TaxTMI 
TaxTMI 
2025 (6) TMI 1394
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....r. For the sake of convenience, the grounds as well as the facts narrated in ITA No.581/Rjt/2024 for assessment Year (A.Y.) 2016-17, have been taken into consideration for deciding the above appeals en masse. 3. Although, these appeals filed by the Assessee and Cross- Appeals, filed by the Revenue, contain multiple ground of appeals. However, at the time of hearing, we have carefully perused all the grounds raised by the Revenue as well as cross objections raised by the Assessee. Most of the grounds raised by the Revenue as well as Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of Revenue and the Assessee as well. With this background, we summarize and concise the grounds raised by the Revenue as well as Assessee, as follows: 1. Ground No.1. The Ld.CIT(A) erred in holding that proceedings u/s 148 culminating into order u/s 147 of the Act were valid and thus erred in dismissing assessee's grounds of appeal challenging the action u/s 148 of the Act and subsequent proceedings in law. [This is ground No.1 in assessee's appeal in ITA No.545....
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....rward unabsorbed depreciation. [This is ground No.6 in ITA N0.546/Rjt/2024 A.Y.2018-19] 4. Now we shall take above, summarised and concise ground of appeals, of assessee and revenue, as follows. 5. The summarised and concise ground No.1 is reproduced below for ready reference. "1. Ground No.1. The Ld.CIT(A) erred in holding that proceedings u/s 148 culminating into order u/s 147 of the Act were valid and thus erred in dismissing assessee's grounds of appeal challenging the action u/s 148 of the Act and subsequent proceedings in law. [This is ground No.1 in assessee's appeal in ITA No.545/Rjt/24 A.Y.2017-18, Ground No.1 in assessee's appeal in ITA No. 546/Rjt/2024 A.Y.2018-19, Ground No.1 in assessee's appeal ITA No.547/Rjt/2024 A.Y. 2019-20, Ground No.1 in assessee's appeal in ITA No.581/Rjt/2024 A.Y. 2016-17]" 6. Succinctly, the factual panorama of the case is that assessee before us is an Individual, and the Income-tax Return for assessment year(AY) 2016-17, has been filed on 14-10-2016, declaring total income of Rs. 28,39,970/-. A Search, Seizure and Survey action was carried out by the office of DDIT (Inv.), Unit-1, Rajkot in the case of lead....
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.... of these devices was taken and the same were seized. The backup contained key accounting files of the entire group in a systematic manner, like the accounts of (1) Sale of units (2) Cost of lands (3) Expenses incurred on various projects and other miscellaneous transactions made by R K Group members with various counter parties were maintained in accounting software known as MIRACLE. Details of sale of units maintained in various excel sheets were also found and seized from the premise of Shri GirishVanjani. From the seized miracle files, details of the flats purchased by Shri Sarvanand Sonwani and his family members in the project Silver Heights were found. As per these details, the Sonwani family members have paid in aggregate Rs. 22,81,00,000/- in cash to the Assessee, Shri Mukesh M Sheth (a proprietor of the firm namely "M/s. Silver Heights"). As details regarding unaccounted part of the aforementioned transactions pertaining to the assessee have been gathered from the seized material during the search operation, a notice under section 148 of the Act, has been issued on 23-02-2023, to the assessee. In response to the notice issued under section 148 of the Act, the assessee has....
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....he Act. It was submitted that provisions of section 149(1)(b) of the Act, empowers an authority to issue notice u/s 148 of the Act, if the alleged income is represented by any asset or expenditure. It is apparent on the face of the show-cause notice(SCN), however, assessing officer is not certain, as to whether in assessee's case, the alleged escaped income is represented by asset or expenditure, both these phrases have been issued in the show-cause notice (SCN). The reason and the belief as also the information leading to allegation of escapement of income must be clear and explicit at the initial stage itself prior to recording of the reasons and then issue of notice pursuant to the reasons. The SCN having used both the phrases at a time, it suffers from vagueness and demonstrates absence of initial judgment itself, as to whether the information represents assessee's asset or expenditure. As a result, the notice becomes bad in law and assessment order deserves to be quashed. The exercise of jurisdiction u/s the new sections 147 and 148 of the Act, is not meant to determine during reassessment, as to whether an item represents an asset or an expenditure or whether it exceeds the t....
