TMI Blog2018 (8) TMI 1765X X X X Extracts X X X X X X X X Extracts X X X X ..... erved on behalf of the Revenue. Thus, the first additional ground raised on behalf of the assessee is a damp squib. The additional ground on this score is thus dismissed. The scheme of Act does not suggest that mere search action revealing incrementing material against the person other than searched person would automatically oust the power of the AO over the assessee concerned under S. 147 of the Act. The overriding provisions of S. 153C merely enables the AO to set aside the pending reassessment proceedings and grants primacy to Section 153C of the Act. As noted earlier, exercise of power under S. 153C is governed without any stringent fetters of holding ‘reason to believe’ contemplated u/s 147. Therefore, while exercise of overriding power under S. 153C will render S. 147 otiose, the converse case of clipping the powers available under S. 147 in search cases per se is not found to be reconcilable to the scheme of the Act. In the light of scheme of the Act narrated above, we are of the view that the AO of the assessee (person other than searched person) cannot be compelled to pursue remedy necessarily under s.153C of the Act in exclusion to remedy available to the AO u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt : Ms. Aar ti Shah, A. R. For The Respondent : Shri Mudi t Nagpal , Sr . D.R. ORDER Pradip Kumar Kedia, Accountant Member The captioned appeal has been filed at the instance of the assessee against the order of the CIT(A)-4, Ahmedabad ( CIT(A) in short), dated 21.09.2016 arising in the assessment order dated 05.11.2015 passed by the Assessing Officer (AO) under s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 (the Act) concerning AY 2012-13. 2. The grounds of appeal raised by the assessee read as under: 1. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case by holding that the learned Assessing Officer has rightly invoked provisions of sec. 147 r.w.s. 148 of the I.T. Act, 1961 of the IT. Act, 1961 where in fact no such situation existed in the case of the Appellant so as to come to the conclusion that the Appellant has concealed any income, and therefore, on this ground itself, the reopening of the assessment as well as re-assessment made, requires to be considered as illegal and bad at law. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and on facts of the case in confirming t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to the assessee amounting to ₹ 1,22,24,800/- was quantified by the AO as share of investment by the assessee in the aforesaid land as co-owner. It was further found from the Banakhat that ₹ 10 lakhs was paid in cash by the buyers of the land on 30.09.2010 and another ₹ 1,40,00,000/- was paid on the date of execution of Banakhat. Thus, total amount paid in cash towards part consideration stood at ₹ 1,50,00,000/- for purchase of land as per the Banakhat. This Banakhat was found to be notarized and signed by the parties of both sides. The AO found that this transaction was not incorporated by the assessee while filing the return of income. Consequently, the case of the assessee was reopened by issue of notice dated 09.07.2015 under s.148 of the Act. The reasons recorded under s.148(2) of the Act were provided to the assessee along with the aforesaid notice which reads as under: Shri Shaileshkumar Shivrambhai Patel, residing at 23, Navalpark, Ramji Nagar Road, Laxmipura, Palanpur, District: Banaskantha had purchased some pieces of land at Sujanpur, Patan with five co-partners. The total consideration agreed between the parties was ₹ 6,11,24,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessed income in the case was decided at ₹ 256380/-. Upon sharing of information by central Circle 2(4), it was found that the assessee has purchased some piece of land at Sujanpur, Patan with five co-partners and consideration agreed between parties was ₹ 6,11,24,0007-. As per Banakhat dtd 06.11.2010, amount of ₹ 1.50 crore was paid by the purchaser to the seller. The sale deed of these lands were executed in F.Y. 2011-12. On inquiry the information found to be true. As the income chargeable to tax exceeding Rs. l,22,24,800/- as share of assessee escaped assessment, the case was re-opened u/s. 147 obtaining approval from JOT, B.K. range Palanpur and notice u/s. 148 on 09.07.2015 duly served on the assessee with copy of reason. Thereafter, show cause notice u/s. 42(l) of the I.T. Act was issued on 27.10.2015 requesting the assessee to submit its reply of show cause. 6. The appellant contended that during the assessment proceedings u/s. 143(3), all the details were submitted before the A.O., therefore, re-opening of the assessment is not valid. The appellant cited various case-laws in support of this contention. On going through the facts of the case an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been shown by the appellant in the return filed, the A.O. made the additions of ₹ 1,22,24,800/- (Share of the appellant) in the hands of the appellant as his unexplained investment in this land. 7.2 The appellant confirmed all the facts mentioned in the Banakhat as mentioned in para 7 of the submission dated 27.08.2016. But he contended that the vendor Shri Chandankumar Ramandas Pohani had Banakhat rights from one Shri Arvindbhai Modi and the vendor has not acquired the rights of actual purchase of the said land by valid purchase deed. The appellant further contended that the possession of the land is to be given on full final payment on execution of registered sale deed. The appellant also contended that it is mentioned on page No. 6 of the Banakhat that the Banakhat is made to purchase the land to earn commission. Thus, the appellant requested that the full facts of the Banakhat have not been considered by the A.O. Therefore, addition made by the A.O. should be deleted. 