INCOME TAX ACT, 1961

Section 147

Reassessment - Validity - AO made addition on another issue without making addition as regards subject-matter of reopening -

AO reopened assessment so as to verify source of investments towards purchase of agricultural land amounting to Rs. 1,07,00,000. During the course of assessment proceedings, assessee was asked to furnish details regarding source of the investments. The assessee submitted that she had received advance of Rs. 50,00,000 from M/s P. G. to whom notice under section 133(6) was issued and in response, said company submitted its necessary confirmation along with audited balance-sheet, bank statement and other evidence which was found satisfactorily explained by AO. The assessee also submitted that she had received a sum of Rs. 45,33,000 from nine agriculturists as advance towards sale of another agricultural land and said money was used for purchase of the impugned agricultural land which was subject-matter of notice under section 148. During the course of assessment proceedings, the summons were issued under section 131 and statement of these agriculturists were recorded by AO. AO, however, held that these agriculturists did not have any financial networth for purchase of such expensive piece of land and therefore, their creditworthiness could not prove and amount of Rs. 45,33,000 was treated as unexplained cash credit under section 68 . Further, assessee submitted that she had received gift of Rs. 2,51,000 from her father and Rs. 5,51,000 from her father-in-law and a copy of gift deeds were submitted during assessment proceedings, however, for the reason that financial net worth of donors was not proved, amount of Rs. 8,02,000 was also treated as unexplained cash credit under section 68. Assessee pleaded that AO had not made any addition towards unexplained investments under section 69 in respect of which reasons for escapement of income were recorded and notice under section 148 was issued, however, he brought the second set of transactions to tax as unexplained cash credit under section 68. Held: There were two independent transactions one was purchase of agricultural land by assessee amounting to Rs. 1,07,00,000 and the second was of the sale of agricultural land by the assessee amounting to Rs. 45,33,000, Advance received from the second transaction had been claimed to be utilized towards discharge of consideration towards first transaction of purhase of the agricultural land and to that extent, these two transactions could be said to be connected, however, earning their respective attributer and character and where no addition was made by AO towards unexplained investment under section 69 for which notice was issued under section 148, and the very basis for reassessment did not exist anymore. Therefore, AO could not travel beyond and extend his jurisdiction and bring to tax others transactions to tax under section 68 during reassessment proceedings because invocation of these two sections was in entirely different set of circumstances as it is clear from the wordings of these two sections.

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