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Income Tax Appellate Tribunal, Hyderabad ‘ B ‘ Bench, Hyderabad
Before: Shri R.K. Panda, Vice- & Shri K. Narasimha Chary
Per R.K. Panda, Vice-President.
This appeal filed by the assessee is directed against the order dated 30/01/2023 of the Assessing Officer passed u/s 144 r.w.s. 144C(13) of the I.T. Act relating to A.Y.2017-18.
Facts of the case, in brief, are that the assessee is a Non-Resident individual for the A.Y. 2017-18. As per the information available with the Department, the assessee is a non-filer of Return of Income for the AY 2017-18. The Assessing Officer noted from the copy of Sale Deed No.6433/2016 available with the department that the assessee, during the F.Y. 2016-17 relevant to A.Y. 2017-18, purchased an immovable property for a consideration of Rs. 2,55,75,000/- on 05.10.2016 and paid the entire consideration in Cash. Since the assessee paid such a huge sum of money in cash in-spite of being a non- filer, he had a reason to believe that income has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. After recording the reasons and obtaining the necessary approval of Addl. CIT (IT), Hyderabad, he initiated proceedings u/s 147 for the A.Y. 2017-18 by issuing a notice u/s.148 of the Act on 24.02.2021. The said notice was served on the assessee through e-proceedings/ITBA on the same day i.e. 24.02.2021.
The assessee failed to file the Return of Income in response to the above mentioned notice u/s. 148 of the Act. Vide letter dated 25.10.2021, another opportunity was granted to the assessee to comply with the notice issued u/s. 148 of the Act. In response to the same, the assessee vide his letter dated 02.11.2021 acknowledged the receipt of notice u/s. 148 of the Act dated 24.02.2021 and requested for a week's time to file the return of Income. Since the assessee again failed to file the Return of Income within the extended time sought by him, another notice u/s. 142(1) of the Act was issued to the assessee on 18.11.2021 through ITBA. In response to the same, the assessee vide his letter dated Nil received by the Assessing Officer on 30/11/2021 informed that due to technical glitches in the Income Tax Website, he was unable to upload the return of Income. The assessee requested to consider the return of Income filed on 29/11/2021. The assessee further requested for the reasons for the issue of notice u/s. 148 of the Act.
3.1 Since the above-mentioned Return of Income filed by the assessee on 29.11.2021 was without e-verification, the Assessing Officer did not treat the same as valid return. Since the assessee had failed to file a valid Return of Income in response to S. 148 notice, the assessee's request for communicating the reasons recorded for issuing the notice u/s. 148 of the Act was not acceded to and another notice u/s. 142(1) was issued by the Assessing Officer to the assessee on 21.12.2021. In response to the same, vide his letter uploaded on 29.12.2021 the assessee submitted as follows:
"...With respect to the Sale Transaction entered vide Document No. 6433/2016 dated 05.10.2016, I would like to bring to your kind notice that I had entered into sale deed registered vide Document No. 6433/2016 at SRO, Narapalli. The property purchased through above sale deed is under litigation. Copy of the petition filed before Junior Civil Judge, RR District is enclosed in this connection. In view of the litigation crept in the ownership of the property, I had not paid the consideration of Rs. 2,55,75,000/-. Since no consideration has been paid towards the Purchase of Immovable Property sources for the acquisition does not arise in the present case.... ".
The assessee thereafter filed the return in response to notice u/s 148 and the Assessing Officer supplied the reasons for such reopening.
Subsequently, the Assessing Officer issued notice u/s 143(2) & 142(1) which were served on the assessee. He also asked the assessee to explain as to why the amount of Rs.2,55,75,000/- paid by him in cash towards the purchase of the immovable property should not be treated as his income in absence of proper explanation regarding the source of the same. Since the assessee did not respond to the said notice, the Assessing Officer proceeded to complete the assessment u/s 144. He observed that on 05/10/2016, a Sale Deed was executed by and between the five Vendors viz. Smt. Ravula Nirupa Rani, Sri Ravula Dayanand Yadav, Smt Salla Saritha Yadav, Smt. Mailkol Navitha, Smt Thota Swathi Yadav and the Vendee i.e. the assessee Sri. Farooq Ali. The said Sale Deed was registered as Document No. 6433 of 2016 by the Sub-Registrar, Narapalli on 05/10/2016. As per the sale deed, the assessee purchased an agricultural land totally admeasuring 4 Acres 26 Guntas (i.e. 0 Acres 25 Guntas in Survey No. 117, 2 Acres 19 Guntas in Survey No. 118 and 1 Acre 22 Guntas in Survey No. 120) situated at Jalpally Village, Saroornagar Mandal, Ranga Reddy District from the above mentioned vendors. The actual sale consideration as per the Sale Deed as well as value adopted by the SRO for stamp duty purpose are same i.e. Rs. 2,55,75,000/-. Further, on page No. 4 of the above-mentioned Sale Deed, it is mentioned that the vendee i.e. the assessee had paid the total sale consideration of Rs. 2,55,75,000/- on 05/10/2016 jointly to the vendors by way of cash and the vendors have admitted and acknowledged the same.