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....with the assessee, much less the allegation of on money paid. In the show cause notice dated 13.03.2023, it is mentioned that the reopening proceedings are made as per clause (iv) of Explanation 2 to Section 148 of the Act, this, is in stark contradiction to the reasons mentioned in the very notice issued u/s. 148 dated 23.02.2023. In the said notice issued u/s 148 of the Act on 23.02.2023, it is mentioned that assessment is reopened on account of search initiated u/s 132 of the Act, in assessee's case or in the case of the person in respect of which assessee is assessable under the Act. This means that while reopening the proceedings, assessee had formed an opinion and a belief that, either search has been carried out in assessee's case or that assessee's representative or any other search person (In this case of R K Group). Thus, the very initiation of the reassessment proceedings is on a completely incorrect factual premises or belief and it is strongly objected to. Therefore, on this ground also, initiation of proceeding u/s. 147 of the Act is incurably and defective. In para-3 of SCN, it is stated that the provision of Section 149(1)(b) has been followed by taking approval fro....
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....seized documents / data with the prevailing jantri /market rate and hence, cognizance taken on such data is misplaced. 13. On merit, the assessee also submitted that the regular assessment proceedings for assessment years, 2017-18 and 2018-19 have been completed u/s 143(3) of the Act and the jurisdictional assessing officers after thorough verification of the books of account and relevant supporting documents have accepted the book results. Also, statutory audit by the officers of service-tax department have also been undertaken for the period April 2013 to March 2017, wherein, books of account of the assessee have been accepted. Therefore, proposal to reject book results by invoking the provisions of section 145(3) of the Act and to estimate the profit on the alleged unaccounted receipts solely on the basis of third party data / documents would be completely unjustified. 14. On merit, the assessee also submitted before the assessing officer that the allegation of receipt of unaccounted cash is based on purported accounts statements, which are stated to have been recovered from the digital data seized from the possession of one Shri Girish Vanjani, an accountant of RK Group. ....
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.... written document executed by assessee in their names, (iv) There is no noting of any cheque amount paid to assessee; hence, there cannot be a corelation that both cheque and cash were paid to assessee for same purpose and by the same person. (v) There is no specific admission or surrender by RK Group in assessee's name; and in absence of admission of payment, a corresponding receipt by a receiver does not take place. (vi) Even if there is a payer, who can be inferred (though there is none named on the data), a receiver cannot be inferred as the seller of the apartment; the so called payments could be for other purposes of the apartment at best but the seller does not become the beneficiary of the amounts stated thereon. (vii) On the face of the seized data relied upon, there is no mention of actual transaction with assessee, hence such data does not implicate assessee, the relates to or 'pertains to cannot be viewed in isolation, it must have a visible, direct nexus with me on the face of it, which is missing here and hence cannot lead to undisclosed income on assessee's part. (viii) The amounts and dates noted on the seized data ma....
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....tion of an appropriate rate of profit. After considering all the above aspects, the reasonable rates of profits have been arrived in a range of 35% to 45% for different category of projects i.e. Commercial and Residential respectively. The assessee relates to the same group of searched people / entities which were covered in a same search operation. Therefore, applying the rule of similarity the same rates of profits can be adopted across all the projects the data of which has been recovered from the same search operation. Moreover, in respect of the project under consideration, the material gathered during search operation indicated on-money receipts only. Under these circumstances, it would not be fair if the same benchmark rates adopted for other projects where receipts and payment both kinds of transactions are available are also applied to the project where only on-money receipts are available. At the same time, considering that the assessee is also in the same line of business with the same group of persons, the possibility of having incurred unaccounted expenses cannot be ruled out completely (No data is recovered during search does not necessarily mean no unaccounted expens....
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....served that in the new regime/scheme of search assessment, the proceedings for search assessment of search party as well as third party are made u/s.147 of the Act, unlike in the earlier/old scheme of search assessment wherein the search assessment of searched party was made u/s.153A of the Act, whereas the assessment of third party was made u/s.153C of the Act. Since in the present reassessment proceedings both of the searched party, as well as third party assessments are covered, and it was observed that the initiation of reassessment proceedings in the present case is valid in law. While passing the assessment order, the assessing officer has also observed that search was carried at the assessee's premises on 24-08-2021 and pursuant to the search, notice under Section 148 of the Act was issued in case of assessee. As search was carried out in the case of assessee after 01-04-2021 wherein provisions of Section 148 were amended and provides deemed satisfaction for three assessment years prior to the date of search and even on this ground, the assessing officer has validly issued notice under Section 148 of the Act. Therefore, this argument raised by the assessee was rejected b....
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....e addition, the assessing officer has made addition of profit on on-money cash receipts @50% on the on-money cash receipts as per the seized material. The assessing officer himself has also observed that after considering all the aspects, the reasonable rates of profits have been arrived in a range of 35% to 45% for different category of projects i.e. commercial and Residential respectively. It was observed that the assessing officer even observed the net surplus in the assessee group concern was 35% to 45%, but has made addition of unaccounted income by estimating profit @50% on unaccounted receipt which clearly suggests that the assessing officer has not adopted any scientific basis for working out unaccounted income in the hands of the assessee. It was also observed from the assessee's submission by ld CIT(A) that the assessee had itself shown Gross profit(GP) for the project @ 15.38% in the different assessment years wherein the addition of on-money was made by the assessing officer and requested to estimate profit @6% of on-money receipt. In view of the above facts and circumstances of the present case, the ld CIT(A) held that it would be appropriate to estimate the profit @18....
