AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2024 (7) TMI 570
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....have been taken into consideration for deciding the above appeals en masse. 3. The grounds of appeal raised by the assessee, in lead case in ITA No. 664/SRT/2023 are as follows: "1. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer's reopening of assessment u/s 147 and issue of notice u/s 148 for AY.2010-11. 2. Ld. CIT(A), NFAC, Delhi has erred in law and on fact appreciating the fact that there was neither any business of Hari Sai Sarnam Project nor any sale of flat-shop made in the year under appeal. 3. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer's addition of Rs. 20,00,000/- without considering the settle position of law that profit on - "On Money Receipts" is to be taxed in the year of completion of project i.e. in the year in which normal profit, as per books, is taxed. 4. Ld. CIT(A), NFAC, Delhi has erred in law and on fact to upheld assessing officer's Addition of Rs. 17,75,000/- on account of unsecured loan received from another company i.e. Jahanvi Home Developers and Finance Ltd, overlooking the fact that the appellant has discharged its onus in terms of section 68 of IT Act." 4. The grounds....
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.... u/s 148 of the Act, was passed by the assessing officer, on 23.02.2016. In this case survey u/s 133A of the IT Act dated 24.03.2014, was carried out at M/s Vaibhav Reality Developers Ltd, at 13/1, Arunoday Society, Alkapuri, Vadodara and Project site office at "Hari Sai Sharnam", Near Kala Darshan Char Rasta, Waghodia Road, Vadodara. During the course of survey proceedings, various incriminating documents were found and impounded which were inventoried, as Annexure A-l to A-5. Further, during course of survey proceedings, laptop of Smt. Parul J. Shah, Director of the company, was examined, in which customer wise details of payment in respect of project "Hari Sai Sharnam" of M/s Vaibhav Reality Developers Ltd was found. The Prints out of customer- wise details were taken and same was inventorised and impounded as A-l containing page Nos. 1 to 189. The details consist the name of party, block, flat No, type, floor, value and below that details of amount received various dates through cheque or cash were written. Smt Parul J. Shah was confronted with the Annexure A-l and was asked to explain whether payment received in cheque and cash has been shown in the books of account or not? Sh....
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.... by way of cheque or by way of cash will partake the character of taxable income when it is clear from record that the assessee did not explain it through the books of accounts and/or did not offer it in the return of income filed after issuance of notice u/s 148 of the Act. Therefore, ld CIT(A) confirmed the addition made by the assessing officer at Rs. 80,00,000/-. The ld CIT(A) also noted that financial position of Jahanvi Home Developers and finance Ltd shows that the debtor is not having any income for the past five yea Rs. There is no credit worthiness of the debtor who advanced the credit to the appellant. Since, there is no credit worthiness of the debtor as per income tax return filed the unsecured loan of Rs. 17,75,000/- is to be treated as not genuine. The ld. CIT(A) noted that the appellant did not file any document with respect to the aforesaid unsecured loans before assessing officer. Although, income tax return of the lender has been filed by the assessee but the lender does not have credit worthiness to offer such a loan to the appellant. The assessee could not furnish details and evidences to establish genuineness of the unsecured loan relating to the aforesaid par....
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....de solely based on statement taken during the survey proceedings. Thus, it reflects an arbitrary exercise of the power, by the Income Tax Authorities, conferred under section 147 of the Act. In the reasons supplied to the assessee, there is no whisper, what to speak of any allegation, that there has been an escapement of income chargeable to tax. Even at the assessment stage, the assessee has raised the contention that the Assessing Officer was not having any material information to form "a reason to believe" that there was an escapement of income, however, the Assessing Officer did not accept the contention of the assessee. Therefore, Ld. Counsel stated that the reason recorded by the Assessing Officer is bad in law, hence, reassessment proceedings may be quashed. 13. On merits, Shri Upadhyay, Learned Counsel, argued that no addition should be made in the hands of the assessee, merely based on the statement taken during survey, because, the statement so taken was not supported by any corroborative evidences. Besides, Ld. CIT(A), did not appreciate the facts that there was neither any business of 'Hari Sai Sarnam Project' nor any sale of flat-shop made in the year under appeal. Th....
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....ed as Annexure A-1 to A-5. During the course of survey proceedings, laptop of Smt. Parul J. Shah, Director of the company was examined, in which customer wise details of payment in respect of Flats of project "Hari Sai Sharnam" of M/s. Vaibhav Realty Development Ltd was found. Print outs of customer wise details were taken and same was inventorised and impounded as Annexure A-1 containing Page No. 1 to 189. The details consist of the name of party, block, flat no, type, floor, value and below that details of amount received on various dates through cheque or cash are written. Smt. Parul J. Shah was confronted with the Annexure A-1 and was asked to explain whether payment received in cheque and cash has been shown in the books of account or not? She replied and confirmed in answer to question No. 11 of the statement recorded u/s. 131 of the Act dated 24.03.2014 that this print outs are taken from my laptop and details are customer wise ledger account of our project "Hari Sai Sarnam". Further she stated that this papers contained details of cash and cheque received from the customers during the F.Y. 2009-10 to 2013-14. Further she admitted that the amount received through cheque have....
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....the amount received through cheque have been accounted for in the regular books of account, however cash received have not been counted for in regular books of accounted. As such the cash receipt received during the F.Y.2010-11 comes to Rs. 20,00,000/- and the same is admitted as unaccounted income of M/s. Vaibhav Realty Development Ltd by Smt. Parul J. Shah, Director of the company, in her statement dated 24.03.2014 recorded u/s. 131 of I.T. Act. In view of the above facts, I have reasons to believe that the income of the assessee to the extent of Rs. 20,00,000/- has escaped within the meaning of section 147 of the Act. Thus, it is a fit case for issue of notice u/s. 148 of the I.T. act." 18. We note that survey was conducted u/s 133A of the Act on 24.03.2014 and based on the subsequent survey, the Assessing Officer has recorded the reasons for AYs.2010-11 and AY.2011-12. During the survey proceedings, Director, Smt Parul J. Shah replied to question no.11 of the statement recorded under section 131 of the Act dated 24.03.2014 that print out taken from her laptop where the details of customers in respect of "Hari Sai Sharnam". Smt Parul J. Shah stated that the print out from h....
