The Delhi Bench of Income Tax Appellate Tribunal(ITAT) upheld the decision of the Assessing Officer (AO) regarding the validity of the reassessment based on Annual Information Return(AIR) information.
Gajendra Pal Sharma, appellant- assessee, filed a return of income on July 25, 2012, declaring Rs. 2,34,600 as total income and Rs. 49,500 as agricultural income. AIR information from the sub-registrar revealed that he purchased a residential property in Ghaziabad for Rs. 90,95,000, including stamp duty, on February 16, 2012, jointly with Meena Sharma.
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The AO issued a notice under Section 133(6) to verify the transaction, but there was no response. A notice under Section 148 was then issued on March 29, 2019, with approval from the Principal Commissioner of Income Tax(PCIT), Ghaziabad.
During assessment, the AO was not satisfied with the explanation and added Rs. 70,95,000 under Section 69 of the Act. On appeal, the CIT(A) reduced the addition to Rs. 41,47,382.
The assessee’s counsel disputed the validity of the notice under Section 148, arguing it was based solely on AIR information, without tangible evidence. The counsel claimed the AO wrongly considered the entire property value as unexplained investment, despite the assessee holding only a 50% share. It was also argued that the PCIT’s approval was granted mechanically.
The counsel cited several rulings, including CIT v. Smt. Maniben Valji Shah, to argue that further verification indicated the AO had reason to suspect, not believe, income had escaped assessment. On merits, the counsel explained that the property was co-owned, and the AO treated the full amount as unexplained, despite evidence provided. The CIT(A) upheld the reopening but reduced the addition to Rs. 41,47,382, based on a similar addition in the wife’s case.
The revenue counsel supported the notice under Section 148, stating it was based on information from the Sub-Registrar about the property purchase. The AO found a mismatch between the declared income and investment, issuing a Section 133(6) notice to verify the transaction. The counsel argued the entire investment was considered unexplained in the assessee’s hands, as the purchase deed didn’t mention the wife’s 50% share.
The counsel emphasized the assessee’s failure to respond to the notice, leading the AO to form a reason to believe income had escaped assessment. The PCIT’s approval was argued to be given after proper consideration. On merits, the revenue counsel backed the CIT(A)’s decision, stating the investment source wasn’t adequately explained.
The two member bench comprising Challa Nagendra Prasad (Judicial Member) and Naveen Chandra(Accountant Member) after reviewing the submissions and material on record, focused on the main issue: whether the AO had valid reasons to reopen the assessment. The AO had based the reopening on information received from the Sub-registrar’s office about the purchase of immovable property worth Rs. 90,95,000/- on 16.02.2012. The assessee had filed the return declaring income of Rs. 2,84,099/- for the assessment year 2012-13.
The AO noticed that the investment appeared disproportionate to the declared income. A notice under section 133(6) was issued to the assessee on 13.08.2018, but the assessee did not respond. The AO then invoked section 69, treating the unexplained investment as income.
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The appellate tribunal found that despite the non-compliance, the AO had valid grounds to issue a notice under section 148. The PCIT had also approved the reopening, finding the reasons sufficient.
After considering the facts, the bench concluded that the AO had reasonable grounds to reopen the assessment and that the reassessment proceedings were valid. The tribunal dismissed the assessee’s objections and upheld the AO’s actions.
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