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....3. The Ld.Counsel also took us through the paper book at page no.17, wherein notice u/s.148 of the Act, issued by the assessing officer, dated 23.02.2023, is placed, wherein it is stated as follows: "I have information that a search was initiated under section 132 of the Act in your case or in the case of person in respect of which you are the assessable under the Act on the date 22/10/2021. The notice is being issued after obtaining the prior approval of the DGIT(INVESTIGATION) AHMEDABAD accorded on date 07/02/2023, vide reference no.DGIT(Inv.)/Ahd/148-Approval/MMS/2022-23/3101......." 24. The Ld.Counsel for the assessee referring to the above notice u/s.148 of the Act, stated that in the notice u/s.148 of the Act, it is mentioned that "search was initiated u/s.132 of the Act in your Case", however, real fact is that search was not initiated in assessee's case. In fact, a search and seizure action was carried out by the office of DDIT (Investigation), Rajkot, in the case of leading real estate builders of Rajkot and their associates on 24.08. 2021. Therefore, the actual date of search was 24.08.2021, whereas the date is mentioned in the notice under section 14....
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....at on prima-facie verification of the documents and digital data seized including rough projections / estimates, accounting data under various heads in Miracle software, day-books etc., it appears that such documents/ data are not correct and complete, but there are apparent errors, contradictions, overlapping, duplications, incompleteness in such documents /data. 14. That name and nomenclature of the different ledger accounts, group etc. in the digital data cannot be matched or reconciled with the actual name and the figures under various transactions are also not comparable, correlated with actual transaction that has taken place. Therefore, there are all possibility that merely on the basis of face-value of the transactions some presumption or guess work may be made, however, such presumption or estimate would lead to unnecessary hardship to the assessee and third parties as the intrinsic nature of the transaction remained unidentified. The digital data found in miracle software is not genuine and not correct, therefore by this affidavit I clarify that no reliance should be made on the digital data which has no authenticity." 27. Therefore, the Ld.Counsel stated that....
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....han the stamp duty valuation authority, therefore, higher amount has been shown suo-moto, therefore, the percentage of profit is very higher side, which should be reduced to a reasonable extent. 30. On the other hand, the Ld.DR for the Revenue submitted that the letter of approval for issue of notice u/s.148 of the Act, which is written by DGIT (Investigation) to the PCIT -(Central Circle), contains the term "Assessment Year" which is placed at paper book page no.15. The letter address by the ITO on behalf of the PCIT, dated 07.02.2023 also contains the term "Assessment Year" however, the primary document do not contain the term "Assessment Year", therefore, it does not invalidate the re-assessment proceedings. The Ld.DR also submitted that the procedure followed in issuing notice u/s.148 of the Act and the satisfaction recorded by the assessing officer are valid in the eye of law. The Ld.DR also submitted that as per the provisions of section 149(1)(b) of the Act, the total asset can be computed based on the cash on hand and based on "on money" mentioned in the seized documents, however, assessing officer forgot to state in the notice, and for this small mistake committed by th....
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....iven by the higher authorities. That is, how much amount has escaped assessment should be necessarily stated in the reasons recorded by the assessing officer and notice under section 148 of the Act and also in the approval note of the higher authorities, therefore, it is a complete non-application of mind by the lower authorities as well as higher authorities of the Income Tax Department. 35. We have given our thoughtful consideration to rival contention. We have perused case file as well as paper books furnished by assessee with the able assistance of Shri D.M Rindani, representing the assessee and Shri Sanjay Punglia, Learned CIT(DR), representing the Revenue. We find that one key issue arises in summarised and concise ground no.1, for our apt adjudication in the instant lis, which is, whether the Ld.CIT(A) erred in holding that proceedings u/s 148 of the Act, culminating into order u/s 147 of the Act, were valid? and whether the ld CIT(A) has erred in dismissing assessee's grounds of appeal challenging the action u/s 148 of the Act. Let us, first examine the approval of satisfaction note given by the Principal Commissioner of Income Tax. (ld.PCIT), which is placed at paper bo....
