TMI Blog2021 (6) TMI 266X X X X Extracts X X X X X X X X Extracts X X X X ..... d party, within the prescribed period of limitation, on the basis of information gathered in the case of an assessee. We thus not being able to persuade ourselves to subscribe to the aforesaid contention so advanced by the ld. A.R, reject the same. Whether reasons recorded by the A.O, were insufficient, for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment? - Material before the A.O was sufficient enough for him to arrive at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment for the year under consideration. At this stage, we may herein observe that what is required at the stage of reopening of a concluded assessment is that the formation of belief by the A.O that the income of the assessee chargeable to tax had escaped assessment should have a nexus with the material available with him. We are unable to subscribe to the claim of the ld. A.R, who had tried to impress upon us that the material available before the A.O prompting the reopening of a concluded assessment should conclusively prove that the income of the assessee had escaped assessment. We thus not finding favour with the cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O had failed to supply the copy of the reasons to believe to the assessee, we reject the same. Undisclosed income - The notings in the document as seized from the premises of M/s Pathik Construction i.e the buyer of the property in question clearly points out to the undisclosed consideration that had changed hands. It is clear from the records that the assessee had purchased/acquired all the rights, interests and benefits in respect of the property in question from Jai Ganesh Co-operative Housing Society Ltd., vide the Agreement to Transfer and Assign for a consideration thus it would therefore be beyond comprehension as to how any part of consideration received on a subsequent sale of the said property was not to be accounted for in its hands. In fact, now when the assessee had accounted for the part sale consideration received from M/s Pathik Constructions in its books of accounts, there is no justification on its part to distance itself from the unaccounted sale consideration i.e the onmoney received from the said buyer Now when the assessee firm i.e M/s Om Developers vide an agreement, dated 15.10.2006 was vested with the interests, rights and benefits in the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed material facts, thereby vitiating the mandate of proviso to Section 147 of the Income Tax Act, 1961, and, hence, the entire foundation of re-assessment is vitiated and all proceedings are bad in law (b) Whether on facts and circumstances of the case and in law, notice issued under section 148 dated 25/03/2015 is void ab-initio, non-est and is without valid jurisdiction and authority of law and it makes all subsequent proceedings including order passed by learned Assessing Officer and impugned Order passed by Ld. CIT Appeal (26) bad in law, void abinitio and non-est; (c) Whether on facts and circumstances of the case and in law, the Assessment Order dated 21/03/2016 issued by the Ld. AO is bad in law for being in flagrant violation of the Proviso u/s 147 of the Income Tax Act, 1961; (d) Whether on facts and circumstances of the case and in law, it was bad in law to reopen assessment u/s 147 of the Income Tax Act, 1961 by placing heavy reliance only on a handwritten chit of paper whose author is unknown and which did not even disclose the name of the Appellant? (e) Whether the Impugned Orders suffer from a jurisdictional error in as much as they have proceeded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh component of ₹ 5,94,96,000/- (Rupees five Crores Ninety Four Lacs Ninety Six Thousand Only)? (j) Whether the lower authorities failed to consider that the entire proceedings against the Appellant initiated on the purported payment of cash by or on behalf of one Pathik Construction is purely based on suspicion, surmises, assumptions and conjectures ? 