2022 (10) TMI 121 - AT - Income Tax

Reopening of assessment u/s 147 - addition on account of alleged cash investment in property - HELD THAT - CIT(A) on comparing the signature of assessee on seized material with the signature of Income tax return of assessee and held that assessee is the same person. No opportunity was given to the assessee to explain his version on such comparison. We find that the stand of the assessee throughout the proceedings is that the assessee has not relation nor any business transaction with Baldevbhai P Patel. We find that said Baldevbhai P Patel filed Petition under chapter XIXA of Income tax for settlement of his case and took similar plea as stated in his statement before survey team that assessee is one of his partner in making investment in land. However, such statement of assessee was not accepted by ld Income Tax Settlement Commission and the petition of Baldevbhai P Patel was dismissed and on further appeal Jurisdictional High Court was dismissed Considering the categorical finding of the Income Tax Settlement Commission (ITSC) in its order vis-a-vis land of survey No. 223 to 225 at Vesu, Surat, in holding that none of the dates, which were shown to be the dates of transactions tallied with the dates on which the consideration in the land was received. Commission observed that no evidence was brought on record by Baldevbhai B Patel to establish his proximity with Hitesh Savani (assessee) and that the order of the ITSC has been affirmed by Jurisdictional High Court, therefore, we find merit in the submissions of the ld AR for the assessee that there is no evidence to connect the assessee with the sized material except the statement of third party. We find that the statement of Baldevbhai P Patel is not accepted by Principal Commissioner, on the basis of which the settlement petition of Baldevbhai P Patel was not allowed. On the basis of aforesaid factual discussion, we are of the view that the addition on account of alleged cash investment in the land at survey No. 223 to 225 Vesu, Surat by assessing officer was not justified. Hence, we direct the assessing officer to delete the addition. In the result, the ground of the appeal is allowed.

Summary

Issues Involved:
1. Validity of reopening the assessment and issuing notice under Section 148 of the Income Tax Act, 1961.
2. Legitimacy of the addition of Rs. 34,85,466/- on account of alleged cash investment in property.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Assessment and Issuing Notice Under Section 148:
The assessee challenged the reopening of the assessment under Section 147 and the issuance of notice under Section 148, arguing that the notice was issued by an officer without jurisdiction. The notice was issued by the ACIT, Range-9, while the jurisdiction lay with the ACIT, Range-3. The assessee contended that the reasons recorded for reopening were based on incorrect incriminating material. The Commissioner of Income Tax (Appeals) [CIT(A)] acknowledged that the reasons recorded were based on wrong incriminating material but deemed the defect not fatal enough to invalidate the reassessment. The Tribunal noted that the CIT(A) had observed that the Assessing Officer did not conduct the required investigation to ascertain the exact identity of 'Hitesh Savani' mentioned in the seized material. The Tribunal did not delve further into the validity of the reopening, as the appeal was allowed on merits.

2. Legitimacy of the Addition of Rs. 34,85,466/- on Account of Alleged Cash Investment in Property:
The addition was based on the statement of Baldevbhai Bhikhabhai Patel and certain impounded documents from a survey action. The Assessing Officer concluded that the assessee was a dormant partner in the transaction involving the purchase of land at survey numbers 223, 224, and 225 at Vesu, Surat, and had made an unaccounted cash investment of Rs. 34,85,466/-. The assessee denied any involvement in the transaction, stating that the documents did not bear his signature and that he had no relationship with Baldevbhai Bhikhabhai Patel.

The CIT(A) upheld the addition, concluding that the signatures on the seized material matched those on the assessee's income tax returns, and inferred that the assessee was involved in the transaction. However, the Tribunal found merit in the assessee's argument that there was no evidence connecting him to the seized material, except for the statement of a third party, which was not corroborated by independent investigation. The Tribunal referred to the findings of the Income Tax Settlement Commission (ITSC) and the Gujarat High Court, which had rejected Baldevbhai Bhikhabhai Patel's petition for settlement, noting that there was no full and true disclosure of income and no evidence to establish the proximity of the assessee with the transactions.

The Tribunal concluded that the addition of Rs. 34,85,466/- was not justified, as the evidence was insufficient to substantiate the claim that the assessee made the alleged cash investment. Consequently, the Tribunal directed the Assessing Officer to delete the addition.

Conclusion:
The Tribunal allowed the appeal, directing the deletion of the addition of Rs. 34,85,466/-. The discussion on the validity of reopening the assessment became academic as the appeal was decided on merits. The order was pronounced in the open court on 30th September 2022.