Rejecting the various explanation given by the assessee, the Assessing Officer made addition of Rs.2,55,75,000/- to the total income of the assessee by recording as under:
The assessee approached the DRP who vide letter dated 16.12.2022 rejected the various objections filed by him.
Finally the Assessing Officer completed the assessment on 30.01.2023 and passed the order making addition of Rs.2,55,75,000/- to the total income of the assessee.
Aggrieved with such order of the Assessing Officer, the assessee is in appeal before the Tribunal by raising the following grounds:
8.1 The assessee has also filed the following additional grounds:
The learned Counsel for the assessee referring to the above additional grounds submitted that these are purely legal in nature and no fresh facts are required to be investigated. Referring to the decision of the Hon'ble Supreme Court in the case of NTPC Ltd vs. CIT (229 ITR 383) he submitted that the additional grounds be admitted for adjudication.
The learned DR, on the other hand, opposed the admission of the additional grounds.
After hearing both the sides and considering the fact that the additional grounds raised by the assessee are purely legal in nature and no fresh facts are required to be investigated, therefore, following the decision of the Hon'ble Supreme Court in the case of NTPC Ltd (Supra),the additional grounds raised by the assessee are admitted for adjudication.
The learned Counsel for the assessee strongly challenged the order of the Assessing Officer as well as the DRP. He submitted that the case of the assessee was reopened by issue of notice u/s 148 of the Act dated 24.2.2021 by the Income Tax Officer (International Taxation-1) Hyderabad. The time limit to complete the assessment as per the provisions of section 153(2) is 31.3.2022. However, the Assessing Officer in the instant case has passed the order u/s 144 r.w.s 144C of the Act on 30.01.2023. Referring to the provisions of section 153(2) of the Act, he submitted that no order of assessment, re- assessment or re-computation shall be made u/s 147 after the expiry of 12 months from the end of financial year in which the notice u/s 148 was served on or after 1.4.2019. He submitted that if the contention of the Revenue in respect of service of notice on 24.2.2021 is considered to be duly served, the time limit to pass the final assessment order u/s 147 of the Act in the present case of the assessee lapses on 31.3.2022. Therefore, the assessment order passed u/s 147 r.w.s. 144 on 30.01.2023 is itself time barred and does not survive in the eyes of law.
Referring to the decision of the Hon'ble Rajasthan High Court (Jodhpur Bench) in the case of PCIT vs. Virendra Choudhary reported in 139 Taxmann 90, he drew the attention of the Bench to Para No.7 of the order which reads as under:
“7. The case of the assessee thus was covered under clause (ii) of further proviso to Section 153B(1)(b). The Commissioner, therefore, correctly examined the factual position in the background of such legal proviso and noted that the documents relating to the assessee were sent to the assessing officer and were received by him on 30.09.2014. As per the second proviso, the time-limit for passing assessment would be nine months from the end of financial year of 2014-15 i.e. 31.12.2015 or twenty-one months from the end of financial year in which last of the authorisation and search were made, whichever is later. In this case, these two relevant dates were 31.12.2015 and 31.12.2014 respectively. The assessing officer had to pass the order of assessment latest by 31.02.2015. He completed the assessment on 31.03.2016, which was clearly time-barred. No question of law arises. The appeal is dismissed.”
He accordingly submitted that the impugned assessment order dated 30.01.2023 passed u/s 147 r.w.s. 144 of the Act in the present case being barred by limitation is liable to be quashed.
