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TMI Blog2024 (11) TMI 960X X X X Extracts X X X X X X X X Extracts X X X X ..... ource of investment in property being held to be explained in the hands of the co-owner of the property, the addition so made is illegal and liable to be deleted in the interest of justice. 3. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A) grossly erred in confirming the addition under section 56(2)(vii)(b) treating the stamp duty valuation of the property as the fair market value determining the fair market value of the property and without referring the property for valuation and without following the due process in law which makes the addition bad in law and liable to be deleted in the interest of justice. 4. On the facts and circumstances of the case and in law, the AO grossly erred in making and the CIT(A) grossly erred in confirming the addition under section 56(2)(vii)(b) treating the stamp duty valuation of the property as the fair market value ignoring the fact that the property suffered from various disadvantages due to which the price at which the property has been purchased is the fair market value of the property and as such the addition made under section 56(2)(vii)(b) deserves to be deleted in full in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 09/07/2021, objected to the re-opening on various grounds and relying on various judicial precedents in support and urged before the Assessing Officer to drop the impugned proceedings under section 148 of the Act in the interest of justice. The Assessing Officer, vide order dated 27/08/2021, rejected the objections of the assessee and opted to continue with the re-opening proceedings. During the year, the assessee purchased an immovable property for a total consideration of Rs. 1,53,02,000, situated at Parsodi, along with her husband from 32 co-owners. The ready reckoner value of the said immovable property for the purpose of payment of stamp duty was Rs. 7,58,97,000/-. The source of the investment was through loan taken from M/s. Sonu Constructions, which is a proprietary concern of the assessee's husband Shri Vinod Durugkar. The said investment was duly reflected in the audited statement of accounts of M/s. Sonu Constructions, which also has been duly accepted and assessed during assessment under section 143(3) of the Act in respect of Shri Vinod Durugkar, the husband of the assessee. The assessment for the A.Y. 2015-16 in respect of Shri Vinod Durugkar, the husband of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te authority for redressal of her grievances. 5. The learned CIT(A) held re-opening to be valid and proceeded to adjudicate the issues on merit. 6. Insofar as addition of Rs. 97,53,600 under section 69 of the Act on account of investment in immovable property is concerned, the learned CIT(A) rejecting the submissions of the assessee and upheld the order of the Assessing Officer on this count. The relevant observations of the learned CIT(A) are as under:- "4.2.1 The AO held in the assessment order that during the year under consideration, the assessee had purchased immovable property jointly with her husband Shri Vinod Durgakar for sale consideration of Rs. 1,53,02,000/- and other expenses of Rs. 42,05,200/- for stamp duty and registration fee were incurred and the total comes to Rs. 1,95,07,200/-. A show cause notice along with draft assessment order was issued on 08.09.2021 proposing that the value of the investment of Rs. 97,53,600/- is deemed to be the income of the assessee for the year under consideration in terms of section 69 of the I.T. Act. The assessee was given opportunity to furnish reply. However, the assessee has grossly failed to furnish any reply till the comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed the assessment of Shri. Vinod Durugkar by making an addition of Rs. 44,39,587/- under sec. 56(2))vii)(b) of the Act representing the 50% of the total difference considering the share of Shri. Vinod Durugkar in the property. The appellant ought to have been submitted the information before the Assessing Officer during the assessment proceedings. However, she has not filed any information before Durugkar, nowhere the sources of the investment was mentioned. In the absence of the details for the sources, there is no reason to interfere in the order of the AO. I am constrained to to dismiss the appeal. Therefore, the addition of Rs. 97,53,600/- (i.e ½ share of the investment of Rs. 19507200/2) is upheld. Accordingly, the ground No.2 raised in this appeal is dismissed." 