2. Briefly stated, the assessee firm which is engaged in the business of a builder and developer had filed its return of income for A.Y 2008-09 on 26.09.2008, declaring its total income at ₹ 63,16,295/-. Income of the assessee firm was originally assessed by the A.O vide his order passed under Sec. 143(3), dated 16.12.2010 at an amount of ₹ 71,06,560/-. Subsequently, information was received from the Assessing Officer, Panvel, wherein it was stated inter alia that in the course of a search conducted u/s 132 of the Act on Pathik Construction group certain incriminating documents pertaining to a land deal executed between M/s Pathik Constructions and Jai Ganesh Cooperative Housing Society Ltd. were seized. As per the information, M/s Pathik Constructions had purchased a property situated at Plot No. 31, Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Pathik Construction Group. It was observed by the A.O, that the documents seized during the course of the search proceedings included a sheet of paper with handwritten notes, identified as Annexure O-2 - Page no.92 (of the seized material). On a perusal of the seized document, it was noticed by the A.O that the same made a mention of certain payments in relation to a transaction in property styled as Jai Ganesh CHS , viz. (i) Cheque :₹ 2,22,00,000/-; and (ii) Cash: ₹ 5,94,96,000/-. Observing that the assessee had disclosed the amount of sale consideration of ₹ 2,22,00,000/- which was received vide cheques in its return of income and statements of accounts for the year under consideration, i.e A.Y. 2008-09, the A.O held a conviction that the balance cash receipt of ₹ 5,94,96,000/- (supra) represented the on-money that was received by the assessee on sale of the aforesaid property in question. In the backdrop of his aforesaid conviction, the A.O called upon the assessee to put forth an explanation as to why the aforesaid amount of ₹ 5,94,96,000/- may not be treated as undisclosed sale consideration in its hands. In reply, the assessee denied of having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .e 23.04.2007. As regards the claim of the assessee that it was just a pass through intermediary or a confirming party to the sales made to M/s Pathik Constructions, the CIT(A) observed, that as the assessee was the effective owner of the property in question, therefore, its aforesaid claim did not merit acceptance. Insofar the sale consideration of the property in question was concerned, the CIT(A) after referring to the contents of the document i.e Annexure O-2 - Page 92 that was seized in the course of the search proceedings conducted u/s 132 from the premises of M/s Pathik Constructions i.e the buyer of the property in question observed, that it was evident from the notings that M/s Pathik Constructions had purchased the property from the assessee @ ₹ 14,720/- per sq. mtr. (as mentioned in the seized document), which worked out to an amount of ₹ 8,16,96,000/- [5550 sq. mtrs X ₹ 14,720/- per sq. mtr.]. It was observed by the CIT(A) that out of the total sale consideration of ₹ 8,16,96,000/- the assessee had received an amount of ₹ 2,22,00,000/- by cheques, while for the balance amount of ₹ 5,94,96,000/- was received in cash. In order to fortif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nagiri, Tal. Uran, Dist. Raigad to M/s. GM DEVELOPERS a Partnership firm, through its Partners 1) MR. PRAMOD D. MORE and 2) MR GAJANAND G. KANADE (hereinafter referred to as the ASSIGNOR) for proper consideration and had upon receipt of the Agreed consideration for the same, handed over possession of the plot to the Assignor. 6.2. I t is abundantly clear from the above that the appellant was the effective owner of the said proper t y as on the date of s ale of the same to MIs Pathik Constructions on 23.04.2007. The proper ty has also been shown by the appellant as part of its opening stock as on 0.1.04.2007 and the cheque receipts of ₹ 2,22,00,000/- on account of sale of the proper t y has al so been reflected in its Profit and Los s ac count . The total sales consideration received including the cash component therefore, has to be taxed in the hands of the appellant. 6.3. The appellant has submitted that the cheque as well as the cash component of ₹ 5,94,96,000/ - has been taxed in the hands of Jai Ganesh Co -op Society Ltd. which has been confirmed by the CIT(A) against which further appeal was pending before the Hon'ble ITAT. The appellant has, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering the sur rounding facts and circumstances of the case. The notings mention payment details in respect of Plot no.31, Sector-47, Dronagiri which is the property sold by the appellant to M/s Pathik Constructions. Though the appellant 's name is not mentioned therein, the logical conclusion to be drawn is that the payments noted therein pertain to the appellant and more so as the cheque component of the payment matches with the consideration received shown by the appellant. 