The Income Tax Appellate Tribunal (ITAT), Mumbai bench has held that the reasons mentioned in the re-assessment notice under section 148 of the Income Tax Act, 1961 cannot be improved later.
The assessee, along with her husband purchased flat from Saraswati Devi Ramji Lal trust as “Owner” and SashwatConstruwell Pvt Ltd. as “Developer” for a total consideration of Rs. 41,00,000. The return filed by the assessee was selected for scrutiny and notice under section 142 (1) of the Act was issued, inter-alia, asking for detail of premises owned by the assessee, which was duly replied by the assessee.The AO passed under section 143 (3) read with section 147 of the Act in addition to the basis mentioned in the reasons for reopening the assessment also observedthat the market value of the flat as determined by a stamp duty valuation authority is much more than the documented payment of Rs. 41,00,000 and thus the same circumstantially corroborate that extra consideration over and above the agreement value of Rs. 41,00,000 would have been paid by the assessee. Accordingly, the AO made an addition of Rs. 14,00,000 under section 69 of the Act as unexplained investment.
After perusing the facts and the documents, the Tribunal bench comprising Shri Sandeep Singh Karhail, Judicial Member and Shri Gagan Goyal, Accountant Member observed that the reference to market value of the flat as determined by stamp duty valuation authority also cannot justify initiation of reassessment proceedings under section 147 of the Act, as thevalidity of reassessment has to be tested only on the basis of reasons recorded by the Assessing Officer before issuing notice under section 148 of the Act and those reasons cannot be further improved.
“Further, in the present case, the AO has also not granted opportunity to the assessee to cross examine the person on the basis of whose statement proceedings under section 147 of the Act were initiated. We find that in Shri Abhishek Dhanotia v/s ITO: ITA No.655/Ind./2018, wherein reassessment was also initiated on the basis of similar search proceedings carried out on 5 October 2015 on M/s Ekta and Bhoomi Group and the statement of the Director of M/s Bhoomi Group was recorded on 28 December 2015 under section 131 of the Act,” the Tribunal said.
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