In his 2nd plank of argument, the learned Counsel for the assessee submitted that as per the provisions of section 151A of the Act inserted w.e.f. 1.11.2020, any notice in the course of assessement proceedings shall be issued in faceless manner through faceless assessment scheme. However, in the instant case, the notice u/s 148 of the Act was issued on 24.02.2021 by the Income Tax Officer (International Taxation-1) Hyderabad and the same was issued without jurisdiction. He submitted that the Assessing Officer has failed to consider the fact that the jurisdictional Assessing Officer has no power to issue notice u/s 148 of the I.T. Act.
The learned Counsel for the assessee drew the attention of the Bench to the provisions of section 151 of the I.T. Act as well as the order passed u/s 119 of the Act by the CBDT according to which it is mandatory to conduct assessement proceedings in faceless manner. The learned Counsel for the assessee drew the attention of the Bench to the relevant extract of the order dated 13.08.2020 issued by the CBDT which reads as under:
He submitted that the above order u/s 119 of the Act only empowers the jurisdictional Assessing Officer to conduct assessment or to pass necessary orders as per the Act, however, the issue of notice u/s 148 of the Act is governed by the provisions of section 151A of the Act wherein with effect from 1.11.2020, any notice u/s 148 must be issued under the faceless assessment scheme through automatic allocation procedure in a faceless manner. Thus, the Assessing Officer in the instant case has failed to follow the procedure laid down in the Act as well as the CBDT Circular which is binding on the Revenue therefore, the assessment order is liable to be quashed.
So far as the merit of the case is concerned, the learned Counsel for the assessee submitted that the provisions of section 69 of the Act can be invoked by the Assessing Officer only when the assessee made investment out of unexplained investment earned in India. However, in the instant case no such allegation was made by the Assessing Officer that the assessee earned income in India and out of that the investment was made. The learned Counsel for the assessee referred to the provisions of section 5 (2) of the Income-Tax Act according to which a person who is a ‘non-resident’ has to pay tax only on that income which is either received or is deemed to be received by him in India, or accrues or arises or deemed to accrue or arise to him in India, during the year. Thus, he will be liable to tax only in respect of income received or accrued to him in India. He submitted that during the year under consideration, the Assessing Officer in the final assessment order has made addition of Rs.2,55,75,000/- alleging that the assessee had paid cash to vendors for purchase of the said property and accordingly made addition of unexplained investment. He submitted that for the year under consideration, the residential status of assessee is Non-Resident Individual and is engaged in construction and fabrication business at Sharjah, UAE. He submitted that the source of income was explained before the Assessing Officer. He submitted that as per section 90 of the Act and DTAA entered by India & UAE, the assessee is liable to pay tax in the residency i.e. UAE and not in India. Therefore, proposing addition as unexplained investment u/s 69 of the Act is unjustified and bad in law. However, without prejudice to the above, he submitted that the payment can be considered as an application of income and not the source of income. Therefore, the Assessing Officer cannot tax the application of income.
The learned Counsel for the assessee referring to the decision of the Mumbai Bench of the Tribunal in the case of Income Tax Officer v. Rajeev Suresh Ghai reported in (2021) 132 Taxmann.com 234 (Mumbai Trib.) submitted that the Tribunal in the said decision has held “where assessee a non- resident Indian settled in and a tax resident of UAE paid some unaccounted monies to a builder which were brought to tax u/s 69 and incomes representing unexplained investments were not proved to be earned in India, only investment was made in India, since assessee had been tax resident of UAE all along with no economic activities in India, unexplained investments by assessee which were inherently in nature of application of income rather than earning of income, could not have been taxed u/s 69 as these fall under article 22 of Indo-UAE DTAA which makes such income taxable in country of residence (UAE) unless these investments are proved to be made out of income generated in India.
Referring to various other decisions to the above said proposition, he submitted that since the assessee during the impugned A.Y is a non-resident and that the provisions of section 69 of the Act are not applicable in the case of NRI as income is not generated in India, therefore, the addition so made by the Assessing Officer is not correct.