7.3 The facts of the case as narrated above and the submissions of the appellant has been carefully considered. There is no dispute about the facts mentioned above about the land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . These facts prove that at the first stage, the land was purchased by the appellant with 4 other partners. These five persons made investment in the said land, which is confirmed by the Banakhat and has not been disputed by the appellant. This land was later on sold to Shri Ramesh B. Agrawal and sale deed was directly made in the name of vendor and Shri Ramesh B. Agrawal. In the intervening time, the appellant made investment in the said land. Such modus operandi is normal in land deals. This method is adopted to avoid payment of stamp duty on multiple purchase sale of the same land. The appellant s contention that the Investment was made to earn commission is also of no help to him because it is not mentioned in Banakhat that the cash of ₹ 1.5 Crore paid does not belong to the appellant and it has been financed by someone else. The purpose of investment has no relevance weather it is for earning profit for commission. Only quantum of investment is relevant for income tax purposes. Therefore, these contentions of the appellant are also found not acceptable, hence, rejected. 8. Keeping in view the discussion above, the additions made by the A.O. are found justified, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be invocation of Section 153C of the Act. Accordingly, the learned AR professed that the whole proceedings under s.147 is void ab initio and bad in law. 10.3 On merits, the learned AR pointed out that the proposed seller of the land in question as per Banakhat was not the owner but was having merely Banakhat rights. The whole purpose of Banakhat was earning commission by the purchasers and sellers named in the document. The learned AR vociferously denied payment of any consideration as a result of such Banakhat and contended that the seller has not received any amount from the assessee and other co-owners being the proposed purchasers. The learned AR heavily relied upon the contents of the Banakahat on page 6 thereof to point out that the executing parties to the Banakhat namely party agreeing to sale (Pohani Chandankumar Ramandas) and intended purchasers (assessee other co-owners) were very well aware that the Banakhat was never meant to be finally adjudicated as the purported sellers had no legal right, title or interest for execution of sale deed. The learned AR emphasized that seller mentioned in the Banakhat not being the owner of the land was not capable of selling the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in FY 2010-11. Therefore, the onus lies on the assessee to squarely prove that the whole of land deal transactions belong to some other assessment years. The learned DR pointed out that in view of the sale deeds executed in AY 2012-13, the presumption would naturally arise against the assessee for taxable event falling in assessment year 2012-13. 11.2 The learned DR also invited a reference to the enabling provisions of Section 150(1) r.w.s. 153(6) of the Act for taxability of the undisclosed income eventually in one year or another year. 11.3 The learned DR pointed out that the AO is required to only arrive at prima facie belief towards escapement of income at the time of initiation of proceedings under s.147 of the Act. The tangible material in the form of Banakhat and final sale deed permits the AO to form such prima facie belief of escapement based on total sale consideration involved. The learned DR pointed out that once the action under s.147 of the Act and the re-assessment has been rightly commenced based on prima facie satisfaction, it was always open to the assessee to dislodge such formation of belief on merits in the course of the re-assessment proceedings. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR thus submitted in conclusion that the Revenue was perfectly justified in assessing the undisclosed source of income in the hands of the assessee as borne out from the documentary evidences and no interference with the orders of the AO and CIT(A) is called for. 12. We have carefully considered the rival submissions and perused the orders of the authorities below and material referred to and relied upon on behalf of the assessee as per Rule 18(6) of the ITAT Rules, 1963 and the case laws cited at bar. 12.1 The precise question that arises for our consideration is whether in the given set of facts, impugned addition of ₹ 1,22,24,800/- in the hands of the assessee alleged to be paid out of undisclosed source to the proposed seller of the land in terms of agreement to sale, in the capacity of a joint purchaser will come within a sweep of Section 147 of the Act or not, for the purposes of assessment of alleged income escaping assessment. 12.2 Two legal questions emerge in the facts of the case as per the additional grounds raised on behalf of the assessee. Therefore, it is considered expedient to first deal with these legal issues. 