TMI Blog2018 (2) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... eration paid by the assessee for purchase of the property under consideration when pitted against the ‘market value’ fixed by the stamp valuation authority is found to be substantially high, further fortifies the veracity of the claim of the assessee that his investment made towards purchase of the property under consideration was well in order. We are of the considered view that though the material acted upon by the department for drawing of adverse inferences as regards payment of “on money” by the assessee formed a strong basis for doubting the investment made by the assessee for purchase of the property under consideration, but the same falling short of clinching material which would have irrefutably evidenced the said fact, thus, does not inspire much of confidence as regards the way they have been construed by the lower authorities for drawing of adverse inferences in the hands of the assessee. the adverse inferences drawn by the A.O as regards payment of “on money” of ₹ 2.23 crore by the assessee for purchase of Flat No. 2501 from M/s Lakeview Developers are based on of premature observations of the A.O, which in the absence of any clinching evidence cannot be sustain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- showing salary income from BG Exploration Production India Ltd., capital gain from sale of equity shares/mutual fund units and interest income. The return of income filed by the assessee was processed as such under Sec. 143(1) of the Act. The case of the assessee was taken up for scrutiny assessment and the income of the assessee was assessed at ₹ 91,93,540/- under Sec. 143(3) on 19.11.2009. The Director General of Income-tax (Inv.), Mumbai as per his letter dated 27.03.2014 shared information with the A.O that the Search seizure proceedings conducted on Hiranandani Group of cases revealed that the assessee had made on money payments to Hiranandani Group for purchase of property in the projects of the said group, as under: Concern of Hiranandani Group to whom 'On Money' paid. Amount of money paid Lake View Developers ₹ 85,00,000/- Lake View Developers ₹ 30,00,000/- Lake View Developers ₹ 60,00,000/- Lake View Developers ₹ 32,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee vide letter dated 28.04.2014 did not tally with the 5 separate amounts as were intimated to the assessee vide another letter dated 09.03.2015; (v). the aggregate of the amounts of ₹ 2.13 crores mentioned in the reasons to believe supplied to the assessee vide letter dated 28.04.2014 did not tally with the amount of ₹ 2.03 crores intimated to the assessee vide letter dated 09.03.2015; (vi). the information on the basis of which escapement of income of the assessee was alleged was falling short of material facts, viz. date and mode of receipt of on money , who had paid the money, to whom the money was paid, date of agreement and who had prepared the details; (vii). that from the records it could neither be gathered as to what was the source from where the information was received in a pen drive and under what circumstances the statement of Shri. Niranjan Hiranandani was recorded, nor any opportunity was afforded to the assessee to cross-examine the aforesaid person whose statement was being relied upon by the department; AND (viii). that as the purchase consideration for which the assessee had purchased the flats vide agreements which were registered on 21.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the assessee to disclose fully and truly all material facts necessary for completing the assessment, the A.O had wrongly assumed jurisdiction and reopened the case of the assessee. The CIT(A) however being of the view that as the A.O was in receipt of specific information from the investigation wing in respect of purchase of 3 flats, viz. Flat No. 2501A, 2501B and 2501C in Somerset project of Lakeview Developers (a project of Hiranandani group), which revealed that the assessee had paid on money for purchase of the aforesaid property, therefore, in the absence of full and true disclosure of all the material facts as regards the investment made by the assessee for purchase of the aforesaid property, the reopening of the case was validly done. The assessee further averred before the CIT(A) that the A.O by acting on the basis of vague information had initiated the reassessment proceedings on the basis of suspicions, which was not permissible as per the mandate of law. The CIT(A) after deliberating on the challenge thrown by the assessee to the validity of the reassessment proceedings on the ground that the same was based on suspicions and not on the basis of a bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence found during the course of the Search seizure proceedings conducted on Hiranandani group, therefore, the same were well in order. The CIT(A) observed that the fact that the assessee had made payment of on money for purchase of 3 flats was corroborated from a perusal of the running cash ledger containing on-money cash receipts from flat purchasers as was recorded in the pen drive seized during the course of the aforesaid Search seizure proceedings. The CIT(A) fortifying his view that the additions made by the A.O were well in order, observed that complete details as regards the name, address, PAN No., flat no. and amount of cash paid by the assessee had emerged from the material seized during the course of the Search seizure proceedings. The CIT(A) further observed that Sh. Niranjan Hiranandani had in his statement recorded by the Investigation wing accepted the fact that the entries in the seized pen drive pertained to the on money received by his group from sale of flats and had admitted on amount of ₹ 475.60 crore on the said count as additional income u/s 132(4), which thereafter was offered before the Settlement Commission as the undisclosed income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O after taking the approval of the Jt. CIT-24(1), Mumbai. The ld. A.R submitted that in the backdrop of the settled position of law, as the A.O while issuing the notice dated 29.03.2014 had not obtained the satisfaction of either of the aforesaid appropriate authorities, therefore, in the absence of valid assumption of jurisdiction by the A.O the reassessment proceedings on the said count itself was liable to be quashed. The ld. A.R in support of his contention that in absence of approval of the appropriate authority contemplated under Sec. 151(1) the reassessment framed stands vitiated, relied on the judgments of the Hon ble High Court of Bombay in the case of Ghanshyam K. Khabrani Vs. Assistant Commissioner of Income-tax (2012) 346 ITR 443 (Bom) and DSJ Communication Vs. DCIT (41 taxmann.com 151). Per contra, the Ld. Departmental representative (for short D.R ) submitted that by way of a bonafide mistake the A.O had obtained the approval of the Jt. Commissioner of Income-tax, and on learning of the said mistake a noting to the said effect was recorded in the order sheet. It was averred by the ld. D.R that the said mistake fell within the purview of Sec. 292B and