The learned Counsel for the assessee inyet another plank of argument submitted that the assessee during the impugned A.Y has entered into the sale deed registered vide document No.6433/2016 located at Jalpally Village, Saroor Nagar Mandal, R.R. District from 5 vendors. However, the agricultural land purchased through above sale deed is under litigation for which the assessee had not paid the consideration of Rs.2,55,75,000/-. He submitted that the assessee has filed a petition before the Jr. Civil Jude, RR District, copy of which is placed at Page 32 & 43 and also affidavits from the 5 vendors of the property confirming that the consideration has not been received by them. Under these circumstances, since no consideration has been paid towards purchase of the immovable property, sources of the acquisition do not arise in the present case. Further, the Assessing Officer has not cross verified from the vendors who had filed affidavits stating that they have not received any money nor any corroborative evidence was available with the Assessing Officer. He accordingly submitted that both legally and factually, the addition made by the Assessing Officer is not justified.
The learned DR, on the other hand, heavily relied on the order of the Assessing Officer. So far as the validity of 148 proceedings are concerned, she submitted that the notice u/s 148 was issued on 24.02.2021 which was served electronically on the same day. The assessee vide reply dated 2.11.2021 himself has acknowledge the receipt of the notice. Further, the assessee has filed his return of income in response to notice u/s 148 after acknowledging its receipt. She drew the attention of the Bench to section 292BB and submitted that since the assessee had not raised any objection on the validity or merit of the reasons recorded by the Assessing Officer for initiating proceedings u/s 147 of the Act, therefore, the requirement of passing a speaking order or disposing of the objections does not arise. She submitted that the Assessing Officer in the instant case has made addition of Rs.2,55,75,000/- after thoroughly discussing the issue and in absence of any explanation furnished by the assessee regarding the source of such money for the investment so made, the Assessing Officer had rightly made the addition. She accordingly submitted that the order of the Assessing Officer be upheld and the grounds raised by the assessee be dismissed.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.2,55,75,000/- u/s 69 of the I.T. Act on the ground that as per the sale deed, the assessee had paid total sale consideration of Rs.2,55,75,000/-on 5.10.2016 to the vendors by way of cash, that the vendors have admitted and acknowledged the same and the assessee could not explain the source of such payment made for purchase of the immovable property. While doing so, he further held that the sale deed in itself is conclusive evidence and the contents of the same could not be proved further and a civil suite filed by the 3rd party claiming the title to the said property after the registration of sale deed between the assessee and the vendors will not negate the contents of the sale deed.
23.1 It is the submission of the learned Counsel for the assessee that the assessment order passed by the Assessing Officer is barred by limitation. It is also his submission that the assessee being an NRI and settled in UAE does not have any economic activities in India, therefore, there cannot be any addition of unexplained investment in the hands of the assessee as these fall under article 22 of Indo-UAE DTAA which makes such income taxable in the country of residence i.e. UAE unless these investments are proved to be made out of income generated in India.
We find some merit in the above argument of the learned Counsel for the assessee. A perusal of the record shows that the notice u/s 148 was issued on 24.2.2021, a fact not disputed by the Revenue. There is no reference made to the TPO for making any adjustment of arm’s length price of the international taxation. We find the provisions of section 153(2) read as under: “ 153. Time limit for completion of assessment, reassessment and re-computation. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: [Provided further that in respect of an order of assessment relating to the assessment year commencing on the— (i) 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii) 1st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted.] (1A) Notwithstanding anything contained in sub-section (1), where a return under sub-section (8A) of section 139 is furnished, an order of assessment under section 143 or section 144 may be made at any time before the expiry of nine months from the end of the financial year in which such return was furnished.]
(2) No order of assessment, reassessment or re- computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted.”
Thus, a perusal of the above provision clearly shows that the time limit for completion of the assessment in the present case lapses on 31.3.2022. However, the final assessment order u/s 144 r.w.s. 144C has been passed on 30.01.2023 which is beyond the time limit prescribed u/s 153(2). Since the assessment order has been passed on 30.01.2023 as against 31.03.2022, therefore, the same, in our opinion, is barred by limitation and accordingly, the assessment order is liable to be quashed. We therefore, quash the re- assessement proceedings being barred by limitation. Since the assessee succeeds on this preliminary legal issue, the other grounds become academic in nature and therefore, are not being adjudicated.
In the result, appeal filed by the assessee is allowed.
SA No.59/Hyd/2023. 27. Since the appeal of the assessee has been disposed of, the S.A filed by the assessee become infructuous. Accordingly, the same is dismissed.
In the result, the appeal of the assessee is allowed and the S.A filed by the assessee is dismissed.