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....t paper book page no. 17 of the assessee's paper book, and the same is reproduced below: We have gone through above notice u/s.148 of the Act and in the above notice, it is stated that the search was initiated in the assessee's case, however, in fact, no search was initiated in the assessee's case. The search was initiated u/s. 132 of the Act, in case of other assessees. The above notice also mentioned that search was initiated on 22.10.2021, in case of other assessees, which is also wrongly stated in the notice under section 148 of the Act. The actual date of search is as on 24.08.2021, whereas in the notice it is mentioned as 22.10.2021, which shows, complete non-application of mind by the assessing officer. Hence, it is not a valid notice in the eye of law. Law is well settled that when the statute requires to do certain thing in certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim 'Expressiouniusest exclusion alteris', meaning there by that if a statute provides for a thing to be done in a particular manner, then it....
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....re. Therefore, there is clear contradiction between the allegation raised on the basis of so-called documents/data seized from the premises of third party and averment made in justification of compliance with the provision of Section 149(1)(b) of the Act. For better understanding, the provisions of Section 149(1)(b) of the Act, are reproduced below: *"Time limit for notices under sections 148 and 148A. 149. (1) No notice under section 148 shall be issued for the relevant assessment year- (a) if three years and three months have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years and three months, but not more than five years and three months, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence related to any asset or expenditure or transaction or entries which show that the income chargeable to tax, which has escaped assessment, amounts to or is likely to amount to fifty lakh rupees or more. (2) No notice to show cause under section 148A shall be issued for the relevant asse....
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....ted by ld Counsel that provisions of section 149(1)(b) of the Act, empowers an authority to issue notice u/s 148 of the Act, if the alleged income is represented by any asset or expenditure. It is apparent on the face of the show-cause notice (in brief "SCN"), that assessing officer is not certain, as to whether in assessee's case, the alleged escaped income is represented by asset or expenditure, both these phrases have been issued in the SCN. The reason and the belief as also the information leading to allegation of escapement of income must be clear and explicit at the initial stage itself prior to recording of the reasons and then issue of notice pursuant to the reasons. The show cause notice (SCN) having used both the phrases at a time, it suffers from vagueness and demonstrates absence of initial judgment itself, as to whether the information represents assessee's asset or expenditure. As a result, the notice becomes bad in law and assessment order deserves to be quashed. The exercise of jurisdiction u/s the new sections 147 and 148 of the Act, is not meant to determine during reassessment, as to whether an item represents an asset or an expenditure or whether it exceeds the ....
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....ng with the name of the assessee, it cannot be presumed that such transactions are carried out with the assessee, much less the allegation of 'on money' paid. In this regard, it is pertinent to reproduce here, show cause notice issued by the assessing officer on 13.03.2023, during the assessment proceedings, which is as follows: 42. In the above show cause notice dated 13.03.2023, it is mentioned that the reopening proceedings are made as per clause (iv) of Explanation 2 to Section 148 of the Act, this, is in stark contradiction to the reasons mentioned in the very notice issued u/s. 148 of the Act, dated 23.02.2023. In the said notice issued u/s 148 of the Act, on 23.02.2023, it is mentioned that assessment is reopened "on account of search initiated u/s 132 of the Act, in your case or in the case of the person in respect of which you are assessable under the Act"(vide para 37 of this order). This means that while reopening the proceedings, assessing officer had formed an opinion and a belief that, either search has been carried out in assessee's case or that assessee's representative of any other search person (In this case of R K Group). Thus, the very initiation of the reass....
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.... and 724), are also dismissed. 46. In the combined result, all assessee's appeals (In ITA Nos.ITA No.545/Rjt/24, ITA No. 546/Rjt/2024,ITA No.547/Rjt/2024, and ITA No.581/Rjt/2024), are allowed, whereas revenue`s appeals (In ITA Nos. 723 and 724/RJT/2024), are dismissed. Order is pronounced on 10/06/2025 in the Open Court. ============= Document 1 OFFICE OF THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRALE, Boaes 86.313, 3º Hleor, hayeka Ellavan Ph. 079-37546282, Fax: 27561003 To . The Addi, Commissioner of Income Tax Central Range, Rajkot Sult: Approval of Satisfaction Note in the case OF Man M Bet (PAN AFUPS1512C) - regarding. Rat Hà n hin Auldi CIT/CRIngISNie Noi/2022-23 cuied 12.12.2022. Kindly refer to the above 2. In this connection, vide etjove referred letter proposal submitted by OCIT, CC-2, Rajkot in the case of Mukesh M Sheth for approval of satisfaction note was forwarded by your office. 1 am directed to convey the approval of Satisfaction |Note In tre amoresald case by the Pr.CIT(Central), Ahmedabad as per the Explanation -2(iv) to Section 148 of the Income Tax Ast. (Copy enclosed) Yours folkfully (Sanjay Kumar Yadav) ITO (Tech) ....