2025 (8) TMI 1362 - AT - Income Tax

Reopening upheld under section 148; investment treated as benami, additions to be reallocated between joint beneficial owners under section 69

ITAT upheld validity of the reopening, finding departmental approval on the ITBA portal dated 29.03.2018 authorized issuance of notice under section 148; ... Validity of reopening of assessment - approval u/s 151 to be granted by the Sanctioning Appropriate Authority - benami transactions - HELD THAT:- AO has received approval from Ld. Pr. CIT on the ITBA Portal on 29.03.2018, however, the manual communication through letter was forwarded to the Ld. AO by the office of Ld. Pr. PCIT on 31.03.2018 enclosing therewith copy of approval u/s 151, wherein CIT has granted the approval under his hand written satisfaction without any date, therefore, it can be inferred that the date of approval was 29.03.2018, which was on the ITBA portal of the department, therefore, AO was well informed on 29.03.2018 itself to issue the notice u/s 148. We found substance in the submission of the Ld. Sr. DR that the notice u/s 148 was issued under proper compliance of the pre-requisite conditions to obtain approval u/s 151 as per mandate of law, therefore, the contention raised by the ld. AR that the approval u/s 151 was granted after issuance of notice u/s 148 is found to be misplaced, bereft of merits / substance, accordingly, the same does not qualified to be subscribed to.- Decided against assessee. Investment made by the appellant remain unexplained from the income declared by the appellant in its ITR -We are of the considered view that the issue qua the subject benami transaction, which is the foundation causing forming of reason to believe by the Ld. AO for reopening of assessment u/s 147 in the assessee’s case for AY 2011-12, has now been placed at a different footing, as at initial stage Shri Premsingh Saluja (the assessee) was only the beneficiary of the impugned transaction of purchase of immovable property as per information received from ACIT, (Benami Prohibition, Raipur, C.G.), however, after the order of adjudicating authority, PBPT, Zone Raipur though the transaction is held as “Benami” as per provisions of u/s 2(9)(a) of the PBPT Act, Mr. Bhanupratap Singh is Benamidar and Mr. Premsingh Saluja (assessee) along with M/s Bhatia Energy and Minerals Pvt. Ltd are held as beneficial owners. Such verdict by the adjudicating authority, PBPT, Zone Raipur exhibits that the assessee in present case i.e., Mr. Premsingh Saluja is not the only beneficial owner, whereas M/s Bhatia Energy and Minerals Pvt. Ltd is also a beneficial owner in the impugned benami transaction. Considering the decision of adjudicating authority PBPT, the entire addition of the transaction cannot be made in the hands of assessee, treating the same as unexplained investment u/s 69 of the Act, the same needs to be allocated between the joint beneficial owners, as emerging from the order under PBPT Act, dated 20.06.2019. The contention of revenue that the assessee had applied for VSVS- 2020 cannot be used against the assessee as the assessee had initiated to opt under the said scheme but have not completed the compliances for the reasons best known to him, be that as it may, the VSVS-2020 was for settling the direct tax issues in litigation at the option of assessee, which may be or may not contains the substance to be concluded in favour or against the assessee, therefore, it cannot be conclusively considered as admission of the assessee. Since the issue involved qua benami transaction was under adjudication before the authorities under PBPT Act, wherein at the stage of Zonal Adjudicating Authority, the basis of reopening that the assessee alone is the beneficial owner of the benami transaction has been transformed by holding that there are two beneficial owners including the assessee. In any case the matter needs to be restored to the file of AO to examine and give effect to the orders of PBPT Authorities, so as to arrive at the quantum of addition in the hands of respective beneficial owners. We set aside the order of Ld. CIT(A) and restore the case back to the file of Ld. AO for fresh adjudication, as per the directions of PBPT Authorities, in the present case. ISSUES PRESENTED AND CONSIDERED 1. Whether the reopening of assessment under section 147/148 was valid in view of requirement of prior approval under section 151(1), when the notice u/s 148 bears an earlier date than the manual communication of approval? 2. Whether addition of Rs. 51,53,100 as unexplained investment under section 69 is sustainable where the Assessing Officer relied on statements recorded under the Prohibition of Benami Property Transactions Act (PBPT Act) and the Adjudicating Authority under PBPT subsequently held the transaction to be benami involving multiple beneficial owners? 3. Whether, in light of an adjudication under the PBPT Act holding multiple beneficial owners and a pending appeal before the appellate body under PBPT, the entire addition can be sustained solely in the hands of the assessee or requires reallocation among beneficial owners and fresh adjudication by the Assessing Officer? ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of Reopening - Approval u/s 151(1) and Issuance of Notice u/s 148 Legal framework: Section 147/148 empower reopening where the Assessing Officer has reason to believe income has escaped assessment; section 151(1) requires prior approval from the Principal Commissioner/Commissioner before issuance of notice for reopening in specified cases. Precedent treatment: The Tribunal considered the requirement of prior approval as a pre-requisite that must be complied with before issuing notice u/s 148; reference to departmental practice of communicating approval through ITBA portal was central to the factual determination. Interpretation and reasoning: The Tribunal examined documentary materials - the ITBA portal entry indicating approval on 29.03.2018, the order-sheet entry and the manual letter dated 31.03.2018. The Tribunal inferred that the electronic approval on ITBA dated 29.03.2018 satisfied the statutory pre-condition even though manual communication followed later, because the Assessing Officer had access to the portal approval and recorded issuance of notice on that date. Ratio vs. Obiter: Ratio - where electronic/portal approval is evidenced to have been recorded and available to the Assessing Officer prior to issuance of the notice, the requirement of prior approval under section 151(1) is satisfied; Obiter - observations about the form of manual communication are ancillary. Conclusion: The reopening u/s 147/148 was valid; the contention that approval came after issuance of notice was rejected as without merit because electronic approval on ITBA preceded the notice. ISSUE-WISE DETAILED ANALYSIS - Issue 2: Sustainment of Addition u/s 69 Based on PBPT Statements and Evidence Legal framework: Section 69 treats unexplained investments as income where the assessee fails to account for source; statements recorded under PBPT Act may furnish material indicating beneficial ownership and source of payment; assessment must be based on credible evidence and application of human probabilities where appropriate. Precedent treatment: The Tribunal and lower authorities applied the standard of preponderance of probabilities (referring to established tests of human probability) to accept PBPT statements and seller/broker statements as corroborative evidence of beneficial ownership. Interpretation and reasoning: The Assessing Officer relied on statements recorded under PBPT Act: (i) broker's statement confirming cash payment by the assessee; (ii) benamidar's statement admitting signing registry on instruction and lack of means; and (iii) sellers' statements. The Assessing Officer found the assessee's denials uncorroborated and held the written submissions as afterthoughts. The CIT(A) affirmed, noting failure to produce documentary evidence and pointing to the assessee's initiation of filings under a dispute-settlement scheme as indicating acceptance of ownership facts. The Tribunal noted these materials supported the reason to believe and formation of addition but qualified that the PBPT adjudication later altered the characterization of beneficial ownership. Ratio vs. Obiter: Ratio - PBPT-recorded statements and seller/broker statements, when credible and un-retracted, can constitute sufficient material to form reason to believe and sustain addition u/s 69 where other evidence is absent; Obiter - inferences drawn from the assessee's initiation of settlement scheme (Vivad Se Vishwas) as an admission were considered but held not conclusive. Conclusion: The finding that the assessee was a beneficial owner and that unexplained investment existed had evidential basis; however, sustainability of the entire addition on the assessee alone required reassessment in light of subsequent PBPT adjudication holding multiple beneficial owners. ISSUE-WISE DETAILED ANALYSIS - Issue 3: Effect of PBPT Adjudication Holding Multiple Beneficial Owners and Pending Appeal Before ATPML Legal framework: PBPT Act adjudications determine benami nature and identity of benamidar/beneficial owner(s); income-tax consequences (additions u/s 69) must align with outcomes of PBPT authorities where those outcomes bear on beneficial ownership and source of investment; where multiple beneficial owners are identified, tax liability/allocation must reflect that reality. Precedent treatment: The Tribunal treated the adjudicating authority's order under PBPT as an intervening authoritative finding relevant to the foundational facts forming the reason to believe for reopening and assessment. The Tribunal recognized the pendency of appeal before the ATPML as a factor counseling caution in final allocation. Interpretation and reasoning: The Adjudicating Authority under PBPT held the property to be benami, identified the benamidar and held that there were multiple beneficial owners (including another corporate entity). Given that finding, the Tribunal reasoned it was inappropriate to sustain the entire addition solely in the hands of the assessee without apportionment. Because the PBPT order is being challenged before the ATPML, definitive allocation between beneficial owners is sub judice. The Tribunal therefore concluded that the correct course is to remit the matter to the Assessing Officer to re-examine the quantum of addition and allocate liability among beneficial owners in accordance with PBPT directions, affording the assessee reasonable opportunity of hearing. Ratio vs. Obiter: Ratio - where an authoritative PBPT adjudication identifies multiple beneficial owners, an assessing authority must re-adjudicate tax additions to reflect allocation among beneficial owners; remand for fresh adjudication is appropriate where allocation remains unresolved and appellate proceedings under PBPT are pending; Obiter - remarks that initiation of a tax settlement scheme application by the assessee cannot be conclusively treated as admission. Conclusion: The entire addition could not be sustained solely against the assessee; the matter was remitted to the Assessing Officer for fresh adjudication to determine and allocate tax effect among beneficial owners consistent with PBPT findings, with observance of due process and opportunity to be heard, while refraining from expressing a final view on benami characterization pending ATPML outcome. OVERALL CONCLUSION The Tribunal upheld the validity of the reopening (section 151(1) approval via ITBA portal preceding notice), accepted that initial AO/CIT(A) findings had evidential basis to make an addition under section 69, but set aside the order confirming the full addition against the assessee alone because a subsequent PBPT adjudication identified multiple beneficial owners; the Tribunal remitted the assessment to the Assessing Officer for fresh adjudication and proper allocation among beneficial owners in light of PBPT directions and pending appellate proceedings, directing that the assessee be given reasonable opportunity of hearing.