The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the reopening of assessment under Section 147 of Income Tax Act,1961 for unexplained investment in property, dismissing the appeal of the assessee.
J K Associates,appellant-assessee,did not file a return of income for A.Y. 2017-18. The Assessing Officer (AO) found that the assessee had bought property worth Rs. 1 Crore in F.Y. 2016-17, but the source of the money was not explained. So, the AO started proceedings under Section 147 of the Act. The assessment was completed on 25.03.2022, with an addition of Rs. 1 Crore for the unexplained investment in the property.
The assessee, dissatisfied with the AO’s order, filed an appeal with the Commissioner of Income Tax(Appeals)[CIT(A)] who upheld the AO’s decision on the unexplained investment in the property and dismissed the appeal.
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The issue was regarding the reopening of the case under Section 147. The assessee’s counsel argued that the AO did not provide a clear reason for reopening, making it invalid. He also pointed out that no addition was made on the original reason, so no other addition should have been made, citing a Gujarat High Court case for support.
The revenue counsel, stated that the AO had given a clear reason for the escapement of income due to the unexplained investment in property and made an addition of Rs. 1 Crore for it. He argued that the Gujarat High Court’s decision in the Mohd. Juned Dadani case did not apply to this situation.
The two member bench comprising T.R.Senthil Kumar ( Judicial Member ) and Narendra Prasad Sinha(Accountant Member) found that the assessee did not file a return for AY 2017-18. The AO reopened the case to investigate the Rs. 1 Crore property investment. When the explanation was unsatisfactory, the AO added Rs. 1 Crore.
The addition was based on the issue for which the case was reopened. The Gujarat High Court’s decision in Mohd. Juned Dadani was not applicable, and the grounds against reopening were dismissed.
In short,the appeal filed by the assessee was dismissed.
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