Krishna Deep Builders Vs ITO (ITAT Mumbai)
The Mumbai Bench of the Income Tax Appellate Tribunal decided cross appeals filed by the assessee and the Revenue against the order of the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2017-18. The assessee challenged the reopening of assessment, the addition of ₹32,78,500 under Section 56(2)(vii)(b) on account of the difference between the stamp duty value and the actual sale consideration of an immovable property, and contended that the property was situated in a no-development zone without municipal road access. The Revenue challenged the deletion of an addition of ₹87,93,925 made under Section 69 relating to the source of investment in the property.
The assessee had originally filed its return declaring nil income. The assessment was reopened through notice under Section 148 following an order under Section 148A(d) on the ground that the assessee had purchased an immovable property for ₹80 lakh whereas its stamp duty value was alleged to be ₹1,12,78,500, resulting in an alleged escaped income of ₹32,78,500. The Assessing Officer completed the reassessment by making additions of ₹32,78,500 under Section 56(2)(vii)(b) and ₹87,93,925 under Section 69 read with Section 115BBE. The CIT(A) upheld the addition under Section 56(2)(vii)(b) while deleting the addition under Section 69 after accepting the documentary evidence regarding the source of investment.
Before the Tribunal, the assessee challenged the validity of the reassessment proceedings. It was contended that the notice under Sections 148 and 148A had been issued more than three years after the end of the relevant assessment year solely on the allegation of escaped income of ₹32,78,500, which was below the threshold of ₹50 lakh prescribed under Section 149(1)(b). The Revenue argued that since the final reassessment resulted in aggregate additions exceeding ₹50 lakh, the reassessment was valid.
The Tribunal examined Section 149(1)(b) and observed that where more than three years but not more than ten years have elapsed from the end of the relevant assessment year, a notice under Section 148 can be issued only if the Assessing Officer possesses material revealing escaped income of ₹50 lakh or more. It noted that the notice issued to the assessee was based solely on the alleged escaped income of ₹32,78,500 relating to the difference between the stamp duty value and the sale consideration. The Tribunal held that the statutory requirement applies at the stage of issuance of notice and not with reference to the additions ultimately made during reassessment. Relying on the judgment of the Naresh Balchandrarao Shinde vs. ITO (Bombay High Court), [2023] 146 taxmann.com 66 (Bombay), the Tribunal held that the reassessment notice dated 15.06.2021 and the order passed under Section 148A(d) dated 30.07.2022 were void ab initio and quashed them. Since the reassessment itself was held invalid, the Tribunal did not examine the merits of the additions, rendering the remaining grounds academic.
Accordingly, the assessee’s appeal was allowed and the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These are cross appeals filed by the revenue and the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) Delhi (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act’), pertaining to the Assessment Year (‘A.Y.’ for short) 2017-18.
2. The assessee has challenged the addition of Rs. 32,78,500/- u/s. 56(2)(vi)(b) of the Act being the difference between the stamp duty value and actual sale consideration, where it is alleged that the ld. CIT(A) has failed to consider the objection of the assessee that the property was in ‘no development zone’ and with no access to municipal roads and therefore the valuation as per the ready reckoner rate ought not be applied. The assessee has also challenged reopening of the assessment u/s. 144 of the Act. The revenue has challenged the deletion of addition of Rs. 87,93,925/- being the unexplained investment u/s. 69 of the Act in respect of the purchase of immovable property, where it is alleged that the assessee is said to have not explained the source of the said investment.
3. The brief facts are that the assessee is a firm and had filed its return of income dated 03.07.2017, declaring total income at Rs. Nil. The assessee’s case was reopened vide notice u/s. 148 dated 15.06.2021, in consequence to order u/s. 148A(d) of the Act dated 30.07.2022, for the reason that the assessee has entered into transaction for purchase of immovable property amounting to Rs. 80 lacs which is lesser than the stamp value of the property alleged to be Rs. 1,12,78,500/- as per Section 56(2) of the Act. The assessee filed its return of income in response to notice u/s. 148, declaring total income at Rs. Nil. The learned Assessing Officer (‘ld. AO’ for short) then passed the assessment order u/s. 147 r.w. 144B of the Act dated 12.05.2023, determining total income at Rs. 1,20,72,425/- after making an addition of Rs. 32,78,500/- u/s. 56(2)(vii)(b) of the Act, being the difference in the stamp duty value and the sale consideration and Rs. 87,93,925/- towards the addition on account of unexplained investment u/s. 69 r.w.s. 115BBE of the Act.
4. Aggrieved the assessee was in appeal before the first appellate authority, challenging the impugned addition along with other grounds of appeal. The ld. CIT(A) vide order dated 08.10.2024 had partly allowed the appeal filed by the assessee, thereby upholding the addition made u/s. 56(2)(vii)(b) of the Act, on the ground that the assessee has failed to substantiate the reason for the difference in the stamp duty value and the sale consideration and deleting the addition made u/s. 69A of the Act, on the ground that the assessee has filed the relevant documentary evidence to substantiate the genuineness and source of the investment which was not explained before the ld. AO due to paucity of time.
