ cash payments‟ received from various parties on account of sale of flats. The AO in the order of assessment has categorically mentioned that the Director of the Hiranandani Group in the Shri JanakPranlalLadhani statement recorded on oath had accepted the fact that „on money‟ (cash) was received on sale of various flats from various persons including the assessee and the Hiranandani Group had declared such „on money‟ receipts as additional income in respective assessment years. Since this fact was unearthened during the course of search and seizure action conducted on Hiranandani Group of builders and developers and during the course of search proceedings, the statement of the director of Hiranandani Group were recorded by the Investigation Wing of the Income Tax Department, wherein the directors/promoters of the Hiranandani Group admitted to have received on money from the assessee and confirmed that the same had not been reflected in the regular books of account. The said admission made by the directors is on oath before the investigation wing which conducted such proceedings during the discharge of their official duties. Apart from the above, during the conduct of such search, the incriminating evidence i.e. a pen drive was also found which contained a running cash ledger of the cash receipts of Hiranandani Group. The statements recorded on oath of Shri Niranjan Hiranandani and Shri Surendra Shri JanakPranlalLadhani Hiranandani which form part of the Appraisal Report of the Hiranandani Group also constitutes „incriminating evidence /material‟ and as per the judgment of Hon‟ble Supreme Court in the case of ACIT vrs. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500(SC) wherein it was held as under:- "The word 'reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion- The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers . In other words, at the initiation stage, what is required is 'reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could, have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by Shri JanakPranlalLadhani the Assessing Officer is within the realm of subjective satisfaction's” As stated above, there should be relevant material on which a reasonable personal could have formed a requisite belief, However as can be seen from the reasons recorded for reopening there are various mistakes as pointed out i. para 2.05. Also the Ld AO was not aware of the fact also that the flat was hold by two persons i.e. appellant and his wife and not only appellant. This shows that the IA AO had merely consider the information received and based on suspicion reopened the case. However, it is clearly stated in above case also that "reason to believe" is required and "reasons to believe" is not the same thing as "reason to suspect".

After having heard both the counsels at length and after perusal of the material placed on record, we find that Ld. CIT(A) while deciding these grounds has mentioned that the assessee had disputed the addition of Rs. 1,00,00,000/- made by the AO. Ld. CIT(A) while upholding the additions made by AO had only relied upon the statement of the directors of Hiranandani Group Shri JanakPranlalLadhani admitting the receipt of cash money from the assessee. Whereas on the contrary, the assessee from the begining had been requesting the AO to provide the copies of the statement of the Director of Hiranandani Group and to provide opportunity of cross examination of the said director. We have further noticed that at every step of investigation, the assessee had been requesting the revenue to provide copies of statement or the material on the basis of which additions are being made. However even in spite of several requests made by the assessee, the revenue had not supplied the said documents to the assessee. In our considered view that not providing copies of the statement of the Director of the Hiranandani Group to the assessee before making additions and not providing opportunity of cross examination to the assessee itself amounts to infringement of „legal rights‟ of the assessee which caused prejudice to the rights in this context. After considering the judgments cited by both the parties, we find that Hon‟ble Apex Court in the case of Kapurchand Shrimal Vrs. CIT 1981 131(ITR) Page 451 has held that the duty of the Tribunal does not end with making a declaration that Shri JanakPranlalLadhani the assessments are illegal and it is duty bound to issue further directions. The appellate authority has the jurisdiction as well as the duty to correct all errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute and the statute does not say that such a direction cannot be issued by the appellate authority in a case of this nature. Therefore, considering the above judgment and keeping in view the interest of justice, we set aside the order of Ld. CIT(A) and remit the matter back to the file of AO with a direction to provide copies of statement of directors/promoters of Hiranandani Group and to provide opportunity of cross examination to the assessee and thereafter pass afresh order assessment. It is needless here to mention that before passing the order of assessment, the AO shall provide sufficient opportunity of hearing to the assesse. Before parting, we may make it clear that our decision to restore the matter back to the file of AO shall in no way be construed as having any reflection or expression on Shri JanakPranlalLadhani the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law. With these directions, these grounds of appeal