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....conducted by the Assessing Officer, during the survey proceeding or post-survey proceedings that the assessee-company has received cash from the custome Rs. Therefore, based on the general statement, the addition should not be made especially when it is not supported by any corroborative evidences. 21. We note that during the survey proceedings, the statement taken by the Income Tax Authority, on oath does not have any evidentiary value, however if the statement is supported by any tangible material then only the Revenue Authority can make the addition in the hands of the assessee, therefore we note that there is no tangible material and hence the reassessment proceedings fails, for that we rely on the circular of CBDT Circular No. F.No.286/98/2013/IT ( Inv.-II), dated 18.12.2014, wherein it is stated that based on the statement taken during survey, no addition should be made. Therefore, addition, if any, may be made, based on the evidence or tangible material. 22. We also note that reasons recorded by the assessing officer, on the basis of statement taken during the survey, is not sustainable in law, as the statement on oath taken during the survey is not supported by any tangib....
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....he sales turnover of the firm. On perusal of the Return of Income filed for the Asst. year 2014-15 it is observed that the net profit on the sales turnover as admitted by the assessee is only 0.55 on the sales turnover of Rs. 2,27,14,446/- whereas in the sworn statement recorded during the course of survey the partner of the firm has admitted for the net profit margin @18.75%. In the circumstances, I have reason to believe that the income chargeable to tax has escaped assessment for the Asst. Year 2014-15 within the meaning of section 147 of the Income Tax Act, 1961 and the case is reopened for assessment for the Asst year 2014-15 with the prior approval of the appropriate Authority. 9. The reasons are identical for all three yea Rs. The Supreme Court, in the case of GKN Driveshafts (supra) has outlined the procedure to be followed by the assessee as well as the department in the matter of re- assessments and in line with the same, preliminary objections to the notices under Section 148 were filed by the petitioner on 09.07.2018. The broad basis on which the notice was objected to was that (i) it was bereft of jurisdiction insofar as no approval had been obtained from the Joint ....
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.... and as such the allegation that the proceedings were without jurisdiction was incorrect. There is really no contest as far as this point is concerned and I thus, reject the contention that the proceedings are without jurisdiction on the ground of lack of sanction. http://www.judis.nic.in 13. As far as the statement of Mr.Janakiraman is concerned, the Revenue contends that Mr.Janakiraman was well versed in English and in fact, the income tax returns filed by the firm are signed only by him. Thus, they would brush away the argument that the statements were recorded without knowledge of Mr.Janakiraman of the contents. According to the revenue, the retraction of the statement was an afterthought and the contents of the statement make it very apparent that there was significant suppression of income by the petitioner. When confronted, the partner of the petitioner firm had rightly computed the gross profit on the undisclosed income and undertaken to pay advance on the same. This, according to the revenue, is sufficient to establish the necessity as well as validity of the proceedings for re-opening of the assessments. 14. The issue that I am called upon to decide is whether a not....
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....ssessments and re-assessment of income in cases where the Assessing Officer has reason to believe that income has escaped assessment. It is trite to state that the reasons recorded by the Assessing Officer should be based on tangible materials that have come to his notice/are in his possession. This aspect of the matter has been long settled by a series of judgment of the Supreme court as well as the High Courts commencing from ITO v. Lakhmani Mewal Das [(1976) 103 ITR 437] to the judgment of the Supreme Court in the case of CIT, Delhi Vs. Kelvinator ltd. where the Bench states as follows: '5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained, viz., that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefor....
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.... is not the same. The provisions of Section 133A(3) sets out the limits of power endowed upon an Income Tax Authority carrying out survey action as follows: Power of Survey... 133A-....(3) An income-tax authority acting under this section may,- (i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom, (ii) impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him: Provided that such income-tax authority shall http://www.judis.nic.in not- (a) impound any books of account or other documents except after recording his reasons for so doing; or 19[(b) retain in his custody any such books of account or other documents for a period exceeding ten days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or Director General therefor, as the case may be,]] (ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him, (iii) record the statement of any person which may be useful for, or relevant to, any proceeding under....
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....onclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973]9 1 ITR 18(SC) ; (ii) In contradistinction to the power under Section 133A, Section 132(4) of the Income Tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act. On the other hand, whatever statement is recorded under Section 133A of the Income Tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income Tax [2003] 263 ITR 101 (Ker); (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income Tax Act, 1961, would include the materials ....
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.... her (Director) and as per her statement, the amount appearing in the laptop are not recorded in the books of accounts. The survey team of the Income Tax department did not find any corroborative evidence or any tangible material that cash appearing in the laptop was belongs to the assessee-company, and assessee-company had actually received the cash, in fact, during the assessment proceedings, the director has denied, having received such cash. Therefore, reasons recorded by the assessing officer fails. Therefore, in the light of the aforesaid judicial precedents, we note that to initiate reopening of the assessment, the assessing officer must have 'reason to believe' that income chargeable to tax has escaped assessment. Such reason to believe must be based on some material coming to the possession of the Assessing Officer which may trigger reason to suspect. It must be kept in mind that the "reason to believe" must have a rational connection with or relevant bearing on the formation of the belief, i.e, there must be the direct nexus or link between the material and the formation of such belief. Since in the instant case, the issues/ cheque amount, for which the Assessing Offi....