Commissioner Of Income Tax vs Smt. Reena Arora
2013 Latest Caselaw 4490 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

?AFR
 
Court No. - 32
 

 
Case :- INCOME TAX APPEAL No. - 555 of 2009
 

 
Appellant :- Commissioner Of Income Tax
 
Respondent :- Smt. Reena Arora
 
Counsel for Appellant :- Shambhu Chopra/Sc
 
Counsel for Respondent :- S.K. Garg,A. Bansal
 

 
Hon'ble Sunil Ambwani,J.

Hon'ble Surya Prakash Kesarwani,J.

1. We have heard Shri Sambhu Chopra, learned counsel for the income tax department. Shri Ashish Bansal appears for the respondent-assessee.

2. This income tax appeal under Section 260A of the Income Tax Act, 1961 arises out of the order dated 6.2.2009 passed by the Income Tax Appellate Tribunal in ITA No.342/LUC/2008 for the assessment year 2002-03.

3. The department has preferred the appeal on following questions of law:-

"1. Whether on the facts and circumstances of the case, Hon'ble ITAT was justified in law in canceling the action u/s.147 of the I.T. Act on the basis of information received from investigation wing leading to a bonafide belief of income escaping assessment.

2. Whether the order of the Hon'ble ITAT is perverse in as much as it failed to take into account the fact that the assessee in course of reassessment surrendered the Long Term Capital Gain thus accepting the reasons recorded by the Assessing Officer that the Long Term Capital Gain shown in the return was bogus.

3. Whether on the facts and circumstance of the case the order of the ITAT is perverse in as much as it placed wrong reliance on the decision of CIT Vs. Anupam Kapoor (Punjab & Haryana High Court) and CIT Vs. Pradeep Kumar Gupta (Delhi) wherein the question of validity of notice u/s. 147 was not an issue at all."

4. The assessee Smt. Reena Arora had disclosed purchase of Flat No.503 and 504, Palm Court, Gurgaon for Rs.38,41,175/-. The return declaring income of Rs.1,55,31,940/- for assessment year 2002-03 was filed on 29.7.2002. The return was processed under Section 143 (1) of the Act on 15.2.2003, on which a refund of Rs.53,621/- was issued on 26.6.2003. On the basis of some information from CIT, Central Circle-18, New Delhi regarding tax evasion by Smt. Reena Arora in the form of investments in the immovable property during financial year 2001-02 relating to assessment year 2002-03 an action under Section 147 read with Section 148 of the Act was taken by issuing notice under Section 148 on 23.12.2004.

5. The assessee filed objections regarding initiation of proceedings under Section 147 read with Section 148 of the Act. She relied on GKN Driveshafts (India) Ltd. v. I.T.O. & Ors., 259 I.T.R. 19 (SC) and submitted that the information relied on to issue notice under Section 147 was not credible information. The entries in the diary of Shri D.N. Taneja, who had admitted in the course of his statement recorded on 4.2.2002 that the payments of Rs.5.25 crores were received by him on account of sale consideration of properties sold to Shri Praveen Arora son of Shri Dilbagh Rai Arora was not sufficient to connect the dates of the purchase of properties by the assessee and that the assessee did not make any payment, as found in the entries in the diary of Shri D.N. Taneja. The A.O. did not accept the objections and found that family members of Arora Group have made investment of about 50 properties during financial year 2001-02, assessment year 2002-03 and that since 8 members were involved in the purchase, in which Smt. Reena Arora had purchased two properties, an income of Rs.21 lacs arrived at by dividing Rs.5.25 crores with 8 was added to her income.