7. The addition under section 56(2)(vii)(b) of the Act is concerned, the learned CIT(A) held that there is no dispute with regard to the fact that assessee had purchased immovable property and there was a difference of value as disclosed by the assessee and adopted by the Stamp Valuation Authority. He also was of the view that it is also not a case where the assessee objected before the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more details are sought or some verification is proposed that cannot be a substitute for the reasons which let the AO to believe that an income chargeable to tax has escaped assessment. 23.5. Similar view has been taken by the Nagpur Bench of the Hon'ble Bombay High Court in PCIT 2 Vs. Sheetal Dushyant Chaturvedi (ITA No. 106 of 2017). SLPNo. 13935 of 2021 filed by the Income Tax Department before the Hon'ble Supreme Court has also been dismissed. 23.6. The reopening having been done solely for the purpose of verification of investment in immovable property is illegal and accordingly the reopening along with the assessment as completed pursuant to search illegal reopening deserves to be quashed as per law. 23.7. The assessment is further illegal as the same has been completed without properly disposing of the objections of the Appellant vide a speaking order as mandatorily required under law. 23.8. The Appellant invites your honours kind attention to the order of the AO wherein the AO has allegedly tried to dispose of the objections of the Appellant which your honour will appreciate have been done without objectively considering all the objections of the Appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ource of purchase of investment is to be verified. 4. Enquiries made by the AO as sequel to information collected/ received: On perusal of the information available in ITS and 360 degree profile on ITBA as well as on e-filing portal it is noticed that the assessee had filed return of income for the assessment year 2015-16 showing total income of Rs. 6,46,890/-. The source of purchase of investment is huge and is to be verified. 5. Findings of the AO: The assessee had purchased immovable property for a total sale consideration of Rs. 1,53,02,000/- and market value of Rs. 7,58,97,000/- during the F.Y. 2014-15. However, it is noticed that the assessee has filed return of income for the assessment year 2015-16 showing total income of Rs. 6,46,890/-. The source of purchase of investment is huge and is to be verified. 6. Basis forming reason to believe and details of escapement of income: Sources of investment in property is very huge and is to be verified In view of the above, I have a reason to believe that the amount of Rs. 76,51,000/- (50% of total amount of Rs. 1,53,02,000/-) has escaped assessment for the A.Y. 2015-16. 7. Seventh paragraph will include escapement of incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. 1.4 Fishing enquiry-Information from intelligence wing: Giriraj Enterprises v. ACIT (2019) 174 DTR 409 (Bom.)(HC) 1.5 No reopening to make fishing inquiries. (a) PCIT v. G & G Pharma India Ltd. [2017] 383 ITR 147 (Delhi)(HC) (b) Bhogwati Sahakari Sakhar Karkhana Ltd. v. Dy. CIT (2004) 269 ITR 186 (Bom.)(HC) (c) Hindutan Lever Ltd. v. R. B. Wadkar, ACIT (2004) 268 ITR 332 (Bom.)(HC) d) Bhor Industries Ltd. v. ACIT (2004) 267 ITR 161 (Bom.)(HC) (e) Ajanta Pharma Ltd. v. ACIT (2004) 267 ITR 200 (Bom.)(HC) II. REASON TO BELIEVE AND NOT REASON TO SUSPECT: 2.1 The reasons for formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. But it has to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ITO, W.P. no.3344 of 2018, judgment dated 10/01/2019 (Bom. HC); v) The Swastic Safe Deposit and Investments Ltd. v/s ACIT, W.P. no.1230 of 2019, judgment dated 25/06/2019 (Bom. HC); and vi) PCIT v/s Sheetal Dushyant Chaturvedi, Income Tax Appeal no.106 of 2017, judgment dated 26/02/2021 (Bom HC Bench Nagpur). 13. The Hon'ble Bombay High Court in Nivi Trading Ltd. v/s Union of India, W.P. No.2314 of 2015, reported as [2015] 375 ITR 308 (Bom.) and other judgments mentioned above, has categorically held that the re-assessment under section 147 of the Act cannot be done solely for the purpose of verification. 14. Before us, the learned Departmental Representative argued that in the absence of proper explanation with valid supporting evidences to prove the source, the arguments / submissions of the assessee cannot be accepted and hence, failure of the assessee to explain her case with proper supporting documents and evidences, the re-opening of assessment by the Assessing Officer which was further confirmed by the learned CIT(A) is just and proper. 15. Here, as is evident, the re-opening was done only for the purpose of verification of the source of investment in the property, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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