6.5. As regards the actual consideration received on account of sale of the aforementioned property to /s Pathik Constructions, it would be relevant to consider the notings in the sheet of paper seized under annexure 0-2 at the premises of M/s Pathik Constructions. For the sake of ease and clarity, the legible contents written on the sheet are being typed out below: Annexure 0-2 DCO File No- 5550 Sqm Plot No.3 1, sect-47, Dronagiri Rate 14720/- sqm Payment Details Paid to Jali ganesh co-op. members (a) Cheque 2,22,00,000/- (b) Ca 5,94,96,000/- Sold to ------(not legible) - Rate 25600/- sqmt 6.6. It is evident from the above notings tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the appellant had simply stated that the sale of land was included in the sale a/c of Jai Ganesh Society in its books and that the P L a/c showed the true picture of the sales and no further proceeds were received. There is nothing on record to indicate that the appellant had sought for cross examination of the party. Nothing to that effect has been brought to my notice during appellate proceedings also. I find that due opportunity of being heard was accorded to the appellant and there was no violation of principles of natural justice. The appellant s ground of appeal on this issue is dismissed. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal. Before us, the assessee has assailed the addition made by the A.O on merits, as well as challenged the validity of the jurisdiction assumed by the A.O for reopening of its case u/s 147 of the Act. We shall first deal with the challenge thrown by the assessee to the validity of the jurisdiction assumed by the A.O for reopening of its case under Sec. 147 of the Act. As observed by us hereinabove, the assessee has assailed the validity of the jurisdiction assumed by the A.O on multip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o agree with the claim of the ld. A.R, that pendency of an appeal, reference or revision on a particular matter in the case of an assessee would preclude the revenue from reopening the case of a third party. To sum up, though the legislature in all its wisdom had in order to avoid parallel proceedings contemplated a restriction by way of a 3rd proviso to Sec.147, but the same, in our considered view cannot be stretched to the extent of reading restrictions on reopening the case of a third party. In fact, if the 3rd proviso to Sec. 147 is construed in the manner it has been projected by the ld. A.R before us, the same would disentitle the revenue from initiating reassessment proceedings in the hands of a third party, within the prescribed period of limitation, on the basis of information gathered in the case of an assessee. We thus not being able to persuade ourselves to subscribe to the aforesaid contention so advanced by the ld. A.R, reject the same. The additional Ground of appeal No. (c) is accordingly dismissed. 7. We shall now advert to the claim of the ld. A.R that the reasons recorded by the A.O, were insufficient, for arriving at a bonafide belief that the income of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Commissioner of Income tax-28(2), Mumbai As can be gathered from the aforesaid reasons, the A.O was in receipt of information from the ITO, Ward-3, Panvel, vide a letter dated 23.02.2015, wherein it was intimated that a land deal was executed between M/s Pathik Construction and Jai Ganesh Cooperative Housing Society Ltd. for a total consideration of ₹ 8,16,26,625/-, which comprised of viz. (i) Cheque payment: ₹ 2,21,30,625/-; and (ii) Cash receipt: ₹ 5,94,96,000/-. As is discernible from the reasons to believe, the A.O was inter alia intimated that Jai Ganesh Cooperative Housing Society Ltd. had assigned its rights, title, interest and benefits pertaining to the aforesaid property to the assessee firm, i.e. M/s Om Developers, through the latters partners viz. (i). Mr. Pramod D. More; and (ii) Mr. Gajanan R. Kanade. Apart from that, the A.O was informed that the aforesaid sale transaction was executed by the assessee firm. Observing, that the assessee had accounted for the sale consideration only to the extent of ₹ 2,24,88,685/-, the A.O held a bonafide belief that the income of the assessee to the extent of ₹ 5,91,37,940/- that was charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not finding favour with the claim of the ld. A.R that the A.O had reopened the case of the assessee in the absence of sufficient material, reject the same. The additional ground of appeal No. (a) is accordingly dismissed. 