merel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating on the claim of the assessee, however, being of the view that as the flat was under construction during the year and the possession of the same was taken by the assessee in June, 2008, had thus disallowed the claim of deduction raised by the assessee under Sec. 24. The ld. A.R in the backdrop of the aforesaid facts averred that as the assessee had furnished all material facts as regards purchase of the flat under consideration, which had even been deliberated upon by the A.O during the course of the assessment proceedings, therefore, assumption of jurisdiction under Sec. 147 after a lapse of a period of four years from the end of the assessment year on the ground that the income of the assessee had escaped assessment because of failure on the part of the assessee to truly and fully disclose all the material facts necessary for framing of assessment could not be sustained. The ld. A.R further took us through the relevant extract of the statement of Sh. Niranjan Hiranandani recorded by the investigation wing (Page 41 of APB ) and information gathered by the department from the pen drive on the basis of which payment of on money by the assessee for purchase of flats was being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ckdrop of the aforesaid contentions the ld. A.R submitted that a perusal of the facts as had emerged from the records and the statement of Sh. Niranjan Hiranandani clearly revealed that no adverse inferences as regards payment of any on money by the assessee were liable to be drawn. Per contra, the ld. D.R relied on the orders of the lower authorities and submitted that the factum of payment of on money by the assessee stood established from a perusal of the contents of the pen drive, which thereafter had been affirmed by Sh. Niranjan Hiranandani in his statement recorded by the investigation wing during the course of Search seizure proceedings and affirmed thereafter in his statement recorded u/s 131 by the department. 12. We have heard the authorised representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first take up the objection raised by the ld. A.R as regards the validity of the jurisdiction assumed by the A.O in reopening the concluded assessment of the assessee in the absence of sanction of the appropriate authority contemplated in Sec. 151(1) of the Act. We find that it is a matter of a con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll fairness specified the authorities with whose approval alone the cases could be reopened by the A.O. We find that as a precautionary measure the time limit for reassessing a concluded assessment after the lapse of a period of four years from the end of the assessment year had been subject to the condition that the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice. We are unable to persuade ourselves to subscribe to the view of the ld. D.R that failure on the part of an assessing authority to take the approval of the appropriate authority while assuming jurisdiction under Sec. 147 and issuing a notice under Sec. 148 can be given a go by as being a technical mistake which would be curable under Sec. 292B of the Act. We are of the considered view that the failure on the part of the A.O to take the sanction of the appropriate authority contemplated under Sec. 151(1) would go to the very root of the validity of assumption of jurisdiction by the A.O. We are further of a strong conviction that issuing of notice under Sec. 148 by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al facts necessary for his assessment. The ld. A.R had assailed before us the validity of the reassessment proceedings for the reason that the reasons recorded by the A.O for reopening the case of the assessee does not make any mention of escapement of the income of the assessee for failure on his part to fully and truly disclose all material facts necessary for his assessment. We have perused the copy of the reasons to believe on the basis of which the case of the assessee was reopened by the A.O (Page 31 of APB ). We find that nowhere in the reasons to believe there is any mention by the A.O that the case of the assessee had been reopened for the reason of the failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment. We find that the assessee by challenging the validity of the reopening of the concluded assessment in his case on the present ground, had sought our indulgence for adjudicating as to whether in the absence on the part of the A.O to make a mention in the reasons to believe that the case of the assessee had been reopened for the reason of the failure on the part of the assessee to fully and truly disclose all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to disclose truly and fully any material fact necessary for assessment, let alone the details thereof, the impugned notice dated 30th March, 2007 and the impugned order dated 5th December, 2007 are liable to be quashed and set aside on this ground alone . We thus in the backdrop of the facts involved in the present case read with the settled position of law as had been deliberated at length hereinabove, being of the considered view that now when there is no allegation in the reasons recorded as regards the failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment in the hands of the assessee, therefore, following the judgment of the Hon ble High Court of Bombay in the case of Nirmal Bang Securities (supra) are of the view that the reassessment proceedings in light of the aforesaid jurisdictional defect in the assumption of jurisdiction cannot be sustained. We thus in the backdrop of our aforesaid observations, therefore, hold that the reassessment proceedings initiated by the A.O beyond a period of four years from the end of the assessment year, without making a mention in the reasons to believe that the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss-examination had clearly stated that neither he was aware of the person who had made the entry in the pen drive, nor had with him any evidence that the assessee had paid any cash towards purchase of flat. We have deliberated on the fact that Sh. Niranjan Hiranandani in his statement recorded on oath in the course of the Search seizure proceedings had confirmed that the amounts aggregating to ₹ 475.60 crore recorded in the pen drive were the on-money received on sale of flats, which was offered as additional income under Sec. 132(4) and thereafter offered as such for tax in the petition filed before the Settlement commission. We are of the considered view that there is substantial force in the contention of the ld. A.R that mere admission of the amounts recorded in the pen drive as the additional income by Sh. Niranjan Hiranandani, falling short of any such material which would inextricably evidence payment of on money by the assessee would not lead to drawing of adverse inferences as regards the investment made by the assessee for purchase of the property under consideration. We rather hold a strong conviction that the very fact that the consideration paid by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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