1992 (3) TMI 102 - AT - Income Tax

Tribunal confirms tax reassessment, dismisses appeal, upholds Rs. 1,85,900 addition in property price discrepancies case.

The Tribunal upheld the validity of reassessment proceedings under section 147(a) of the IT Act, 1961, and confirmed the addition of Rs. 1,85,900 in the ... Accounting Year, House Property, Original Assessment Issues Involved:1. Validity of reassessment proceedings initiated under section 147(a) of the IT Act, 1961.2. Addition of Rs. 1,85,900 based on the difference between the actual purchase price of the property and the price shown in the agreement and wealth-tax records.Detailed Analysis:1. Validity of Reassessment Proceedings Initiated under Section 147(a):The first issue concerns the validity of reassessment proceedings initiated under section 147(a) of the IT Act, 1961. The CIT (Appeals) noted that the assessee's representative did not press the point regarding the validity of the reassessment proceedings, leading to its rejection. Before the Tribunal, the learned counsel for the assessee argued that the reassessment was invalid because the original assessment was completed after the raid, and all material facts were already available to the assessing authority. The counsel relied on various judgments to support this contention, including the Supreme Court's judgment in ITO v. Mewlal Dwarka Prasad and the Bombay High Court's judgment in CIT v. Mangilal Dhanraj, arguing that reopening based on pre-existing information was invalid.However, the Tribunal found no merit in the assessee's contention, noting that the assessee's representative had consciously waived this ground before the CIT (Appeals). The Tribunal held that the reopening of the assessment was valid, given the incriminating evidence found in the seized diary, which indicated the assessee's failure to disclose fully and truly all material facts necessary for assessment. The Tribunal emphasized that the scheme of assessment under section 143(1) relies on the taxpayer's trust, and any breach discovered through incriminating documents justifies reassessment under section 147(a).2. Addition of Rs. 1,85,900 Based on the Difference in Purchase Price:The second issue pertains to the addition of Rs. 1,85,900, representing the difference between the actual purchase price of the property and the price shown in the agreement and wealth-tax records. The seized diary indicated that the property was purchased for Rs. 3,76,121, whereas the agreement and wealth-tax records showed a purchase price of Rs. 1,76,121. The ITO made the addition based on the seized diary's contents, which provided precise details of the transaction.The assessee denied making any extra payment and submitted an affidavit stating that the diary's handwriting did not belong to her or her husband. The seller also denied receiving any extra amount. The learned counsel for the assessee argued that the diary's note was a mistake, suggesting that the figure '3' was written instead of '1'. The counsel also contended that the burden of proving unaccounted investment lies with the department and relied on various judgments to support this argument.The Tribunal, however, rejected the assessee's explanation, noting that the seized diary contained specific and precise details of the transaction, which were not meant for tax authorities. The Tribunal held that the initial burden of proof was on the revenue, which was discharged by the seized diary's contents. The burden then shifted to the assessee to disprove the diary's contents, which the assessee failed to do. The Tribunal found the assessee's explanation of an inadvertent mistake unconvincing, given the vague and evasive replies during the search.The Tribunal also addressed the alternative contention that there was no material to justify the addition in the year under consideration, as the sale-deed was executed in the subsequent year. The Tribunal held that the reasonable inference was that the on money was paid before executing the agreement of sale, which mentioned a reduced amount. The Tribunal concluded that the addition made by the ITO and confirmed by the CIT (Appeals) was reasonable and justified.Conclusion:The Tribunal dismissed the appeal of Smt. Ramilaben R. Shah, confirming the addition of Rs. 1,85,900 in her case. Consequently, the protective addition made in the case of her husband, Shri Ratilal H. Shah, was canceled. The reassessment proceedings under section 147(a) were deemed valid, and the addition based on the seized diary's contents was upheld.