8. We shall now deal with the claim of the ld. A.R that the notice under Sec.148 was issued by the A.O de hors necessary satisfaction of the appropriate authority as required per the mandate of Sec.151 of the Act. As averred by the ld. A.R, the Commissioner of Income-tax-28, Mumbai, while sanctioning the issuance of notice under Sec. 148 to the assessee, on the basis of the reasons recorded by the A.O, had failed to apply his mind and had recorded his satisfaction in a mechanical manner. In order to buttress his aforesaid claim the ld. A.R took us through the form wherein the approval of the Commissioner of Income-tax was obtained, i.e Page 39 of the APB. The ld. A.R drew our attention to Column 13 of the form, and submitted, that the CIT-28, Mumbai by merely stating Yes, I am satisfied that it is a fit case for issue of notice u/s 148 of the Act , had thus, granted his approval in a mechanical manner without any application of mind. It was the claim of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of mind. We have deliberated at length on the issue under consideration and are unable to accept the aforesaid claim of the assessee. As observed by us hereinabove, the CIT-28, Mumbai, had after considering the reasons to believe that were recorded by the A.O i.e. DCIT-28,(2), Mumbai, dated 12.03.2015, had categorically stated, as under : Yes, I am satisfied that it is a fit case for issue of notice under Sec. 148 of I.T. Act. In our considered view, the aforesaid recording of satisfaction by the appropriate authority i.e CIT-28, Mumbai, can by no means be brought within the realm of grant of approval in a mechanical manner, as had been canvassed by the ld. A.R before us. On a perusal of the records, we find, that the A.O had vide his letter dated 12.03.2015 (through Jt. CIT, Range-28(2), Mumbai) forwarded his proposal for reopening of the concluded assessment u/s 147 in the case of the assessee. As per the records, the Commissioner of Income-tax-28, Mumbai, had as on 24.03.2015 in unequivocal terms recorded his satisfaction that it was a fit case for issue of notice u/s 148 of the Act. We are unable to agree with the claim of the ld. A.R that the satisfaction of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. But then, where there is no request by the assessee for supply of the reasons to believe, no obligation in our considered view would be cast upon the A.O to furnish the same. As the assessee in the case before us had at no stage applied for a copy of the reasons to believe on the basis of which its case was reopened, therefore, no fault can be attributed to the A.O in not supplying the same. In the backdrop of the aforesaid facts, finding no substance in the claim of the ld. A.R that the assessment framed u/s 143(3) r.w.s 147, dated 21.03.2016 would stand vitiated as the A.O had failed to supply the copy of the reasons to believe to the assessee, we reject the same. The additional ground of appeal no. (b) is accordingly dismissed. 10. We shall now advert to the contentions advanced on the merits of the case by the ld. A.R in his attempt to impress upon us that the CIT(A) had erred in sustaining an addition of ₹ 5,94,96,000/- towards undisclosed income of the assessee. Before proceeding any further, we would briefly cull out the facts of the case in a chronological manner, as the same in our considered view will have a strong bearing on the adjudication of the iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad, to M/s Pathik Constructions ( Assignee ), for a consideration of ₹ 2,22,00,000/-. The CHS was also made a party to the said Agreement of Assignment-Cum-Sale , dated 23.04.2007, in order to enable M/s Pathik Constructions to get the land in question transferred in its name. The consideration of ₹ 2,22,00,000/- was received by the assessee i.e M/s Om Developers ( Assignor ) from M/s Pathik Constructions ( Assignee ), as under: S.No Particulars Amount 1. Cheque No. 000197, dated 13.03.2007, drawn on IDBI Bank, Vashi Branch.- ₹ 25,00,000/- 2. Cheque No. 007072, dated 10.04.2007, drawn on IDBI Bank, Vashi Branch. ₹ 25,00,000/- 3. Cheque No. 007080, dated 25.04.2007, drawn on IDBI Bank, Vashi Branch. ₹ 60,50,000/- 4. Cheque No. 007081, dated 30.04.2007, drawn on IDBI Bank, Vashi Branch. ₹ 30,00,000/- 5. Chequ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23.04.2007 for an ostensible consideration of ₹ 2,20,00,000/-. Insofar the claim of the ld. A.R that as the Agreement to Transfer and Assign , dated 15.10.2006 entered into between the assessee firm and Jai Ganesh Cooperative Housing Society Ltd was an unregistered agreement executed on a ₹ 100/- stamp paper, therefore, de hors transfer of the title