13. First and foremost, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to sale (Banakhat) and consequent final sale deed, in our considered opinion, provides sound basis for formation of belief towards escapement of income to a person instructed in law. The AO thus has acted within the bounds of law while exercising its power under s.147 of the Act. Merely because a part of the total sale consideration fall in other assessment year, the action of the AO cannot be curtailed to deny the exchequer of its rightful dues. Notwithstanding, the technical defect of such nature can be cured under ss.150(1) 153(6) of the Act as rightly observed on behalf of the Revenue. 13.3 Thus, the first additional ground raised on behalf of the assessee is a damp squib. The additional ground on this score is thus dismissed. 14. We shall now address ourselves to the second legal objection. On behalf of the assessee, it is contended that in view of over-riding provisions of Section 153C of the Act in the case of search assessment, the assessment proceedings in the hands of the assessee are not amenable to jurisdiction under s.147/148 of the Act and therefore, entire assessment proceedings itself is a nullity in the eyes of law. 14.1 Before we proceed for determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further --------- 14.2 On a bare reading of s. 153C noted above, it is self evident that this provision governs assessment of income of a person other than a person in whose case search was initiated. 14.2.1 Also, this provision along with other provisions of s. 153A to 153D exerts an overriding effect over the provisions of sections 139, 147, 148, 149, 151 and 153 of the Act since these provisions contain non-obstante clause. Secondly, the assessment proceedings under s. 153C are far more onerous qua s. 147 in the sense that proceedings are initiated for six assessment years immediately preceding the year in which search u/s. 132 is initiated or requisition is made u/s.132A. Thirdly, the provisions of section 153C are analogous to section 158BD of the Act. Therefore, decision of the Apex Court in the case of Manish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ample if the purchaser s premises are searched and the registered sale deed is seized, it cannot be said that it belongs to the vendor just because his name is mentioned in the document. In the converse case if the vendor s premises are searched and a copy of the sale deed is seized, it cannot be said that the said copy belongs to the purchaser just because it refers to him and he (the purchaser) holds the original sale deed. In this light, it is obvious that none of the three sets of documents - copies of preference shares, unsigned leaves of cheque books and the copy of the supply and loan agreement - can be said to belong to the petitioner. 14.2.4 We also notice that the legislature apparently took note of the restricted scope of expression belong to employed in s. 153C which, to some extent, curtailed the power of the deptt. to invoke s. 153C of the Act. Thus, suitable legislative changes were brought with effect from 1-6-2015 to relax the impediment for implementation of the Section 153C. As noted earlier, as per existing provisions, section 153C could be invoked against such other person only when books of account, etc., belonged to him and not otherwise. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the hands of the assessee unless the document seized or requisitioned actually belong to the assessee. Thus, the independent power available to AO of the third person under s.147 of the Act cannot be artificially curtailed in such a situation. 14.4 Provisions of Section 153C and Section 147 carry many distinguishing features notwithstanding the ultimate effect of redetermination of true income under both provisions. A conjoint reading of S. 153C S. 147 would show that the nature of power of reopening assessment under section 147 is materially different from that of the power conferred under S.153C. Section 153A/S.153C are special provisions dealing exclusively search cases while S. 147 is applicable to all types of escapement including income unearthed in search proceedings. The power available under S. 153C does not render provision of S. 147 repugnant per se. The remedy available under S. 153C and S. 147 are also not inconsistent. Relevant here to note the observation of the Hon ble Bombay High Court in the case of Shirish Madhukar Dalvi v. Asstt. CIT [2006] 156 Taxman 79/287 ITR 242; Section 148 is a substantive provision whereas section 158BC is a procedural section. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Therefore, while exercise of overriding power under S. 153C will render S. 147 otiose, the converse case of clipping the powers available under S. 147 in search cases per se is not found to be reconcilable to the scheme of the Act. In the light of scheme of the Act narrated above, we are of the view that the AO of the assessee (person other than searched person) cannot be compelled to pursue remedy necessarily under s.153C of the Act in exclusion to remedy available to the AO under s.147 of the Act. Thus, on this count also, the action of the AO under s.147 of the Act is within the four corners of law and not be faulted. 14.5 The decisions cited on behalf of the assessee are clearly distinguishable and do not raise any conflict with position of law narrated above. The decision rendered by the Gujarat High Court in the case of Cargo Clearing Agency v. Jt. CIT [2008] 307 ITR 1 has been rendered under a different scheme for assessment of search cases i.e. with reference to block period regime. The Hon ble Gujarat High Court also echoes that in case of conflict between the operation of erstwhile Section 158BC of the Act (pertaining to erstwhile assessment procedure in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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