TaxTMI 
TaxTMI 
2025 (6) TMI 1394
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.... 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/Rjt/24 A.Y.2017-18, Ground No.1 in assessee's appeal in I....
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....ll 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 leading real estate builders of Rajkot and their key associates, on 24.08.2021. The four different groups were covered in the operati....
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.... 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 filed an Income tax return on 27-02-2023, declaring total income of Rs. 28,39,970/-. Subsequently, a notice u/s 143(2) of the Inco....
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....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 threshold of Rs. 50 lakhs. The said exercise is required to be carried out prior to or at the time of recording the satisfaction and the....
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.... 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 from the specified authority. However, as submitted above, there is no mention of asset or expenditure represented by the alleged-escaped inco....
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....essee 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. In this connection, it was submitted that the assessee has no relation/connection with Shri Girish Vanjani and therefore, any data / document fou....
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....eque 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 may be for anything but not for assessee. 16. However, assessing officer rejected the above contention of the assessee and observed that profit element embedded in the entire set of various kinds of unacc....
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.... 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 expenses incurred).Further, various judgments discussed by the assessing officer, in the assessment order endorse the same preposition that only profit embedded in the gross unaccounted receipts should be taxed ....
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....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 by the learned, CIT(A). 18. The ld CIT(A), on merit, noted that when data are found from the premises of accountant, such data cannot be ignored simply stating that it was found from third party or such accountant had filed aff....
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....spects, 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% in the case of residential units of the projects, which would cover various irregularities and incomplete transactions. Therefore, learned CIT (A) directed the assessing officer to re-compute addition of on-money profit @18% . 2....
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....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 148 of the Act, is as on 22.10.2021, which is wrong, therefore, the notice issued u/s.148 is defective. 25. The Ld. Counsel further contended that the procedure mentioned in section 147, 148(A) and 149 of the Act, were not followed by the assessing offic....
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....re 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 no corroborative evidence is available against the seized documents. Hence, seized documents are merely a dump documents and no addition should be made, based on these dump documents, for that ld. Counsel for the assessee, relied on several judgements of High Courts and....
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....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 the assessing officer, the reassessment proceedings should not be treated invalid. 31. On merits, the Ld.DR for the Revenue submitted that there was search in the R.K Group and the main family member Shri Sonwani has instructed the accountant to make the entry in the tele software and ....
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....ation 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 book, page no. 12, of assessee's paper book wherein approval of satisfaction note, in case of Mukesh M. Shah was given, which is reproduced below: It is a settled principle of law that correct income is to be assessed in the correct assessment year. However, in the above satisfaction note, there....
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....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 has to be done in that manner and in no other manner and following of other course is not permissible. Hence, we find that the notice under section 148 of the Act is itself defective and it was issued by the assessing officer without application of mind, therefore, entire reassessment proceedings shou....
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....w: *"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 assessment year (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than five years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment, as per the information with the Assessing Officer, amounts to or is lik....
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.... 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 threshold of Rs. 50 lakhs. The said exercise is required to be carried out prior to or at the time of recording the satisfaction and the reasons and while obtaining the requisite approvals of higher authorities. Obviously, this has not been done and hence the notice suffers from an inherent jurisdictional lack of power. The assessee submitted before the assessing officer that in the assessee's case, no 'asset' or 'expenditure&#....
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....er 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 reassessment proceedings is on a completely incorrect factual premises or belief and it was strongly objected by the assessee during the assessment proceedings. Therefore, on this ground also, initiation of proceeding u/s. 147 of the Act is incurably and defective. 43. We find that in para-3 of SCN(reproduced above), it is stated that the provision of Section 149(1)(b) has been followed by taking approval from the specified authority. However, as ....