2017 (11) TMI 377 - AT - Income Tax

Reopening of assessment - information received from investigation wing of department - Held that - What is necessary is that there must be some relevant material on which the formation of opinion is arrived at by the assessing officer. In the instant case the A.O. formed his opinion based on the information received from the investigation wing of the department and which is the valid basis for issuing notice u/s 148 of the Act. It is not necessary for the A.O. to conduct independent enquiry and gather material to form his opinion. Material may come from within the assessment records or from outside the assessment record. But what is important is that there should be some cogent material which suggests prima facia escapement of income chargeable to tax. Therefore we are of the view that the A.O. has rightly formed his opinion based on the information received from the investigation wing of the department which constitutes a sufficient material for reopening of assessment and hence the A.O. is right in reopening assessment. Therefore we are inclined to uphold reopening of assessment and reject ground raised by the assessee. Additions towards alleged on money received by the assessee for sale of property based on third party statement - Held that - A.O. is not correct in coming to the conclusion that on money is exchanged between the parties based on a loose sheet found in the premises of a third person. To sustain the addition the A.O. should have conducted an independent enquiry about the value of the property and ascertain whether any under valuation is done if so what is the correct value of the property. Further the A.O. did not brought on record any evidence to support his contention to say that there is on-money exchanged between the parties. In the absence of proper enquiry and sufficient evidences we find no reason to confirm addition made by the A.O towards on money. Therefore we direct the Assessing Officer to delete addition made towards on money. Penalty levied u/s 271(1)(c) for concealment of particulars of income deleted.

Summary

Issues Involved:
1. Reopening of assessment under section 147 of the Income Tax Act.
2. Addition of on-money received for the sale of property based on third-party statements.
3. Levy of penalty under section 271(1)(c) for concealment of particulars of income.

Issue-wise Detailed Analysis:

1. Reopening of Assessment under Section 147 of the Income Tax Act:
The assessee contested the reopening of the assessment, arguing that it was based solely on a third-party statement without tangible material evidence. The Tribunal found that the Assessing Officer (AO) reopened the assessment based on information from the Investigation Wing, which indicated financial transactions between the assessee and M/s Hicons Construction Pvt Ltd. The Tribunal held that the AO had sufficient material to form a belief that income had escaped assessment, thus justifying the reopening under section 147 of the Act. The Tribunal emphasized that the primary requirement for reopening is the formation of belief by the AO, supported by material evidence, which was satisfied in this case.

2. Addition of On-Money Received for Sale of Property Based on Third-Party Statements:
The AO added Rs. 3.05 crores to the assessee's income under section 69A, based on seized documents and the statement of a director from M/s Hicons Constructions Pvt Ltd, who admitted to cash transactions. The assessee denied receiving any cash over and above the declared sale consideration of Rs. 170 lakhs. The Tribunal noted that the seized document was a loose sheet found at a third party's premises and not in the assessee's handwriting. The Tribunal ruled that such a document, without corroborative evidence, cannot be used to make an addition. The Tribunal cited various judicial precedents, including the Supreme Court's decision in CIT Vs. P.V. Kalyana Sundaram, which held that loose sheets and third-party statements without cross-examination or corroboration cannot form the basis for additions. Consequently, the Tribunal directed the AO to delete the addition of Rs. 3.05 crores.

3. Levy of Penalty under Section 271(1)(c) for Concealment of Particulars of Income:
The penalty under section 271(1)(c) was levied by the AO for the alleged concealment of income related to the on-money payment. Since the Tribunal deleted the quantum addition of Rs. 3.05 crores, it held that the penalty for concealment of income could not be sustained. The Tribunal directed the AO to delete the penalty, emphasizing that without the quantum addition, the basis for the penalty no longer existed.

Conclusion:
The Tribunal upheld the reopening of the assessment under section 147 but ruled in favor of the assessee regarding the addition of on-money and the penalty for concealment of income. The Tribunal emphasized the need for corroborative evidence beyond third-party statements and loose sheets to justify such additions and penalties. The appeals were disposed of accordingly, with the deletion of the Rs. 3.05 crores addition and the associated penalty.