6. The Commissioner (Appeals) allowed the appeals with findings as follows:-

"I have considered the submissions of the appellant. I have also perused the copy of the document (available at page 31 of the compilation) and also the statement of Shri D.N. Taneja, a reference of which has been made in the assessment order. The foremost point to be noted is that the document, on the basis of which additions of Rs.21.00 lacs have been made in appellant's case, was discovered at the third party's premises. The appellant has not been allowed any opportunity to cross examine Shri D.N. Taneja, from whose premises the documents was reported to be recovered. Besides, the document in question, bears the noting at top i.e. (Parveen Dilbagh) and it only indicates schedule of payments. In other words, the name of the appellant does not appear on the document. I do not understand on what basis additions of Rs.21 lacs have been made in the impugned assessment order. When the documents are recovered from third party's premises, on which AO relies for making addition in any case, then AO's are expected to provide reasonable opportunity to the person, against whom such documents are proposed to be used. Such reasonable opportunity includes opportunity to examine the document (s) and rebut the contents of the same. Besides, AO's are also expected to allow the cross examinations of the party from whose premises such document (s) are recovered. No such opportunity has been provided in the present case. The document in question does not even mention the name of the appellant. Such additions could not be made on the basis of mere presumption and surmises. The Supreme Court in the case of Uma Charan Shaw & Brothers vs CIT (37 ITR 271) has held that suspicion, howsoever strong, could not be the substitute for legal proofs. In view of above discussion, I do not find any justification in making the addition of Rs.21 lacs in the case of the appellant. The addition of Rs.21 lacs is deleted."

7. In the second appeal filed by the department under Section 254 of the Act the Tribunal has confirmed the findings as follows:-

"The reasons recorded clearly shows that the Assessing Officer is not certain whether income escaped assessment or not. Assessee called for to give details if any payment is made to Shri D.N. Taneja and if the assessee is not made, then the Assessing Officer wants to know from that assessee who made investment. This is clear from the above. We are afraid this is not sufficient reason to reopen the assessment. Coming to the second reason, it is reproduced at para 5 above. The reading of the same will also make it clear that there is not credible information with the Assessing Officer to show that assessee had concealed any receipt from capital gains."

8. Shri Sambhu Chopra appearing for the revenue submits that there was credible information, on the admissions made by Shri D.N. Taneja in the search and seizure operations on 22.8.2001 in which incriminating documents were seized; statements were recorded and on the basis of which D.I. has submitted report that family members of Arora Group including Reena Arora had made investments. In the investments found recorded in the diaries of Shri D.N. Taneja he had admitted receipt of Rs.3.25 crores. He submits that Smt. Reena Arora had admitted that she had purchased the properties. The statement of Shri D.N. Taneja and the diary entries clearly connected the investments made by Smt. Reena Arora and thus there was sufficient material to proceed under Section 147.

9. We have examined the assessment orders, appellate order as well as the order of the ITAT and do not find that there was any credible material, which could relate to or connect to the investment of Rs.21 lacs by Reena Arora, which she had paid to D.N. Taneja. The entries in the diary of D.N. Taneja found during search and seizure, which he admitted were not of the amount of Rs.21 lacs paid by Smt. Reena Arora. The entries were with noting on the top (Praveen, Dilbagh) only indicated a schedule of payment. The name of Reena Arora did not appear in the diary. The A.O. while relying upon additions on the basis of the entries did not provide reasonable opportunity to the assessee. He did not allow cross-examination of D.N. Taneja by the assessee nor any bank statement or other records were found connecting these entries to Reena Arora. The A.O. relied upon the report of DI that since investment has been found in the diary entries of D.N. Taneja and which relates to Arora Group, Reena Arora, who had purchased two properties must have made additional undisclosed investment of Rs.21 lacs. The investment made by Reena Arora and quantum was purely a guess work, which has been arrived at on surmises and conjectures without giving her an opportunity to be heard. She should have been allowed cross-examination of Shri D.N. Taneja to establish that she had not paid the amount to him. There was no other material on record to connect undisclosed investment made by Smt. Reena Arora in the properties.

10. We are of the view that the findings recorded by the appellate authority and the Income Tax Appellate Tribunal do not suffer from any error of law nor the questions of law framed are substantial questions of law, which require to be decided by this Court, to admit the appeal.

11. The income tax appeal is dismissed in limine.

Order Date :- 24.7.2013

SP/