of the property under consideration no adverse inference as regards vesting of the ownership of the same in the assessee could have been drawn, we are afraid does not find favour with us. Admittedly, transfer of title of any immovable property of a value of one hundred rupees and upwards as per Sec. 17 of The Registration Act, 1908, has to be carried out on the basis of a registered document. But then, we cannot remain oblivious of the fact that the contents of the aforesaid agreement , dated 15.10.2006 had been referred to and form part of the recitals of the Agreement of Assignment-cum-sale , dated 23.04.2007, executed between, viz. (i). Jai Ganesh Cooperative Housing Society Ltd.; (ii). M/s Om Developers (i.e the assessee firm); and (iii). M/s Pathik Constructions, on the basis of which the ostensible sale considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of the search proceedings from the premises of M/s Pathik Construction, the contents of the same have to be read in the backdrop of the said fact. Notings in the seized document i.e Annexure O-2 Page 92 clearly refer to certain payments made in relation to a transaction in a property styled as Jai Ganesh CHS , viz. (i). Cheque :₹ 2,22,00,000/-; and (ii) Cash: ₹ 5,94,96,000/-. On a perusal of the contents of the aforesaid seized document, we further find that the rate at which purchase of the property was transacted is clearly stated to be @ ₹ 14,720/- per sq. mtr. Further, the rate at which the said property was thereafter sold is also clearly mentioned to be @ ₹ 25,600/- per sq. mtr. On the basis of the aforesaid notings it was observed by the lower authorities that the assessee firm i.e M/s Om Developers had transferred its rights, interest and benefits in the property in question i.e Plot No. 31 (admeasuring 5549.59 sq. mtrs) at Sector 47 Dronagiri, Taluka: Uran, District: Raigad to M/s Pathik Construction for a total consideration of ₹ 8,16,96,000/-. As observed by the lower authorities, out of the total consideration of ₹ 8,16,96,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ands. The Ld. A.R had placed on our record an order that was passed by the ITAT, C Bench, Mumbai while disposing off the revenue s appeal in the case of M/s Pathik Constructions (ie. buyer of the property in question) in ITA No. 1498 to 1499/Mum/2012, dated 13.02.2015. As is discernible from the said order, M/s Pathik Constructions i.e the buyer of the property in the course of the search proceedings conducted in its case was found to have received onmoney of ₹ 10.65 crores (i.e over and above the accounted sale consideration of ₹ 3.25 crores) on a subsequent sale of the property in question to M/s Iconic Realtors Ltd. In the course of the search proceedings partners of M/s Pathik Constructions had categorically admitted the payment of on-money for purchase of the property in question. Although, the aforesaid statement was subsequently retracted, but in the absence of any material supporting such retraction the same was rejected by the A.O. As is discernible from the aforesaid order M/s Pathik Construction had in the course of the post search assessment proceedings in its case claimed that its undisclosed income from sale of the property in question be computed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on a subsequent sale of the said property was not to be accounted for in its hands. In fact, now when the assessee had accounted for the part sale consideration of ₹ 2,22,00,000/- received from M/s Pathik Constructions in its books of accounts, there is no justification on its part to distance itself from the unaccounted sale consideration i.e the onmoney of Rs.,5,94,60,000/- received from the said buyer. To sum up, now when the assessee firm i.e M/s Om Developers vide an agreement, dated 15.10.2006 was vested with the interests, rights and benefits in the property in question, therein de hors any material proving to the contrary it would thus be the rightful owner of any consideration received pursuant to a subsequent sale of the property/rights in the property in question. We thus not being able to persuade ourselves to subscribe to the claim of the ld. A.R that the aforesaid amount of ₹ 5,94,96,000/- (supra) was paid by M/s Pathik Constructions to Jai Ganesh Co-operative Housing Society Ltd, decline to accept the same. Accordingly, finding no infirmity in the view taken by the CIT(A) that the cash component of ₹ 5,94,96,000/- of the sale consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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