5. Aggrieved by the order of the ld. CIT(A), both the assessee as well as revenue are in cross appeals before us.
6. The learned Authorised Representative (‘ld. AR’ for short) for the assessee commenced the arguments on the legal grounds challenging the reopening of the assessment to be invalid in the eyes of law on various grounds. Before getting into the merits of the case, we deem it fit to decide the legal grounds raised by the assessee. The ld. AR for the assessee contended that the notice u/s. 148A(d) of the Act was issued to the assessee pertaining to the information that the assessee has entered into a transaction for purchase of property amounting to Rs. 80 lacs, where the stamp value of the said property was Rs. 1,12,78,500/-, thereby forming reasonable belief that income amounting to Rs. 32,78,500/- has escaped assessment. The ld. AR further contended that no notice u/s. 148 shall be issued beyond 3 years from the end of the relevant assessment year, unless the ld. AO is in possession of materials which elucidate that income amounting to Rs. 50 lac or more has escaped assessment as per Section 149(1)(b) of the Act. The ld. AR argued that in the present case, notice u/s. 148 and 148A has been issued only for income which has escaped assessment amounting to Rs. 32,78,500/- which is much below the threshold limit specified by the Act. The ld. AR stated that for these reasons the reassessment initiated in the hands of the assessee is null and void and prayed that the reassessment proceeding be quashed. The ld. AR relied on the decision of Hon’ble Jurisdictional High Court of Bombay in the case of Naresh Balchandrarao Shinde vs. ITO, dated 26.09.2022, [2023] 146 taxmann.com 66 (Bombay).
7. The learned Departmental Representative (‘ld. DR’ for short) on the other hand controverted the said fact and stated that though notice for reassessment was issued for the issue of difference in stamp duty value of Rs. 32,78,500/-, the ld. AO proceeded to make an addition on the unexplained investment u/s. 69A of the Act amounting to Rs. 87,93,925/- both aggregating to Rs. 1,20,72,425/- and stated that the said amount is much above the threshold limit specified in the Act. The ld. DR relied on the order of the lower authority.
8. We have heard the rival submissions and perused the materials available on record. The moot issue to be decided prima facie in this case is whether the reassessment proceeding initiated by the ld. AO is valid. Upon considering the rival contentions, it is observed that the ld. AO has reopened the assessee’s case based on the information received from SRO office that the assessee has entered into a transaction dated 04.04.2016 for purchase of a property for a sale consideration of Rs. 80 lacs which according to the ld. AO was to be reckoned as Rs. 1,12,78,500/- to be the stamp duty value, thereby adding the difference amount of Rs. 32,78,500/-. The ld. AR brought our attention to the impugned notice dated 25.05.2022 along with annexure A, wherein it was observed that this was the sole reason for reopening of the assessment. Pertinently notice has been issued beyond 3 years but not more than 10 years from the end of the relevant assessment year which would squarely fall under the provision of Section 149(1)(b) of the Act, which provision is cited hereinunder for ease of reference:
“149. (1) No notice under section 148 shall be issued for the relevant assessment year,—
[(b) if three years, but not more than ten years, 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 which reveal that the income chargeable to tax, represented in the form of—
(i) an asset;
(ii) expenditure in respect of a transaction or in relation to an event or occasion; or
(iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more:]”
9. From the above provisions, it can be seen that condition for issuance of notice u/s. 148 of the Act, in a case which is 3 years but not more than 10 years from the end of the relevant assessment year has elapsed can be made by the ld. AO, when he is in possession of books of accounts or other documents or evidence which disclose that the income chargeable to tax either in the form of an asset, an expenditure in respect of a transaction or in relation to an event or occasion or any entry in the books of account is found to have escaped assessment which amounts to Rs. 50 lacs or more. Without doubt the provisions are framed in such a manner that the ld. AO can reopen/reassess a case beyond 3 years from the end of the A.Y. only when the income which as escaped assessment is Rs. 50 lacs or more. The provision is clearly worded without any ambiguity per se, where the threshold limit of income which has escaped assessment cannot be lesser than Rs. 50 lacs as contemplated u/s. 149(1) of the Act. It is also evident that the said provision speaks of issuance of notice u/s. 148 and not the finality of the amount determined after assessment as contended by the ld. DR. There is no iota of doubt that the criteria for issuance of notice u/s. 148 ought to have been income escaping assessment amounting to Rs. 50 lacs or more in cases, where 3 years but not 10 years have elapsed from the end of the impugned year.
10. We would also place our reliance on the decision cited by the ld. AR, where the Hon’ble Jurisdictional High Court has categorically held that the AO cannot issue notice u/s. 148 of the Act, where the income which has escaped assessment is less than Rs. 50 lacs as contemplated u/s. 149(1)(b) of the Act. Further, it has been held that only when the amount in question which has escaped assessment is Rs. 50 lacs or more then the AO will assume jurisdiction to issue notice to reopen the assessment where 3 years but less than 10 years have lapsed from the end of the assessment year which was to be reopened. It is also to be noted that in the said case, the Hon’ble High Court has excluded certain amount for which notice was issued stating that the same was not to be taxed in the hands of the assessee and on considering the remaining amount which was alleged to have escaped assessment was considered for the purpose of Section 149(1)(b) of the Act. In the present case in hand, the assessee was in a better footing where the notice issued by the ld. AO u/s. 148 of the Act dated 15.06.2021, and the subsequent order dated 30.07.2022, passed u/s. 148A(d) of the Act was only for income which has escaped assessment amounting to Rs. 32,78,500/-. Therefore, the assessee’s case would squarely be covered by the decision of the Hon’ble Jurisdictional High Court. By respectfully following the same, we are inclined to hold that the notice u/s. 148, dated 15.06.2021, and the order passed u/s. 148A(d) of the Act, 30.07.2022 are void ab initio and are therefore quashed.
11. As we have decided this issue on the legal ground thereby holding the reassessment notice to be invalid and the consequential assessment order is also held to be invalid in the eyes of law. We have restricted ourselves to the legal issue and have not gone into the merits of the case and hence, the other grounds of appeal are rendered academic.
12. In the result, the appeal filed by the assessee is allowed and the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 17.04.2025
