A simple shift in viewpoint cannot justify reconsidering the assessment
Fact and issue of the case
The Petitioner assessee challenges the notice under Section 148 of the Income Tax Act, 1961 (“the Act”) dated 30th March, 2021, whereby seeking to reopen the assessment year 2015-16. The reasons for reopening as communicated to the Petitioner was an advance payment of Rs.17,76,08,505/- made to M/s Nancy Builders and Developers Pvt. Ltd., which according to the Assessing Offcer (A.O.), remain unexplained and, therefore, it was alleged that the Petitioner had failed to disclose fully and truly all material facts necessary for the reassessment.
Reasons as communicated to the Petitioner, briefy stated are as under:
Brief details of the information collected/received by the AO:
On the basis of material available on record it is seen that the assessee has disclosed payment of advance of Rs. 17,76,08,505/- to M/s Nancy Builders and Developers Pvt Ltd. The assessee had paid the said amount for acquiring development rights in a property which has been acquired by them from one M/s Goel Ganga Developers India Pvt Ltd. A MOU (Memorandum of Understanding) between Goel Ganga Developers Private Limited and Nancy Builders and Developers Private Limited was entered into on 09/09/2011. Further it is noticed that the assessee entered into a MOU on 05/04/2012 with M/s Nancy Builders and Developers to acquire the development rights acquired by them from M/s Goel Ganga Developers Private Limited.
Considering the above facts of the case, it is established that MOU is only a colourable device to transfer the money to M/s Nancy Builders as there is no agreement between the assessee and the original owner for transfer of the said development rights.
Therefore, such transaction is to be treated as unexplained investment u/s 69 and brought to taxation.
Analysis of information collected/received:
On perusal of the records it is seen that the assessee has not entered into MOU to acquire the development rights directly with the original party i.e. M/s Goel Ganga Developers Private Limited, but with M/s Nancy Builders and Developers. There is not agreement between the assessee and the original owner for transfer of the development rights.
Inquiries made by AO as a sequel to information collected/received:
On perusal of the records it is seen that the assessee has not entered into MOU to acquire the development rights directly with the original party i.e. M/s Goel Ganga Developers Private Limited, but with M/s Nancy Builders and Developers.
Findings of the AO:
On perusal of the records it is noticed that M/s Goel Ganga Developers Private Limited, the original party was not a party of the MOU between M/s Nancy Builders and Developers Private Limited and M/s Konark Lifespaces. The original owner M/s Goel Ganga Developers Private Limited has not consented to the said transfer. Considering the above facts, it is established that the MOU is only a colourable device to transfer the money to M/s Nancy Builders. Further there is no agreement between the assessee and the original owner for transfer of the said development rights. Hence the transaction of Rs.17,76,08,505/- remains unexplained.
Basis for forming reason to believe and details of escapement of income:
In view of the above facts and discussion made in above paras, I have reason to believe that the income chargeable to tax to the extent of Rs.17,76,08,505/- has escaped assessment for A.Y 2015-16 within the meaning and scope of section 147 of Income tax Act, 1961.
Findings of the AO on true and full disclosure of the material facts necessary for assessment under Proviso to section 147:
The advance payment of Rs.17,76,08,505/- to M/s Nancy Builders and Developers Pvt. Ltd. remains unexplained. Thus, the assessee had not disclosed fully and truly all material facts necessary for its assessments.
Applicability of provisions of section 147/151 to the facts of the case:
In this case return of income was fled for the year under consideration and regular assessment u/s 143(3) was made on 29/12/2017. Since 4 years from the end of relevant A.Y has expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have noted that full and true disclosures of material facts have not been made and thereby necessitating re-opening of assessment u/s 147 of the Act.
It is evident from the above facts that the assessee has not truly and fully disclosed material facts necessary for its assessment for the year under consideration thereby necessitating reopening u/s 147 of the Act.
It is true that assessee has fled a copy of annual report and audited P/L account and balance sheet alongwith the return of income where various information/material were disclosed. However the requisite full and true disclosures for the assessment were not made as noted above. It was only after investigation carried out by the department it was established that the above mentioned entities does not have credit worthiness and unsecured loan from them is not genuine. It is pertinent to mention that even though assessee has produced books of account, annual report, audited P/L account, balance sheet or other evidence as mentioned above, the requisite material facts as noted above in the reason for reopening were embedded in such a manner that material evidence could not be discovered by the AO and could have been discovered by due diligence, attracting provisions of section 147 of the Act.
It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/reassessment. This fact is corroborated from the contents of notices issued by the AO u/s 143(2)/142(1) during the 143(3) proceedings. It is important to highlight here that material facts relevant for the assessment on the issue under consideration were not fled during the course of assessment proceeding and the same may be embedded in annual report, audited P&L a/c, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. For aforesaid reasons, it is not a case of change of opinion by the AO.
In this case, more than 4 years have elapsed from the end of AY under consideration. Hence, necessary sanction to issue notice u/s 148 has been obtained separately from the Principal Commissioner of Income Tax (Central), Pune as per the provisions of Section 151 of the Act.”
Observation of the court
It is also equally well settled that if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If “reason to believe” be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the Assessing Officer to initiate the proceedings under Section 147/148 of the Act.”
Testing the facts of the present case on the on the touchstone of the judgment referred to hereinabove, it can be seen that the issue of ‘Large Loans/Advances’, was not only raised during the scrutiny assessment, but the same was responded to specifically by the assessee, as seen from the clarifications dated 5 June 2017 and 16 August 2017, which finally led to passing of the Order under Section 143(3) of the Act.
In the present case from the record, and specifically from the reasons recorded, it is not justifiable as to what information was received by the assessing officer and what was that issue or material that had not been considered by the assessing officer during the scrutiny assessment proceedings. As between the date of Order of assessment, which is sought to be reopened and the date of forming of the opinion, in the present case, nothing new had happened. It is clear that there is neither a new information received nor has referrence been made to any new material on record. It is an absence of an agreement between the Petitioner, Goel Ganga Developers Pvt Ltd and M/s Nancy Builders and Developers Ltd that the assessing officer formed a basis for reopening the assessment. It is nobody’s case that there existed any such agreement, which ought to have been produced but was not produced. Rather the assessing officer intends to imply that in the absence of any such agreement, the benefit ought not to have been granted to the Petitioner in the scrutiny assessment. There cannot be any failure to disclose fully and truly, if there was no such document as such. This, in our opinion, is nothing but a change of opinion, which does not satisfy the jurisdictional foundation under Section 147 of the Act.
Be that as it may, we hold that the impugned notice dated 30 March 2021 issued under Section 148 of the Ac and all connected proceedings are unsustainable and, accordingly, set aside. Accordingly the Petition is allowed. No costs
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
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